| Tax Rates in Finland Main sources and level of taxation
The level of taxation in Finland is clearly above the average for the OECD countries. According to OECD Revenue Statistics, in 2006 the ratio of total taxes to GDP at market prices was 43.5 in Finland compared with 35.9 in the OECD area as a whole. The tax ratio was the sixth highest among OECD countries.
Taxes in Finland are levied on behalf of the Government, the municipalities (local government), the Social Insurance Institution and various social security funds under some forty different headings. Payments to the local communities of the Evangelical-Lutheran and Orthodox Churches are not classified as taxes in the OECD's statistics.
Income Tax Rates in FinlandIncome tax in Finland consist of 3 different taxes, which makes the country one of the most highly taxed countries. Those are:
- State income tax
- Communal income tax, and
- Church tax
State income taxesState income taxes are levied on the earned income and investment income of individuals and the estates of deceased persons.
The tax on earned income is levied according to a progressive tax scale decided annually by Parliament. The rates of tax for the year 2009 are as follows:
Rates of state income tax on earned income 2009 (euro)
Taxable income / Basic tax amount / Rate within brackets (%)
EUR 13,100 – EUR 21,700 / EUR 8 / 7.0%
EUR 21,700 – EUR 35,300 / EUR 610 / 18.0%
EUR 35,300 – EUR 64,500 / EUR 3,058 / 22.0%
EUR 64,500– / EUR 9,482 / 30.5%
The state income tax on investment income is levied at a flat rate of 28 percent.
Communal taxCommunal (municipal income) tax is levied at flat rates on the earned income (of at least 10 euros) of individuals and the estates of deceased persons. Each municipal council sets the tax rate annually in advance for the following year on the basis of the municipal budget. In 2009 the rate varies between 16,50 and 21 per cent, the average being 18.59 per cent.
Church taxIndividuals who are members of either the Evangelical‑Lutheran Church or the Orthodox Church pay church tax. Local communities of these churches levy the church tax on the earned income of individuals and estates of deceased persons.
Church tax is imposed at flat rates, which are set annually in advance for the following year in each community by the local ecclesiastical council.
In 2009 the rate varies between 1.0 and 2.0 per cent, the average being 1.32. The church tax is levied on the same taxable income as determined for communal tax purposes.
Finland Corporate income taxCorporate income tax is levied at a flat rate of 26 per cent.
Value-added taxThe standard rate of VAT is 22 per cent (of the price excluding tax).
A reduced tax rate of 8 per cent is applied to the following commodities:
- books;
- medicines;
- passenger transport services;
- accommodation services;
- services enabling sporting activities;
- admissions to commercial sporting, cultural and entertainment performances, events and facilities;
- subsidies based on the license fees from the radio and television fund to the Finnish Broadcasting Company and similar subsidies to Aland Radio and TV;
- the sale of a work of art by the artist and the importation of works of art;
- hairdressing (as an interim measure until the end of 2010);
- minor repairing of bicycles, shoes and leather goods and clothing and household linen
- copyright payments received by copyright organizations.
A reduced tax rate of 17 per cent (12 per cent as of 1st October 2009) is applied to foodstuffs and animal feed, excluding restaurant services, live animals, drinking water, alcoholic beverages and tobacco products.
Value Added Tax Exemptions
The following supplies of goods and services are exempted from VAT:
- hospital and medical care undertaken by publicly administered, hospitals and recognized private hospitals or other similar institutions, and the provision of medical care in the exercise of the medical professions;
- social welfare services;
- educational services which are provided in accordance with the law or which are subsidized from State funds in accordance with the law;
- financial services and transactions concerning securities (excluding consultation and safety-deposit services);
- insurance services and services performed by insurance brokers and insurance agents;
- transactions concerning bank notes and coins used as legal tender (excluding collectors' items);
- lotteries and money games;
- the services of performing artistes, the sale of performances intended to be sold to arrangers and the transfer of copyright to literary and artistic works;
- real property, including building land;
- certain transactions carried out by blind persons;
- interpretation services for deaf persons;
- cemetery services rendered by a public cemetery;
- uncultivated berries and mushrooms sold by the person who picked them.
The supplier of exempt goods and services does not have the right to a deduction or refund of (input) VAT on goods and services purchased for these transactions. In some cases the exemption has been realized through a refund to the supplier. This corresponds to zero‑rate. The following supplies are exempted in this way:
- subscriptions to newspapers and periodicals (loose-copy sale is fully taxed);
- printing services for membership publications of corporate bodies for the public good;
- vessels (excluding those used for sport and leisure); exemption covers the sale, hire and charter of such vessels as well as repair, maintenance and other work carried out on them;
- supply of gold to the Central Bank.
Although the sale and rental of real property is exempted the following services are taxable:
- construction services (including supplies of new buildings by property developers);
- the transfer of the right to take materials from the ground, right to fell trees as well as fishing and hunting rights;
- the hiring out of hotel rooms and camping sites and other similar accommodation;
- the hiring out of meeting rooms, exhibition space, places for sporting activities and other similar space;
- airport and harbour services for aircraft and vessels;
- the hiring out of safes;
- the hiring out of parking space;
- the hiring out of advertising space;
- the letting of space for gaming machines, vending machines or suchlike equipment.
The lessor of real property may opt for taxation when renting premises to persons liable to tax. In order to avoid distortion of competition, persons exempt from tax (real estate companies, banks and insurance companies, lessors of real property) are liable to pay tax on certain services which are related to real property and produced by themselves for themselves (construction services, cleaning, waste disposal, care taking and management services), if the salaries including social security contributions of the personnel engaged in these services exceed 35 000 euros per year. If the owner or possessor uses the real property mainly as his own residence, he is not liable to tax.
Inheritance and gift taxAlthough there is actually only one tax which is based on the Inheritance and Gift Tax Act (1940), the tax has two clearly distinguishable tax objectives. For this reason, the taxation of inheritances and bequests on the one hand, and the taxation of gifts, on the other, are treated separately below and the two names for the tax are used accordingly. Inheritance tax and gift tax are imposed solely by the State.
Rates of inheritance and gift tax 2009
Rates of inheritance and gift tax are determined on the basis of two classes of relationship between the beneficiary (the donee) and the deceased (the donor).
Tax class I: Spouse, direct heir in ascending or descending line, spouses' direct heir in descending line and fiancé(e) receiving a certain allowance on the basis of Code of Inheritance). The concept of direct heir in ascending or descending line includes persons in adoption relationships and foster children in certain cases. Class I rates also apply if the provisions of the Income Tax Act concerning spouses are applicable for the year of death to the deceased and an individual who had lived with the deceased in free union, in other words class I rates apply to spouses who previously have been married to each other or who have (or have had) a child together.
Rates of inheritance tax for class I:
Taxable inheritance (euro) / Basic tax amount (euro) / Rate within brackets (%)
EUR 20 000–40 000 / EUR 100 / 7%
EUR 40 000–60 000 / EUR 1500 / 10%
EUR 60 000– / EUR 3500 / 13%
Rates of inheritance tax for class II:
Taxable inheritance (euro) / Basic tax amount (euro) / Rate within brackets (%)
EUR 20 000–40 000 / EUR 100 / 20%
EUR 40 000–60 000 / EUR 4100 / 26%
EUR 60 000– / EUR 9300 / 32%
Rates of gift tax for class I:
Taxable inheritance (euro) / Basic tax amount (euro) / Rate within brackets (%)
EUR 4 000–17 000 / EUR 100 / 7%
EUR 17 000–50 000 / EUR 1010 / 10%
EUR 50 000– / EUR 4310 / 13%
Rates of gift tax for class II:
Taxable inheritance (euro) / Basic tax amount (euro) / Rate within brackets (%)
EUR 4 000–17 000 / EUR 100 / 20%
EUR 17 000–50 000 / EUR 2700 / 26%
EUR 50 000– / EUR 11280 / 32%
An inheritance tax is levied on the individual share of each beneficiary, and not on the estate of the deceased as a whole. Inheritance tax is levied on the following property received as an inheritance or a bequest:
1. any property, if the deceased or the person who receives the property as an inheritance or a bequest was resident in Finland at the time of death;
2. real property situated in Finland and shares or other rights in a corporate body where more than 50 per cent of the total gross assets of that corporate body consist of real property situated in Finland.
Instructions for tax paymentsUn-prompted taxes
Taxpayers are expected to pay some taxes without prompting, i.e. at their own initiative. For example, the following types of taxes are self-initiated, so they should be paid without prompting:
- Value added tax (VAT)
- Employer payments or contributions
- Tax at source (withholding tax)
- Transfer tax
- Stamp duty
- Withholding tax on income from the sale of timber.
You can also make supplementary advance tax payments at your own initiative if you figure that not enough tax is being withheld or that the taxes you have paid in advance will not cover the expected amount of final tax. You should try to have your withholding match your actual tax liability. If not enough tax is withheld, you will owe tax at the end of the year and may have to pay interest and a penalty.
How much tax should I pay?
If you pay tax at your own initiative, you must compute the right amount of tax yourself. In case of advance taxes, tax deficits, tax on real estate and forestry fees, the right amount of tax will be computed by the tax authorities and shown on your tax demand note.
When should I pay my tax?
Value added tax is due the 15th each month.
Employer contributions are due the 10th each month.
Private individuals and partners in partnerships can make supplementary advance tax payments until the end of January in the year following the year when the income was received. In order to avoid corporate interest, corporations must make their supplementary advance tax payments no later than on the deadline for filing their tax returns.
Advance taxes are due the 23rd each month.
Deadlines for the payment of tax deficit or outstanding tax, tax on real estate and forestry fees are defined separately for each year.
Paying taxes on time
The fact whether a payment has arrived on time or whether it is late will be verified by comparing the actual date of payment and the due date. The actual date of payment is the day when the bank acknowledges the receipt of the payment or when the payment is debited from the payer's bank account.
Payments from other countries will be deemed arrived on time, i.e. by their the due date, if the first registration in Finland concerning the payment has been made within a week from the due date of the tax.
If the due date is a Saturday or Sunday or any holiday, the tax can be paid on the next banking day.
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