Resident individuals are taxed in Finland on their worldwide income. A nonresident alien (working occasionally in Finland ) is taxed on Finnish-source income only. Resident individuals are taxed on their worldwide income. Residents are taxed according to progressive tax rates for national tax purposes and flat rates for municipal tax (including church tax and social security). A nonresident alien, e.g. one who is occasionally working in Finland , is taxed on Finnish-source income only.
However, tax treaties may provide that under certain conditions, even this income will not be taxed in Finland . Nonresidents are taxed at flat rates in accordance with the Nonresidents' Tax Act.
An individual is deemed a resident of Finland if he has his permanent home in Finland or if he stays in Finland for a continuous period of more than six months. The stay in Finland may be regarded as continuous in spite of a temporary absence from the country. But a Finnish citizen is considered resident in Finland for three full calendar years after leaving the country, unless he or she can produce evidence that he or she has severed all ties with Finland (the three-year rule). A resident status can begin or end in the course of a calendar year, not necessarily on January 1st.
Individual taxpayers' income can be divided in two categories:
Income tax is paid to the state and the municipalities at a progressive tax rate. Capital income tax is 28 percent.
A foreigner working in Finland may qualify for a special income tax at the flat rate of 35 percent during a 24-month period if he receives any Finnish-source income for duties requiring special expertise. The employee must earn a regular cash salary of at least €5,800 per month. According to the Temporary Act, it is further required that the employee has not been a resident in Finland at any time during the five years preceding the year when he accepts employment in Finland. This temporary tax rule concerns employment contracts that have started in 2007 and prior years.
Those wishing to conduct business independently should use the Finnish Business Information System to submit the Start-Up statement to the Tax Administration. The end date of the accounting period will determine the tax year, so if the accounting period of financial year changes, the Tax Administration should be notified. The necessary forms are available within the Business Information System (BIS). If the business closes or folds, Tax Administration should be notified in order to terminate registrations and release you the obligation to send reports, tax returns and make payments.
Any individual engaged as a business professional, in farming or other comparable entrepreneurial activity, will be registered in the prepayment register. The local tax office will determine what amounts of income tax must be paid in advance. The tax office computes this prepayment on the basis of taxable income. In the statement of starting up a business, the entrepreneur should make his or her best estimate of your future sales and taxable income. If actual profits are not the same, a request can be made to change or reduce the actual advance income tax payments.
The taxable period for VAT is the calendar month. The VAT for the calendar month is due for payment and reporting on the 15th of the second month following the taxable period. VAT is reported by filing a special monthly tax return to the regional tax office.
The employer's contributions for the calendar month will fall due for payment to the regional tax office on the 10th of the calendar month following the payment of wages. The payroll information should be reported using the monthly tax return, which must be submitted by the 15th of the first, not second, calendar month following the payment of wages.
VERO (Finland Tax System): http://www.vero.fi/
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