Finnish Taxes

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Finnish Taxes

• Orientation for American Fulbrighters
• the Fulbright Center
• 31.1.2006
• Carola Bäckström
• Helsinki Area Tax Office

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Structure

• Taxation of individuals in Finland
• Non-residents
• Residents
• Health insurance premium
• Taxation of grants
• Addresses and phone numbers

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1. Taxation of individuals

• the taxable income of an individual is divided in
  two types of income
• earned income and
• investment income.

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Earned income

• wages, salaries, directors bonuses, comissions,
  rental value of an employees free housing.
• pensions, living and housing allowances, car
  benefits.
• unemployment benefits and other social security
  benefits.

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Investment income

• income accrued from capital.
• dividends from listed companies, rental income
  and capital gains.
• taxed at a flat rate of 28 per cent in 2006 for
  both residents and non-residents.
• tax agreement can reduce the rate.

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Preassessment and final taxation

• preassessment during the current year 2006 ?
  withholding tax.
• final taxation tax return in May 2007.
• taxation of 2006 is final by the end of October
  2007.
• if the withholding tax is too small pay more.
• if too much refund.

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Residents and non-residents

• a person is non-resident for tax purposes if he
  stays in Finland for less than 6 months.
• a person is considered resident in Finland if
• he has his permanent home in Finland, or
• he stays here continuously for more than 6 months.

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2. Taxation of non-residents

• only liable to tax for income from a Finnish
  source.
• tax rate of earned income is 35 per cent of the
  gross income after
• a deduction of 510 euros per month or
• 17 euros per day.
• always apply for a tax at source card.
• tax rate of investment income is 28 per cent of
  the gross income.
• most non-residents do not file a tax return.

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Tax at source card

• if a non-resident receives earned income from
  Finland.
• a tax at source card is always needed.
• application form on the internet
  www.vero.fi/english/forms and publications.
• local tax office.

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3. Taxation of residents

• on earned income residents pay
• state tax which is progressive
• communal tax at a flat rate
• church tax
• if members of lutheran or orthodox churches.
• health insurance premium

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Rates of state income tax on earned income 2006
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Communal tax and health insurance premium 2006

• the rate of the communal tax (municipal income
  tax) in Helsinki is 17.50.
• the rate of the church tax in Helsinki is 1.
• the health insurance premium is 2.1 if you are
  covered by the Finnish social security (Kela).

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Deductions from earned income (both state and
communal taxation)

• an individual taxpayer is allowed to deduct the
  following expenses (inter alia)
• membership fees to trade unions or unemployment
  funds,
• travelling expenses from the place of residence
  to the place of employment which exeed 500
  euros/year.

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Deductions continues

• outlays on professional literature, research
  equipment and scientific literature, and expenses
  incurred in scientific or artistic work,
• deductions in officio
• 620 euros for workrelated expenses, if no demand
  for deduction of professional expenses.
• employees obligatory pension insurance
  contribution and the unimployment insurance
  contribution.
• earned income allowance.

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Deductions in municipal income taxation ex
officio

• pension income allowance
• disabled personss allowance
• student grant allowance
• a basic allowance for taxpayers with a small
  income

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Tax card

• first you shall get the Finnish social security
  number from the Local Register Office
  (maistraatti).
• you can also file an application for Finnish
  social security number at the Local Tax Office.
• passport
• when you have your Finnish Social Security number
  you can apply for a tax card at the Local Tax
  Office.

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Tax card

• application form on the internet www.vero.fi/in
  english/forms and publications/application for
  tax card.
• a withholding percentage is marked on the tax
  card.
• without a tax card the withholding rate is 60.
• if you have more than one employer apply for a
  second tax card.

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Tax return

• a resident receives a prefilled tax return for
  2006 in april 2007.
• important to inform the correct address to the
  Local Register Office (Maistraatti) when you move
  from Finland.
• if the information on the tax return is correct,
  you do not have to file it.

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Income from abroad - other than salary or wages

• if you stay for a short period
• it is not necessary to report foreign-source
  income, for example investment income.
• if you stay for a longer period and
• you do not have a permanent home available in
  your home State or
• your spouse and/or family is with you in Finland
• you should also report your foreign-source income.

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Salary or wages from abroad

• if you stay less than 6 months ? salary from
  abroad is not taxed in Finland.
• if you stay in Finland for more than 6 months
• your salary is taxed here and should be reported
  here.
• in this case please contact the Local Tax Office.

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4. Health insurance premium

• if you work less than 4 months -gt
• no health insurance premium.
• if you work longer than 4 months -gt
• health insurance premium of 2.1.
• if you have a certificate of posted employee or
  certificate from Kela
• ? no health insurance premium.
• salary not exceeding 930 /month and weekly
  working hours max 18 -gt
• no health insurance premium.

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5. Taxation of grants

• if you are non-resident
• grants are not taxed in Finland.
• if you stay for a short period
• it is not necessary to report grants.
• if you stay for a longer period and
• you do not have a permanent home available in
  your home State or
• your spouse and/or family is with you in Finland
• you should report your grants.

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Taxation of grants

• grants are taxed at an amount that exceeds
  14.841.72 euros per year.
• if you are considered as resident in Finland
  within the meaning of the Finnish-US tax treaty.
• if you are considered resident in the US, only US
  can tax.
• it is possible to deduct expenses, for example
  travel expenses, expenses for lodging, expenses
  for research.
• same procedure for both residents and
  non-residents.
• no preassessment/withholding tax.
• tax return for final taxation.

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Avoidance of double taxation

• salary
• if Finland has the right to tax your salary make
  sure you have a receipt of the salary and the tax
  withheld.
• enclose the receipt to your US tax return and ask
  for credit for Finnish tax.
• grant
• tax demand note or
• ask for a certificate from the Local Tax Office
  when the taxation is final.

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Example 1

• student A from the US receives a grant of 900
  euros per month during 9 months.
• the total amount is less than 14.841.72 .
• A does not have to pay tax in Finland on the
  grant.
• it is not necessary to look at the residence for
  the purpose of the Finnish US tax treaty.

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Example 2

• B receives a grant of 2.500 euros per month
  during 9 months from a Finnish source.
• B receives rewards from a Finnish University for
  giving lectures 2.000 euros.
• B receives salary from a US University 1.000
  euros per month.
• B has expenses of 3.000 euros in total.
• Bs family lives in the US.

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Example 2 continues

• the salary from the US University is not taxed in
  Finland.
• provided that the US University is a public
  institution.
• the grant is not taxed in Finland
• because B is considered resident of the US within
  the meaning of the Finnish US tax treaty.
• Finland taxes only the income from the Finnish
  University, 2.000 euros.

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Example 3

• same as in example 2 but
• Bs family stays with him in Finland.
• B is considered resident in Finland in accordance
  with the Finnish US tax treaty.
• the salary from the US University is exempted
  from tax but raises the tax rate on the
  Finnish-source income (exemption with
  progression).
• provided that the US University is a public
  institution

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Example 3 continues

• grant 22.500 expenses 3.000 19.500
• 19.500 14.841.72 4.658.28.
• Bs taxable income is 2.000 4.658,28 6.658.28
  euros.
• B reports his total income and all the deductions
  in his tax return.

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Example 4

• D from the US receives a grant of 2.000 euros per
  months during 5 months.
• D is non-resident.
• D receives rewards from a Finnish University for
  giving a lectures.
• the reward is 200 euros per lecture.
• the grant is not taxed in Finland.
• the reward from the lectures is taxed at a rate
  of 35 after a deduction of 17 euros.

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7. Addresses and phonenumbers

• Helsinki Tax Office
• Rajatorpantie 8 A, Vantaa (Myyrmäki)
• Main Post Office
• Itäkeskus
• Pasila
• Phone [phone]
• from abroad 358 10 320 460
• Website www.vero.fi/english
• Publications nro 277e and 278e