Taxation in Finland
Encyclopedia
Taxation in Finland is carried out by the State of Finland
, mainly through Finnish Tax Administration, an agency of Ministry of Finance. Finnish Customs (Ministry of Finance), Finnish Transport Agency and Finnish Transport Safety Agency (Ministry of Transport and Communications) also collect taxes. All taxes are collected by the state agencies mentioned, who then distribute them to the local authorities, municipalities and the church parish
es, and social security institution Kela
.
state tax (tax brackets 6.5% – 30%) and proportional
communal taxes paid to municipalities (16.5% – 21.5%, average 19.17%) and parishes (1.00% – 2.00%, average 1.34%). The permanent residents of Finland have also to pay health insurance contributions, medical care fee (1.19 %) and daily allowance contribution (0.82 %). There is an earned income tax credit
for local taxes, making them slightly progressive despite their fixed rate.
The tax-like mandatory insurance fees are withheld from the wages. They are fully credited from the income taxes. The employee's pension and unemployment insurance fees have rates varying according to the person's age but they are usually at 4.7 % and 0.6%, respectively.
Above rates are as of year 2011.
The total income taxes including the mandatory insurance fees were 29.8 % for an average yearly income of 37,400 € in 2010.
s, rents, and capital gains are taxed with investment income tax. The investment income is taxed at fixed rate of 28%.
The effective dividend tax
rate from publicly listed companies is 19.6% because of a tax credit of 30% for dividends from listed companies. The tax credit for dividends from non-listed companies vary depending on the corporate tax
es paid by the companies themselves and equity in the company. Part of the dividends may be taxed as earned income in case the equity in a non-listed company is not sufficient.
was fully credited in dividend tax
before 2004, but because the neutrality requirements by EU, the tax credits allowed for dividends are now more complex.
Excise taxes are in place for alcohol, tobacco, sweets, lotteries, insurances, pharmacies, transport fuels and automobiles (2011).
The voluntary pension insurance fees or transfers to a personal pension account are credited in earned income taxation up to 5000 € per year.
and Finnish Orthodox Church
, and two country-wide Lutheran parishes, the German parish in Finland and Olaus Petri parish for citizens of Sweden
living in Finland. The tax rates vary from 1 to 2 % of earned income. A small percentage (2.55 % as of 2011) of corporate taxes is distributed to parishes, too.
Finland
Finland , officially the Republic of Finland, is a Nordic country situated in the Fennoscandian region of Northern Europe. It is bordered by Sweden in the west, Norway in the north and Russia in the east, while Estonia lies to its south across the Gulf of Finland.Around 5.4 million people reside...
, mainly through Finnish Tax Administration, an agency of Ministry of Finance. Finnish Customs (Ministry of Finance), Finnish Transport Agency and Finnish Transport Safety Agency (Ministry of Transport and Communications) also collect taxes. All taxes are collected by the state agencies mentioned, who then distribute them to the local authorities, municipalities and the church parish
Parish
A parish is a territorial unit historically under the pastoral care and clerical jurisdiction of one parish priest, who might be assisted in his pastoral duties by a curate or curates - also priests but not the parish priest - from a more or less central parish church with its associated organization...
es, and social security institution Kela
KELA
Kela, or Kansaneläkelaitos , also FPA or Folkpensionsanstalten , and SII or Social Insurance Institution , is a Finnish government agency in charge of settling benefits under national social security programs...
.
Earned Income Taxes
Earned gross income is taxed by a progressiveProgressive tax
A progressive tax is a tax by which the tax rate increases as the taxable base amount increases. "Progressive" describes a distribution effect on income or expenditure, referring to the way the rate progresses from low to high, where the average tax rate is less than the marginal tax rate...
state tax (tax brackets 6.5% – 30%) and proportional
Proportional tax
A proportional tax is a tax imposed so that the tax rate is fixed. The amount of the tax is in proportion to the amount subject to taxation. "Proportional" describes a distribution effect on income or expenditure, referring to the way the rate remains consistent , where the marginal tax rate is...
communal taxes paid to municipalities (16.5% – 21.5%, average 19.17%) and parishes (1.00% – 2.00%, average 1.34%). The permanent residents of Finland have also to pay health insurance contributions, medical care fee (1.19 %) and daily allowance contribution (0.82 %). There is an earned income tax credit
Earned income tax credit
The United States federal earned income tax credit or earned income credit is a refundable tax credit primarily for individuals and families who have low to moderate earned income. Greater tax credit is given to those who also have qualifying children...
for local taxes, making them slightly progressive despite their fixed rate.
The tax-like mandatory insurance fees are withheld from the wages. They are fully credited from the income taxes. The employee's pension and unemployment insurance fees have rates varying according to the person's age but they are usually at 4.7 % and 0.6%, respectively.
Above rates are as of year 2011.
The total income taxes including the mandatory insurance fees were 29.8 % for an average yearly income of 37,400 € in 2010.
| Taxable earned income (euros) | Basic tax amount | Rate within brackets |
| 15,600–23,200 | 8 | 6,5% |
| 23,200–37,800 | 502 | 17,5% |
| 37,800–68,200 | 3,057 | 21,5% |
| 68,200– | 9,593 | 30,0% |
Indirect Income Taxes
There are also indirect tax-like mandatory social security contributions and insurance fees paid by employer in addition to the gross income. The social security contribution is 2.12% of the gross income. The pension and unemployment insurance fees depend on the age of the employee and the size of the employer, they are usually 18.3% and 3.2% of gross income, respectively.Dividend and Capital Gain Taxes
The income from dividendDividend
Dividends are payments made by a corporation to its shareholder members. It is the portion of corporate profits paid out to stockholders. When a corporation earns a profit or surplus, that money can be put to two uses: it can either be re-invested in the business , or it can be distributed to...
s, rents, and capital gains are taxed with investment income tax. The investment income is taxed at fixed rate of 28%.
The effective dividend tax
Dividend tax
A dividend tax is an income tax on dividend payments to the stockholders of a company.-Collection:In many jurisdictions, the government requires the company to withhold at least the standard tax, paying this to the national revenue authorities and paying out only the balance to the...
rate from publicly listed companies is 19.6% because of a tax credit of 30% for dividends from listed companies. The tax credit for dividends from non-listed companies vary depending on the corporate tax
Corporate tax
Many countries impose corporate tax or company tax on the income or capital of some types of legal entities. A similar tax may be imposed at state or lower levels. The taxes may also be referred to as income tax or capital tax. Entities treated as partnerships are generally not taxed at the...
es paid by the companies themselves and equity in the company. Part of the dividends may be taxed as earned income in case the equity in a non-listed company is not sufficient.
Corporate Taxes
The corporate income tax rate is 26%. The corporate taxCorporate tax
Many countries impose corporate tax or company tax on the income or capital of some types of legal entities. A similar tax may be imposed at state or lower levels. The taxes may also be referred to as income tax or capital tax. Entities treated as partnerships are generally not taxed at the...
was fully credited in dividend tax
Dividend tax
A dividend tax is an income tax on dividend payments to the stockholders of a company.-Collection:In many jurisdictions, the government requires the company to withhold at least the standard tax, paying this to the national revenue authorities and paying out only the balance to the...
before 2004, but because the neutrality requirements by EU, the tax credits allowed for dividends are now more complex.
Property Tax
Municipal property taxes are low, since municipalities mostly meet their funding needs via direct income taxes and state subsidies. Tax rates are higher for leisure properties like summer cottages.VAT and Excise Taxes
VAT is levied at a standard rate of 23% (July 2010), and two reduced rates of 13% on food and restaurants, and 9% on transport and accommodation.Excise taxes are in place for alcohol, tobacco, sweets, lotteries, insurances, pharmacies, transport fuels and automobiles (2011).
Pension Fees
The mandatory pension fees are paid to directly to the pension insurance company selected by the employer or entrepreneur. The pension fees total 23% of the gross income (2011), usually 4.7% is deducted from gross income and the rest of the 23% is paid by the employer in addition to the gross income.The voluntary pension insurance fees or transfers to a personal pension account are credited in earned income taxation up to 5000 € per year.
Taxes to Parishes
Taxes are collected by local church parishes belonging to the two official churches, Evangelical Lutheran Church of FinlandEvangelical Lutheran Church of Finland
The Evangelical Lutheran Church of Finland is the national church of Finland. The church professes the Lutheran branch of Christianity, and is a member of the Porvoo Communion....
and Finnish Orthodox Church
Finnish Orthodox Church
The Finnish Orthodox Church is an autonomous Orthodox archdiocese of the Patriarchate of Constantinople. The Church has a legal position as a national church in the country, along with the Evangelical Lutheran Church of Finland....
, and two country-wide Lutheran parishes, the German parish in Finland and Olaus Petri parish for citizens of Sweden
Sweden
Sweden , officially the Kingdom of Sweden , is a Nordic country on the Scandinavian Peninsula in Northern Europe. Sweden borders with Norway and Finland and is connected to Denmark by a bridge-tunnel across the Öresund....
living in Finland. The tax rates vary from 1 to 2 % of earned income. A small percentage (2.55 % as of 2011) of corporate taxes is distributed to parishes, too.