Finland is a beautiful country located in northern Europe. The country has a taxation system that is governed by the Finnish Tax Administration. In this article, we will discuss how the taxation system works in Finland, double taxation agreements, the main taxes expats need to be aware of, special tax breaks that could apply to expats, how and when to file a tax return as an expat, and tax exit procedures for anyone leaving Finland to move abroad.
The Taxation System in Finland
The taxation system in Finland is a progressive system, meaning that the more you earn, the higher your tax rate will be. The tax year in Finland runs from January 1st to December 31st, and taxes must be filed by May 3rd of the following year.
There are several taxes that individuals and businesses in Finland are required to pay. These include income tax, value-added tax (VAT), real estate tax, and social security contributions.
Double Taxation Agreements
Finland has signed double taxation agreements with several countries, including the United States, Canada, and the United Kingdom. These agreements are designed to prevent individuals and companies from being taxed twice on the same income.
If you are an expat living in Finland and your home country has signed a double taxation agreement with Finland, you may be able to avoid being taxed twice on your income. However, it is important to check the terms of the specific agreement as they can vary between countries.
Main Taxes in Finland
Income tax
All residents in Finland are required to pay income tax on their worldwide income. The income tax rate varies depending on income levels and ranges from 6% to 31.75%.
Value-added tax (VAT)
The VAT rate in Finland is currently 24%. This tax is applied to most goods and services, including imports.
Real estate tax
Real estate tax is levied on the value of real estate property located in Finland. The tax rate varies depending on the location and intended use of the property.
Social security contributions
All employees in Finland are required to make social security contributions. The employer and employee each contribute 1.53% of the employee’s salary to social security.
Special Tax Breaks
There are several special tax breaks that could apply to expats living in Finland. These include:
Tax treaties
Finland has signed tax treaties with several countries, including the United States and Canada. These treaties are designed to prevent double taxation and can provide certain tax breaks for expats.
Tax deductions
Expats may be eligible for tax deductions for certain expenses, including moving expenses and travel expenses related to work.
Filing a Tax Return in Finland
If you are an expat living in Finland, you are required to file a tax return if you meet certain criteria. If you are a resident in Finland, you are required to file a tax return if your income exceeds €22,000 per year. If you are a non-resident and earn income within Finland, you must also file a tax return.
The tax return must be filed annually by May 3rd of the following year. The Finnish Tax Administration provides an online platform where you can file your tax return, and it is recommended that you seek the assistance of a tax professional to ensure that you file correctly and take advantage of any applicable tax breaks.
Tax Exit Procedures for Finland
If you are leaving Finland to move abroad, you must complete a tax exit procedure with the Finnish Tax Administration. This procedure involves filing a tax return for the year in which you leave, paying any outstanding taxes, and obtaining a certificate of tax compliance.
The certificate of tax compliance is required to obtain a residence permit or visa in another country. Failure to complete the tax exit procedure can result in a fine and other legal consequences.
Finland has a progressive taxation system, and individuals and businesses are required to pay several taxes, including income tax, value-added tax, real estate tax, and social security contributions. Expats living in Finland may be eligible for special tax breaks, and it is important to file a tax return correctly and complete the tax exit procedure if leaving the country. It is recommended that you seek the assistance of a tax professional to ensure that you comply with all tax regulations in Finland.