5.5.2019 Taxation in Finland

Society needs taxes For financing public services e.g. health services, schools, daycare, road infrastructure For changing people's behaviour taxation can be a tool of economic policy e.g. differential taxes on products that are more friendly for the environment, tax relief given in order to support business in a less favoured geographical region For reducing the inequality of income e.g. progression, childcare allowance, pensions 5.5.2019

Tax rules are part of the law Laws are prepared by the Ministry of Finance and adopted by the Parliament Some tax rules are agreed on the European level so that they concern Finland as a member country of the EU Local districts and local parishes of churches decide on their tax percentage rates themselves 5.5.2019

The State and local districts receive the money 5.5.2019 The State and local districts receive the money Taxpayers: Private individuals and corporations (businesses etc) Main collector of taxes is the Tax Administration Others are Customs Finland and Trafi We pay the money forward to recipients: The State Local districts Kela Churches Forestry associations 5.5.2019

Direct and indirect taxes It is the taxpayer's obligation to pay the first type, Direct taxes: Example: Everyone pays income tax on his wages But someone else may be the actual payer of the second type, Indirect taxes: Example: Value-Added Tax or VAT is added to the price of a product by the seller. However, the final result is that the consumer not the seller is the actual payer of VAT 5.5.2019

Tax rates can be proportional, or they can be progressive Taxes are proportional (flat), if the % rate is exactly the same for all taxpayers Examples: Capital Tax, Municipal Tax Taxes are progressive, if the % rate rises when the taxpayer's income rises Example: Tax on Earned Income 5.5.2019

Income is subject to tax Individuals must pay tax on their income Your tax on earned income (wages, salaries) goes to: To the State of Finland To the district where you live To the parish of your Church if you pay Church Tax To Kela as a healthcare contribution Capital income (example: dividends you receive) The taxes on capital income go to the State Not only individuals but also businesses must pay income tax. To the State, local districts, churches 5.5.2019

Income taxation 5.5.2019

Income taxation 1/3 Tax assessment is not complete until the tax year is over However, you pay money in advance during the year. This reflects your future tax liability This is the process of collecting tax in advance In this way, each time you get paid you pay us some money in advance (as tax withheld). Your withholding % is printed on the card that you give to your employer We send you this document called the tax card -verokortti. Your previous income history is included in the calculation. You have the right to make changes Businesses must also pay tax in advance 5.5.2019

Income taxation 2/3 After the year is over we will know how much income you had We send Pre-Completed Tax Return forms to everyone. They show our database information on the income that has been earned and paid You have the right to send us corrections You have the right to demand tax deductions Some deductions are automatic, others you must ask for Examples of costs that can give you deductions: home-loan interest, major home repair costs 5.5.2019

Income taxation 3/3 Autumn is the time when tax assessment is finished Then we will know if the right amount was paid If too much was withheld by your payors, we will pay the difference back to you. But if your payors withheld too little, you end up paying back tax. This is called jäännösvero We send you the assessment decision by post If you do not agree with your assessment decision, you have the right to appeal against it 5.5.2019

Taxes on consumption Almost all sellers of goods and services pay VAT This tax is included in the price of consumer goods As a result, it is the consumers who pay it Excise taxes are added to the production costs of alcohol and tobacco and some other goods This tax is also included in the price of the goods. 5.5.2019

Other taxes Inheritance tax Gift tax Real estate tax Transfer tax Depends on the donor's family relation and the value of Estate Gift tax Depends on the donor's family relation and the value of the gift Real estate tax Depends on the value of the building and the land where it is located. Is paid to the district where located Transfer tax Must be paid by buyers of real estate (or shares) Tax at Source Must be paid on deposits in banks Public Broadcasting Tax Is used for the financing of YLE. Must be paid by all grownup citizens and all corporate taxpayers 5.5.2019