The economy and government of Finland rely so heavily on taxes to provide the needed public services. When one talks of Finland as ranking high in the global happiness index, just know it that it has a lot to do with a government that us responsive to the needs of its people. In Denmark and gainfully employed or doing business? it goes without saying that you need to know and meet your tax obligations. So as a starting point, one needs to check around to know how much tax to pay, taxable income, minimum tax free income and others.
Prosperity of Finland has to do with diligent tax payment and efficient use
Do you admire the Finnish welfare state’s generosity? But where do you think the money comes from? Perhaps you have read online or heard from first-hand sources that Finland, apart from being a happy state, offers institutional quality. Like other counties, Finland offers high levels of social security and healthcare services which also translates into high taxes.
The state, the municipalities, and the churches, all seem to have a right to levy taxes. Whether on your income, capital, household commodities, and many more, it’s sure of tax deductions. One cool thing about Finns is that they rarely complain about high taxation. This is because they believe it is worth their quality public services. Besides, their complete trust in the government makes them more contented and happy about it.
Honestly, many internationals have shown panic with the high Finnish taxation. As much as they strive to get the best-paying jobs in Finland, that tax is a real shocker to many. Better still, Finland is quite genuine in how it uses its revenues.
Difference between Direct and Indirect Taxation in Finland
In Finland, taxes are levied either directly or indirectly. In direct taxation, the deductions go straight to operations that impose them such as municipality payable and state income taxes. To add to the list are wealth tax, church payable tax, and many others. On the other hand, indirect tax is chargeable on goods and services. For instance, value-added tax (VAT) on goods and custom duty serve as good examples. Everyone in Finland pays for VAT because they purchase goods or even get services.
What You Need to Know about Earned Income Tax in Finland
Wondering what is earned income tax? Then you are in the right place. This kind of tax can either be deductible from your salary or wealth possessions. Besides, other fixed incomes like unemployment relief and social benefits belong here. However, the tax assessment procedure in Finland is quite complex. It first separates the capital tax and then assesses the rest as earned income.
Additionally, they first make deductions from gross income. After that, they assess the remaining amount on a progressive scale imposed on state taxation. Here, the municipal and church tax make fixed deductions on your earned income at 19% and 2%, respectively. Unfortunately, such percentages are on the higher side. For clarity, church tax is payable only if the employee is a member of either Evangelical Lutheran, Orthodox churches, or others.
Taxation of Foreign Individuals in Finland
Just to shed some light, a foreigner staying and working in Finland for over six months is entitled to Finnish income tax. Additionally, all employers must withhold tax on wages paid to their employees. In a similar manner, foreigners working in Finland for less than six months must pay a withholding tax of 35% on their wages. What a great relief!
In Finland, as a foreigner, you may not pay taxes only if the company has a permanent office situated in your native country. It happens so because employees get their salary through the bank. Hence, tax deductions reflect in your motherland.
As a foreigner, even if you have some hobbies that you do online, you need to make a declaration. The reason is that if you fail to do so you may get a hefty fine. Therefore, you better be honest and declare all your sources of income.
Residential Rules Regarding Taxation in Finland
To expatriates, it is strange how Finland gets stringent regulations regarding taxation. As long as you have lived in Finland for more than six months, you are a resident and taxable. It is even more natural for those who have a permanent home there. If you ever thought it was a joke, ask any Finn who was abroad and has returned. The moment you set foot in Finland, your time for taxation clocks instantly.
Furthermore, a Finnish citizen moving abroad gets it even more challenging. For Finland, you still count as a resident from the year of moving abroad until the next three calendar years. Within that period, you must pay tax unless you have evidence of non-attachment to Finland. Even so, such evidence is almost zero to get, so it’s do-or-die for such Finns.
Do you Need a Declaration for Foreign Financial Assets Once you are in Finland?
Of course, you need a declaration for foreign financial assets. As a taxpayer, you have to file a report concerning any relevant information to taxation. After writing your entire account, consider submitting it to the Finnish Tax Administration. Such kind of report may include taxable income or even wealth.
On the question of what should be taxed or not, get it straight here. Anyone with unlimited tax liability gets it a bit rough in Finland. For them, they pay taxes on wealth or income received from within or outside Finland. On the contrary, individuals with limited tax liability pay tax on wealth or income earned within the Finnish jurisdiction.
The Drawback of VAT Tax in Finland
It is unfortunate that similar final goods face multiple taxations but under the same production process. Not only does it apply to goods but also services. This issue is challenging to the taxpayers because they have to pay taxes on the same product severally.
There are two reasons behind such tax pyramid problems. For one, VAT is to blame for failing to tax intermediate business input. Another reason is that VAT tends to provide taxes first paid on inputs during the production procedures. Therefore, in order to avoid such, it would be wise to impose a tax on the final product or service. Not just that, but the tax must be standardized to ease it a little on Finns.