Do you want to know how much tax you pay in Finland? Or have you heard about Finnish high taxes and are wondering if this is a real fact? And what is the salary in Finland after tax reduction?
Rules regarding taxation vary by country, so the tax system in Finland may be different from your country of origin. In this article, you will find an overview of income taxes, how could you estimate your tax rate in Finland, and what are your rights and responsibilities as an employed person.
Before we start diving into the subject, it’s important to note that in Finland you will always get a gross salary offer, as dealing with taxation matters is considered one of the employee’s responsibilities. Therefore, before accepting or negotiating a wage remuneration, you need to have a good estimation of your net income and know how much your salary is after tax.
PAYING TAXES IN FINLAND
Finland has a progressive income tax system. This means that your tax rate depends on the amount of your yearly income – the higher salary you have, the higher the tax percentage you pay, and vice versa. This rate is calculated separately for every working person in Finland, and it applies on your wage and other means of income. The tax office will calculate it for you when you apply for a tax card.
The tax office in Finland is known as Vero. You can contact the authority by phone or visit one of the service points. Another very handy method of dealing with your tax matters is to use the online tax office’s services and access MyTax. For this, strong online authentication is required, via your online banking security codes.
Tax money is used by the state and municipalities to fund a wide array of services, including among others healthcare, education, and public services. Healthcare is considered one of the best in the world and covers all persons working in Finland. The Finnish education system is also globally praised, and it is highly supported by the paid taxes. Also, tax money is used to pay various social benefits and allowances for people that get unemployed, are on sick or parental leave, and those supporting the well-being of the people residing in Finland.
In addition to taxes, the employer withholds obligatory social security contributions (unemployment, pension, and healthcare contributions), in the amount of about 10% of your gross salary.
FINNISH TAX CARD
You don’t need to make tax payments yourself. Taxes are withheld directly from your salary by the employer and passed on to the tax authorities. You just need to send to the employer your tax card. But no worries, we’re guiding and assisting you in applying for your first tax card or in changing a current one.
A tax card is a one-page document that shows your tax rate. You can apply for a tax card by phone or in person at the local tax office. If you have a Finnish bank account, you can also apply online. The tax card is free of charge.
To apply, you will need to estimate your income earned in Finland during the calendar year. In addition to the yearly income earnings, your home municipality or commuting expenses are also taken into account and might influence your tax rate.
To estimate your tax rate, you can use the online tax calculator, provided by the Finnish tax administration.
If later on your income changes (for example if you get a raise) or if you realize your income estimation was incorrect, you should order a new tax card. You should always notify the tax authorities if your yearly income estimate changes significantly.
Remember to apply for the tax card without delay. If the employee doesn’t have a valid tax card, the employer is obliged to withhold 60% of the salary as tax.
If you work in the construction sector in Finland, you also need to have a tax number, that proves that you’re registered with the Finnish Tax Administration. The tax number is issued together with your tax card.
Once a year, usually in March or April, you will receive a tax decision. It contains information on your income, taxes, and deductions for the previous year. If needed, you can make corrections to the form. If all information is correct, you don’t need to do anything – the process continues automatically.
The tax decision regarding the amount of taxes withheld from your salary was correct. If you have paid too much, you will receive a tax refund. If you have paid too little, you will have to pay back the tax.
Keeping your tax card up to date if your income changes are the best way to avoid having to pay back taxes!
In addition to the employee’s tax withholdings, the employer pays separately a significant tax share directly to the tax authorities. This amount is not included in the employee’s gross salary. Alongside taxes, the employer pays mandatory insurance contributions and pension fees for each of the employees.
You can find more information on taxation in Finland on the tax office’s official website.