Value-added tax (VAT)
The general VAT rate is 24%. A reduced rate of 14% is applied to food and animal feed. The reduced VAT rate of 14% also applies to restaurant and catering services. A reduced VAT rate of 10% is applied to certain goods and services (e.g. books, subscriptions of newspapers and magazines lasting one month or longer, accommodation, passenger transport).
A zero rate applies in certain instances (e.g. intra-Community supplies of goods and exports of goods). Additionally, certain services (e.g. financial services, insurance services, and certain educational services) are exempted from VAT.
Many goods imported into Finland from outside the European Union (EU) are subject to customs duties. The rates of duty are provided by the EU’s Common Customs Tariff and vary widely.
Product specific, EU harmonised excise duties are levied on tobacco products, liquid fuels, and alcohol, as well as electricity and certain other fuels. In addition to the harmonised excise duties, Finland levies national excise duties on soft drinks, beverage containers, oil waste on lubrication oils and other oil based lubrication preparations, oil transported through or imported into Finland, waste to landfill deposits, and tall oil, as well as electricity, coal, natural gas, and liquid fuels.
Real estate tax
Municipalities impose an annual real estate tax. The tax is levied on the taxable value of buildings and land. The municipal council determines the applicable tax rates, although the minimum and maximum tax rates are set by tax legislation (e.g. 0.93% to 2.00% for general real estate tax, 0.41% to 1.00% for permanent dwellings). The tax is deductible from taxable business income if the real estate is used for business purposes. The tax is deductible from taxable income of the so-called 'other-source income' if the real estate is used to acquire other taxable income than business income.
A transfer tax of 4% of the sales price is payable on the transfer of real estate situated in Finland. The transfer of shares in Finnish companies (other than housing companies and real estate companies) and other domestic securities is subject to a transfer tax of 1.6%. The transfer of shares in Finnish housing companies and real estate companies is subject to a transfer tax of 2%.
A transfer tax of 2% of the sales price is payable on the transfer of shares in a foreign company whose activities consist mainly of owning or holding (directly or indirectly) real estates in Finland, provided that either the transferor or the transferee is a resident of Finland or, alternatively, a Finnish branch of a foreign credit institution, a Finnish branch of a foreign investment firm, or a Finnish branch of a foreign fund management company.
Generally, the transfer tax is payable by the transferee.
No transfer tax is payable on the transfer of securities that are subject to trading on a regulated market or multilateral trading facility in the European Economic Area (EEA). Similarly, no transfer tax is payable if both the seller and the transferee are non-residents. Transfer tax is, however, always payable on transfers between non-residents if the transferred shares are shares in a Finnish housing or real estate company.
No stamp taxes are levied in Finland.
The employer has a liability to withhold income taxes on remuneration subject to tax in Finland, including cash remuneration and non-cash benefits based on their taxable value. The taxes can, however, be withheld only on cash compensation, and the maximum income tax withholding liability equals the amount of cash remuneration.
Social security contributions
According to the Finnish social security legislation, both Finnish and foreign employers have a liability to pay several social security payments in Finland in cases where an employee performs one's tasks partly or wholly in Finland. The liability concerns all employers, regardless of the form of the company and whether the foreign company has a PE in Finland. The percentage rates for the employer’s (and employee’s) social security contributions are revised on an annual basis.
Compulsory social security contributions payable by the employer in 2018, according to the paid salaries, are as follows:
- Employer’s health insurance contribution: 0.86% (no cap).
- Employer’s pension insurance contribution: 17.75% (on average, no cap).
- Employer’s unemployment insurance contribution: 0.65% for the first EUR 2,083,500 of gross salaries and 2.6% for the portion of the gross salaries exceeding EUR 2,083,500 (no cap). Employer’s unemployment insurance contribution applies to employees of age 17 to 64.
- Group life insurance premium: 0.07% (on average, no cap).
- Accident insurance premium: 0.8% (on average, no cap).
The rates for employer’s health insurance contribution are applicable to salaries paid as of 1 January 2018. The employer’s health insurance contribution is paid to the Finnish Tax Administration, and the other contributions are paid to the insurance providers. All of these contributions are tax deductible as salary cost.
Compulsory social security contributions payable by the employee in 2018 are as follows:
- Employee’s pension insurance contribution: 6.35% for employees of age 17 to 52 or 63 and over, and 7.85% for employees of age 53 to 62 (no cap).
- Employee’s unemployment insurance contribution: 1.90% (no cap).
The above-mentioned contributions are tax deductible for the employee. These contributions are withheld from the gross salary at the time of salary payment and remitted by the employer to the appropriate insurance provider together with the employer’s pension and unemployment contributions.
- Employee’s sickness insurance contribution: 1.53%, provided that the annual taxable income exceeds EUR 14,020 (otherwise 0.00%; no cap).
In 2018, the sickness insurance consists of two payments, a daily allowance contribution of 1.53% and a medicare contribution of 0.00%. From these two contributions, only the daily allowance contribution is tax deductible for the employee. Unlike other employee’s social security contributions, the sickness insurance contribution is included in the withholding tax (WHT) rate of the employee’s personal WHT card and, thus, withheld and remitted to the tax authorities together with the withheld income taxes and is finally settled in the final assessment.
If an employee is regarded as a foreign-posted employee and has an A1 certificate or a certificate of coverage from one's home country, neither the aforementioned employer’s social security contributions nor the employee’s social security charges are payable in Finland, with the possible exception of employee’s sickness insurance premium in some cases.