Information on taxes to new entrepreneurs

Presentation content

Setting up a business and the registers of the Finnish Tax

Administration

Filing and paying taxes

Basic information on value added tax and income taxes

Being an employer

Q&A

Setting up a business Get support in starting your own business from, e.g.

local new business centres and Enterprise Finland

Apply for the start-up grant before submitting a start-up notification

Remember: bank account, bookkeeping and insurance

Hiring an accountant/accounting firm for your business is recommended

Setting up a business - choosing the type of business entity

• A self-employed person who owns and runs a business.

• Personally liable for all debts of the business. Private trader

• Founded by two or more persons or companies

• Ay: Each partner has unlimited personal liability for the debts of the business.

• Ky: General partners are jointly and severally liable for all obligations of the partnership, while limited partners are liable for partnership obligations only to the extent of their investment.

General partnership (ay) Limited partnership (ky)

• Independent taxpayer

• Founded by one or more persons or companies

Limited liability company (oy)

Cooperative

Setting up a business - start-up notification The start-up notification is submitted to the

Business Information System: ytj.fi

A business ID is issued for the business and is available in the BIS after around 2 days

Applications for entry into registers, processing time approximately 3 weeks

– Trade register maintained by the Patent and Registration Office (PRH)

– Registers maintained by the Tax Administration: Prepayment Register, VAT Register and Employer Register

When you set up a business: provide an income assessment for the first fiscal year for the purpose of tax prepayment

Tax Administration’s registers in brief

Prepayment Register

– Being entered in the Prepayment Register means that the business takes care of the

prepayment of tax itself.

VAT Register

– A business must be registered if its turnover exceeds EUR 10,000.

Employer Register

– A business must be registered if

it is a regular employer.

Prepayment Register

Being entered in the Prepayment Register means that your business takes care

of the prepayment of tax; in other words, the payer does not have to withhold

tax (cf. payment of wages)

Your customer is entitled to domestic help credit only if your business is

registered in the Prepayment Register

A business can be removed from the Prepayment Register on the grounds of

neglect of tax obligations

– Being entered in the Prepayment Register is therefore

also a sign that the business has attended to

its tax obligations.

VAT Register

Anyone liable to pay value added tax must register.

Liability to pay VAT covers anyone engaged in selling or leasing goods or

services, or other comparable activities, in the form of a business.

VAT is declared and paid regularly

according to the company’s tax period –

monthly, quarterly or once a year.

Do I have to be entered in the VAT Register?

If your turnover for the fiscal year (12 months) falls below EUR 10,000, you do

not have to be entered in the VAT Register. The estimate of turnover should be

realistic, because liability to pay VAT may also be imposed retroactively.

Even if your turnover falls below EUR 10,000,

you can enter your business into the VAT Register

If the business has been entered in the VAT Register:

– the VAT return can be used to deduct VAT from purchases made for the

purposes of VAT activities

– both the seller and you as the buyer must be entered in the VAT Register

Operations exempt from VAT

Certain functions are exempt from VAT, as specified in the Value Added Tax Act.

If a business is only engaged in the sale of exempt goods or services specified

in the Act, it cannot be registered in the VAT Register or deduct VAT on

purchases made for the purpose of exempt activities.

Such activities include:

• selling and leasing of real estate and flats

• healthcare, medical care and social services

• education and training services specified in the VAT Act

• financial and insurance services

Employer Register

For taxation purposes, an employer is referred to as a temporary or regular

employer. Regular employers must register with the Tax Administration’s

Employer Register.

A business is a regular employer

– if it pays wages to two or more wage earners on a permanent basis, or

– if it simultaneously pays wages to at least 6 wage earners whose employment is temporary

and meant to be short-term.

Those registered in the Employer Register must file and pay employer

contributions according to the business’s tax period – monthly or quarterly.

The tax period is one calendar month for temporary employers.

After you have registered your business...

Read through the letter we sent you carefully; it contains the registration data of

your business and instructions on how to file and pay taxes.

– Also provided in the letter are the Tax Administration’s bank account numbers and a business-

specific reference number for paying self-assessed taxes. The reference number is also

available via the MyTax service.

If you have registered your business in the VAT Register or the Employer

Register, mark the deadlines for filing tax returns and due dates for contributions

in your calendar.

– There is also a mobile app: Important dates (available in Finnish only)

Electronic filing: acquire a Katso ID or authorise your accountant to file

notifications electronically.

E-filing

To file returns electronically (e-file),

a business usually needs to have a

Katso ID.

– Private traders and self-employed

persons can gain access to

certain services with their personal online banking codes.

You can acquire a Katso ID online at

yritys.tunnistus.fi

You can authorise an accounting firm or other agent to use e-services on your

behalf through your Katso ID, or with a power of attorney for e-services.

E-filing

Further information on authentication and authorisation is available at www.tax.fi

under E-file > How to log in

E-filing

Notifications about taxes (tax returns) can be filed via the Tax Administration’s

own services or, for example, directly by using certain accounting software.

We recommend that you start using MyTax for your business.

Filing and paying

self-assessed taxes

Self-assessed taxes

Self-assessed taxes are filed with the Tax Administration using a self-

assessed tax return (e.g. tax return for employer contributions).

Tax returns are filed and contributions paid according to the business’s tax

period.

A return must be filed for each tax period

- even when there have been no activities or contributions during the tax period

Self-assessed taxes must be filed electronically.

One way to file tax returns and pay contributions is to use MyTax.

Self-assessed taxes include, for example, value

added tax (VAT) and employer contributions.

Self-assessed taxes

Tax period

As a rule, the tax period for self-assessed taxes for everyone is

one calendar month. This means filing tax returns and paying

contributions on a monthly basis.

If the business meets certain criteria, it can apply for an extended

tax period of one quarter-year, and also of one calendar year for VAT

– quarter-year: turnover limit EUR 100,000

– calendar year (VAT): turnover limit EUR 30,000

Self-assessed taxes

What is the due date for filing and paying taxes?

NOTE! The self-assessed tax return must arrive at the Tax Administration

on the due date

The due date for

filing and paying

self-assessed taxes is

the 12th of the month

What is the due date for filing and paying taxes?

Value added taxes are filed and paid

on the second month following the tax period

Employer contributions are filed and paid

on the first month following the tax period

Examples of tax returns to be filed in March:

January February March

12th

Self-assessed taxes

You can use MyTax to

– file self-assessed tax returns, e.g. VAT

– check your business’s status: balance, monthly summary

– receive reminders about due dates

– submit a bank account number

MyTax is a one-stop-shop

– The service will be expanded in late 2017:

income tax returns and prepayments by corporations

– Income taxation of individuals in late 2018;

e.g. self-employed persons can also file their income tax return using MyTax

Self-assessed taxes

Monthly summary

A summary is created once a month.

It is available in MyTax.

Upon request, the summary can also be delivered by post.

It is important to check the summary

– Check the comments too, if there are any

How to check the summary, see tax.fi

Self-assessed taxes

How to correct a self-assessed tax return

If the tax return you have filed contains an error, you can correct it

by filing a new replacement return for the tax period in question

The reason for the error must be stated in the replacement return

An alternative method for minor errors: if the error is less than EUR 500, it can

be corrected/recognised in the next return.

Errors must be corrected without undue delay.

Don’t worry!

Oops, I made

a mistake…

Self-assessed taxes

Filing a tax return late

If you miss the deadline for filing a self-assessed tax return, a late fee will be

charged. The late fee is calculated from the first day following the original due

date to the date of arrival of the tax return.

If the tax return is not filed by the specified time limit, the Tax Administration will

determine the amount of tax to be paid on the basis of an assessment.

In addition, a tax increase will be imposed for neglecting the obligation to file a

tax return.

Neglecting the obligation to file a tax return is also sufficient grounds for the Tax

Administration to remove a business from the Prepayment Register.

Self-assessed taxes

Late fee – a penalty for filing a tax return late

1 - 45 days more than 45

days

EUR 3 per day,

no more than

EUR 135

No

late fee

is imposed

+2%

of the amount of tax

filed late

No more than

EUR 15,000

per tax period

per tax type

First tax return

of the tax period

Replacement

return

+2%

of the amount of tax

filed late

Deadline missed by

Submit your business’s bank account number

We need the bank account number of your business in order to

pay any tax refunds due (e.g. VAT refunds).

Submit a bank account number or report any change of bank

account number in MyTax.

You can set a minimum limit for self-assessed tax refunds and the

payment date in MyTax.

A request for a refund of undue taxes can be submitted in MyTax

(Request for refund).

Basic information on

value added tax

I am generally

known as VAT.

What is VAT?

1. VAT is a consumption tax that the seller collects

from the buyer by adding it to the sales price of a good or service.

2. The business does not keep the VAT, which is remitted to the

government.

3. VAT is a self-assessed tax that is filed and paid according to the

business’s tax period.

Liability to pay VAT covers anyone engaged in selling or leasing goods or

services, or other comparable activities, in the form of a business.

• exceptions: turnover of less than EUR 10,000 and e.g. non-profit organisations

• the VAT reverse charge is applied in the construction sector and scrap metal industry

VAT percentages, i.e. tax rates

general tax rate: most goods and services

food, feed, restaurant and catering services

books, pharmaceuticals, exercise services, film screenings,

entrance fees to cultural and entertainment events,

passenger transport, accommodation services, and

royalties for television and public radio activities

24%

14%

10%

How to calculate and file VAT

Example:

The price before tax of the product you are selling is EUR 1,000

and the general tax rate of 24% applies.

VAT of 24% is added to the price, i.e.

1,000 x 24/100 = 240 euros.

The price, including VAT, is EUR 1,240.

How to calculate and file VAT

Basic information on

income taxation

Take care of the prepayment of tax for your business

Businesses are subject to the prepayment of tax

based on an assessment of income for each fiscal

year.

As an entrepreneur, you are responsible for the

assessment

Check the amount of prepayments

to avoid any surprises

Submit a notification of change of prepayment, if

necessary. In this way, you can avoid paying high

back taxes, for example.

The obligation to keep accounting records applies to all businesses

It is important that a business maintains up-to-date and reliable records of its

activities.

The key provisions concerning accounting are laid down in the Accounting Act.

The main purpose of accounting is to calculate the net income, keep the assets

of the business and its owners separate, and provide information on the

business’s status.

It is usually best to leave bookkeeping in the hands of a competent accountant.

The obligation to keep accounting records applies to all businesses

Double-entry, accrual accounting method

The source and use of money is recorded for each business transaction. The

entries show the reason for the movement of cash and the account affected

by the transaction.

At least two accounts must be adjusted when transactions are recorded in

the books.

Exception: self-employed persons may use the single-entry, cash-basis

accounting method, in which case the fiscal year must be the calendar year.

Taxes are based on the books

Business transactions must be recorded in the books in chronological order

and by subject matter; cash payments must be recorded without delay.

Records must be kept in such a manner that the necessary tax returns and

other notifications can be drawn up on the basis of up-to-date books.

The business’s income tax for the accounting

period is calculated from the revenue recorded in

the books, adjusted in accordance with provisions in tax legislation.

>> We recommend that you hire an accountant or an accounting firm!

Taxes are based on the books

Business tax return

Business transactions are

recorded during the fiscal year

on the basis of vouchers

in the accounts in the business’s

books.

Financial statements are

prepared after the end

of the fiscal year.

Corporate income tax return

Different types of business entities have their own tax return forms and deadlines for filing private traders and self-employed persons (5)

person companies (6A)

corporations (6B)

associations and foundations (6C)

Tax returns must be filed by the deadlines, see: Important dates

Read carefully through the instructions for filling in a tax return specific to your business (vero.fi)

Tax returns can also be filed electronically

– e.g. limited liability companies in Corporation Tax Online, to be changed to MyTax

– online forms for person companies, private traders and self-employed persons are available at vero.fi

Private

trader Person company

Limited liability company

Cooperative

Severability No No Yes

Income taxation

Divided into earned income and capital

income earned income: progressive taxation

capital income: 30%

(34% for the part that exceeds EUR 30,000)

Partners’ income

– divided into earned income and

capital income

Corporate income (20%)

Calculation basis for capital

income

Net assets plus 30% of wages and

salaries

Net assets plus 30% of wages and

salaries Net assets (mathematical value of share)

Calculation of net assets Only business-related assets and

liabilities

Severally by source of income;

partner-specific adjustments

All assets and liabilities;

shareholder-specific adjustments

Deduction of losses Can be transferred to the entrepreneur Only at the business Only at the business

Owner withdrawals Possible Possible Not possible

Payment of wages to the

entrepreneur No Yes Yes

Legal action between

business and owner No Yes

Yes, at current prices

Arbitration Act, Section 29

Calculation of profit/loss and net income for tax purpose

Revenues Expenses

= Profit

- losses from previous tax years

Revenues Expenses

= Loss

> <

Revenues higher than expenses: Expenses higher than revenues:

- losses deductible

from capital income

= Losses for the tax year

= Tax year’s net income

Taxable income is calculated by income source

Business

income source

Agricultural

income source

Personal

income source (source of income from other activities)

Taxable income is calculated

according to the Act on the Taxation

of Business Profits and Income

Taxable income is calculated

according to the Farm

Income Tax Act

Taxable income is calculated

according to the Income Tax Act

Example: Corporate income tax for private traders and self-employed persons

PROFITS

LOSSES

CARRIED FORWARD

NET INCOME FOR TAX PURPOSES

is divided based on the previous year’s net assets

CAPITAL INCOME SHARE

(20% of net assets or,

at the taxpayer’s request, 10%)

EARNED INCOME SHARE

(the residual amount or, at the taxpayer’s

request, whole net income)

-

=

Type of business and taxation

Find out more about how income taxation

differs between various types of business

entities and other details at vero.fi.

Do this before you set up a business.

Being an employer

Guidance:

Being an employer

Being an employer

An employer has obligations related to the payment of wages. Taxes must be

withheld from paid wages and health insurance contributions are paid by the

employer on the basis of wages.

Employer contributions are self-assessed taxes that are filed and paid to the Tax

Administration by the 12th day of the second month following the month in

which the wages were paid, unless the business has applied for an extended

tax period.

These returns must be filed electronically, e.g., in MyTax or Palkka.fi.

Video:

How to file employer contributions

Being an employer

For taxation purposes, an employer is referred to as a temporary or regular

employer.

– A business is a regular employer if it pays wages to two or more wage earners on a

permanent basis, or if it pays wages simultaneously to six or more wage earners, even if they

are employed on a temporary or short-term basis.

Regular employers are required to register in the Tax Administration’s

Employer Register and file returns monthly/quarterly, according to their tax

period.

Temporary employers file returns and pay employer contributions monthly for

months in which wages or compensation for work have been paid. Returns do

not have to be filed for months in which no such payments have been made.

Annual information return

An employer must file an annual information return on the wages paid, broken down by

wage earner, by the end of January of the year following the year in which the wages

were paid.

For example, wages paid on 31 January 2017 are recorded in the annual

information return for 2017 - even if the work was performed in 2016.

Electronically, if the return contains information on five or more wage earners

The payroll data in the pre-completed tax returns of wage earners is based on the data

provided in the annual information returns filed by employers.

The annual information return can be filed, for example, by using Palkka.fi, Ilmoitin.fi or

an online form.

Other important information…

Play fair – don’t forget the receipt!

When a business sells goods or services, a receipt or invoice must be given

to the buyer, indicating the amount of VAT.

The buyer may need it, for example, in order to deduct VAT.

For more information, go to vero.fi: Play fair: don´t forget the receipt

Statement of outstanding taxes?

If you conclude agreements in your business’s name, you may need a

statement of taxes paid / statement of outstanding taxes.

– the statement will show whether the filing and payment obligations have

been fulfilled

Such a statement can be easily ordered online at tax.fi (the form is available

in Finnish only) or by phoning

You can also make a standing order and receive a statement each month

Don’t forget that register entries can also be checked via the Business Information System (www.ytj.fi)

In the event of financial difficulties

When a business has difficulties paying taxes,

if certain conditions are met, it can submit a request for payment

arrangements.

A request for payment arrangements must be made before unpaid

taxes are transferred for collection through an enforcement

procedure.

For more information, go to tax.fi:

Payment arrangement

Summary

In summary:

Starting a business

Tax Administration’s registers

Start-up notification submitted to the Business Information System, BIS (at www.ytj.fi)

business is entered in the Trade Register (Finnish Patent and Registration Office PRH)

business can apply for entry in the Tax Administration’s registers

business receives a business ID

Start-up notification

Corporate income taxes

• Prepayment of tax based on an

income assessment

• Income tax returns are always filed

after the fiscal year has ended

refund of prepayments or back

taxes

Filing and paying taxes

• Prepayment Register

• VAT Register

• Employer Register

If your operations have

changed,

submit a notification of

change at www.ytj.fi

Self-assessed taxes

• e.g. VAT and employer contributions

• according to the business’s tax

period, which is usually one month

• the general due date is the 12th of

the month

• if necessary, annual information

return regarding, e.g. wages

Start using MyTax for your business

MyTax can be used to file self-assessed tax returns and pay self-

assessed taxes, as well as review the business’s status. MyTax also

reminds you about due dates etc.

Katso ID gives access to MyTax

Get your Katso ID on time and/or authorise your accountant to

submit notifications and file tax returns electronically on your behalf

Tax.fi: instructions and advisory services

Information on taxation by subject area, such

as a section on value added tax.

The main page for companies and

organisations includes a separate section for

new business enterprises.

Vero.fi also includes a

chat service, open on weekdays

from 9.00 am to 4.15 pm.

Our telephone service numbers are available

on the contact information page.

Contact us

Whenever you have any questions, contact our customer service.

You can reach us through our website’s chat service or by phoning one of our telephone service numbers.

Tax service for businesses: 029 497 051 Advise is provided via chat, e.g. on the Katso identification service website, if you need help with acquiring a Katso ID. The latest addition to our services is the Answer Bank, where you can find answers to a wide range of frequently asked questions. You can also submit your own questions.

New entrepreneur - frequently asked questions

Registering a business

When will I receive my business ID?

Will I receive notification once it has

been issued?

The business ID can be found in the

Business Information System (BIS) at

ytj.fi as soon as the processing of the

start-up notification for your business has

been completed, within two working

days.

The business ID is also provided in the

letter sent by the Tax Administration after

you have been entered in the Tax

Administration’s registers. However, the

processing of registrations takes about

three weeks.

Registering a business

Do I need to register in the

Prepayment Register?

Registering in the Prepayment

Register is recommended, because

being in the register will assure other

businesses that your business

handles its taxation matters as it

should.

VAT and employer contributions – tax period?

How do I know what my business’s

tax period is?

As a rule, the tax period of a business

is one month, unless an extended tax

period has been applied for

separately. The tax period is indicated

in the letter that you will receive after

your business has been entered in

the Tax Administration’s registers.

VAT

How do I calculate how much VAT I

have to pay?

How can I correct erroneous

information provided in the VAT tax

return?

The amount of taxes to be paid is

calculated by deducting the tax

included in VAT purchases from the

total VAT payable in each tax period.

Any errors in the VAT tax return can

be corrected by filing in a

replacement return for the tax period

in question. File a replacement return

to resubmit all of the VAT information

correctly.

Income taxation

How do I know when to file a

corporate income tax return?

Go to the important dates section on the Tax

Administration’s website at vero.fi (the link is

provided on the slides) – the information is

also available on the main page for

companies and organisations.

For limited liability companies, the answer is

simple: tax returns are filed within four

months of the end of the tax period. As a rule,

one person companies, for example, file their

tax returns at the beginning of April.

Income taxes

Do financial statements have to be

submitted when filing a tax return?

For self-employed persons (T:mi), this

is not required, but for others, such as

limited liability companies, it is.

Information in the financial

statements is used, in particular, to

verify the reliability of the tax return.