Tax changes in Finland in 2023
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Important tax changes in Finland in 2026
Taxes are the most important source of government revenue. According Government proposal supplementing the 2023 budget proposal from 19.9.2022, the State budget revenue for 2023 is estimated at EUR 72,5 billion, of which tax revenue will account for EUR 64,5 billion. Tax revenues are estimated to grow by approximately 33% compared to the budgeted for 2022.
In 2023, the tax revenue would be partly affected by the easing of the payment arrangements made to help companies deal with the impact of the COVID-19 pandemic. The payment arrangements had been simplified and the penalty interests on debts temporarily reduced, as a result, around 130 million of 2020, 2021 and 2022 tax revenue would be collected only in 2023. The majority of tax deferrals concern value added taxes.
Taxation of earned income
In connection with the Finnish reform of Health and social services (sosiaali- ja terveyspalvelu-uudistusta, sote-uudistus), the income tax rates of all municipalities in Mainland Finland will be reduced by 12.64 percentage points next year, whereas state taxation will be increased correspondingly (by an analogous percentage). The reform does not concern Åland.
The reform will be implemented in such a way that the taxation of individual taxpayers would not be tightened much at any income level. In order for this to happen, taxation may also be slightly reduced at some income levels (at the overall level, the tax changes related to Health and social services reform will reduce income taxation by EUR 310 million on an annual basis).
The total level of employee's social security contributions will increase, which tightens wage taxation. The medical contribution will increase by 0,07 percentage points and the daily allowance contribution of health insurance by 0.18 percentage points. The employee's unemployment insurance contribution and earnings-related pension insurance contributions remain unchanged.
In general, (taking into account taxes and tax-related payments), the wage earner's tax rates will tighten at many income levels. At certain random income levels, the tax rate will decrease with the change in the tax structure related to Health and social services reform. The tax rates for employees will change in total -0.1-0.5 percentage points depending on the income level, mainly in a tightening direction.
Next year, the pension taxation will be affected by Health and social services reform, as well as exceptionally high pension indexation due to the inflation. The earnings-related pension index to be increased by 6.8%, and National Pensions Index in-turn by 4.2% compared to 2022. Along with this, it is observed the tightening of tax rates, especially for pensioners with the highest incomes.
IN DETAIL: Estimation of the changes in payroll taxation, 2022-2023
| Salary 2022, euros / month |
Annual income 2022, euros |
Tax rate 2022,% |
Tax rate 2023,% |
Change in tax rate, % - points |
Easing (-)/Increasing (+) EUR / year |
| 1 600 |
20 000 |
14,0 % |
14,5 % |
0,5 % |
+100 |
| 2 000 |
25 000 |
18,9 % |
18,8 % |
-0,1 % |
-25 |
| 2 400 |
30 000 |
22,4 % |
22,6 % |
0,2 % |
+60 |
| 2 800 |
35 000 |
25,2 % |
25,1 % |
-0,1 % |
-35 |
| 3 200 |
40 000 |
28,0 % |
28.0 % |
0.0 % |
0 |
| 3 600 |
45 000 |
30,3 % |
30,4 % |
0,1 % |
+45 |
| 4 000 |
50 000 |
32,1 % |
32,3 % |
0,2 % |
+100 |
| 4 400 |
55 000 |
33,6 % |
33,9 % |
0,3 % |
+165 |
| 4 800 |
60 000 |
35,1 % |
35,5 % |
0,4 % |
+240 |
| 5 200 |
65 000 |
36,4 % |
36,8 % |
0,4 % |
+260 |
| 5 600 |
70 000 |
37,5 % |
38,0 % |
0,5 % |
+350 |
| 6 000 |
75 000 |
38,5 % |
38,9 % |
0,4 % |
+300 |
| 6 400 |
80 000 |
39,3 % |
39,7 % |
0,4 % |
+320 |
| 6 800 |
85 000 |
40,0 % |
40,5 % |
0,5 % |
+425 |
| 7 200 |
90 000 |
40,7 % |
41,1 % |
0,4 % |
+360 |
| 7 600 |
95 000 |
41,4 % |
41,8 % |
0,4 % |
+380 |
| 8 000 |
100 000 |
42,4 % |
42,7 % |
0,3 % |
+300 |
| 8 400 |
105 000 |
43,2 % |
43,5 % |
0,3 % |
+315 |
| 8 800 |
110 000 |
43,9 % |
44,2 % |
0,3 % |
+330 |
| 9 200 |
115 000 |
44,6 % |
44,9 % |
0,3 % |
+345 |
| 9 600 |
120 000 |
45,3 % |
45,5 % |
0,2 % |
+240 |
| 10 000 |
125 000 |
45,8 % |
46,0 % |
0,2 % |
+250 |
IN DETAIL: Estimation of the changes in Pension taxation, 2022-2023
| Pension 2022, euros / month |
Annual income 2022, euros |
Tax rate 2022,% |
Tax rate 2023,% |
Change in tax rate, % - points |
Easing (-)/Increasing (+) EUR / year |
| 1 300 |
15 600 |
9,3 % |
9,7 % |
0,4 % |
+62 |
| 1 500 |
18 000 |
13,8 % |
14,2 % |
0,4 % |
72 |
| 1 750 |
21 000 |
18,0 % |
18,1 % |
0,1 % |
+21 |
| 2 000 |
24 000 |
20,8 % |
20,2 % |
-0,6 % |
-144 |
| 2 250 |
27 000 |
23,3 % |
22,3 % |
-1,0 % |
-270 |
| 2 500 |
30 000 |
24,7 % |
23,4 % |
-1,3 % |
-390 |
| 2 750 |
33 000 |
25,6 % |
25,4 % |
-0,2 % |
-66 |
| 3 000 |
36 000 |
27,3 % |
27,2 % |
-0,1 % |
-36 |
| 3 500 |
42 000 |
30,1 % |
30,0 % |
-0,1 % |
-42 |
| 4 000 |
48 000 |
31,6 % |
32,6 % |
1,0 % |
+480 |
| 4 500 |
54 000 |
33,6 % |
34,5 % |
0,9 % |
+486 |
| 5 000 |
60 000 |
35,2 % |
36,1 % |
0,9 % |
+540 |
| 6 000 |
72 000 |
37,7 % |
38,4 % |
0,7 % |
+504 |
In-Kind Benefits or Fringe Benefits
According to the Tax Administration’s official decision on valuation of employer-provided benefits, there is still unchanged rules concerning meals: employees are allowed to pay not only for the lunch itself but for its delivery with the tax-exempt allowance.
As for company cars provided to an employee in the form of a benefit, the calculation is now based on 2 cents/kilometer higher operating costs due to increase of fuel prices.
Regarding company cars' automotive accessories, the tax-exempt threshold is raised from €850 to €1 200.
Work-income tax credit for people over 60
The work-income tax credit based on wage and self-employment income is increased by age for those over 60 years old. The tax credit from work income is increased by:
- 200 euros for those aged 60-61,
- 400 euros for those aged 62-64 and
- 600 euros for those aged 65 and over.
The tax credit for disability
The disability tax credit is no longer part of individual income taxation as of 1 January 2023. The disability credit in Åland Islands municipal taxation remains in force.
Value added tax, VAT
The VAT rate of electric power is temporarily reduced from the general 24% to lowered 10 % from 1 December 2022 to 30 April 2023. The reduced VAT rate does not apply to the electricity transmission price, but only for electricity itself.
Passenger transport, on the other hand, will be moved from the scope of the 10 % reduced tax rate to the 0% tax rate for the period from 1 January to 30 April 2023. A temporary change will apply to the value added tax for domestic train, bus, taxi, plane and ship transport.
The Government's proposal to the Parliament on the temporary amendment of the Value Added Tax Act HE 194/2022 (in Finnish)
Tax credit for electricity expenses. Electricity deduction
Taxpayer is entitled to the tax credit if electricity costs are high in his/her permanent home. The tax credit of 60% is available to taxpayers to the extent that the amount paid exceeds €2 000 threshold during the period from 1 January 2023 to 30 April 2023 and is a maximum of €6 000. This is a temporary measure, which could be available for tax year 2023 only.
Maximum credit is €2 400 per 1 permanent residence. No tax credit is available concerning electricity transmission. There is an own-liability threshold of €100, which is calculated only once and applied jointly for the electricity credit and all other tax credits for household expenses.
In other respects, the tax credit for household expenses remains unchanged.
In addition, a temporary subsidy for electricity costs is intended for households. This assistance will be allocated to those who cannot take full advantage of the tax credit.
Tax deduction for commuting expenses. Daily trips between home and work
The temporary increase in the commuting expense tax deduction (maximum deductibility of €8 400 in paid expenses for daily commutes and a deduction of €0.30 per kilometre granted for those driving their own motor vehicle to work) will be continued under the current conditions in 2023.
Tax deductions for home loan interest
In 2023, the interest expenses of home loans will no longer be deductible at all (for your own apartment). The size of this deduction has diminished step by step since 2012.
Tobacco tax. Excise duty on tobacco
The excise duty on tobacco will be increased semi-annually in 2023. The increases (in January and July) will affect the price of a pack of cigarettes by a total of about 50 cents. The price of a pack of snuff (30 g) would increase by 1.5 euros.
On average, the excise duty on cigarettes will increase by 13%, on roll-your-own tobacco by 40%, on pipe and cigarette tobacco by 24%, and on cigars and cigarillos by 31%.
Paraffinic diesel and heating biogas
The tax support for paraffinic (synthetic) diesel (2 cents/l in 2022) will be removed permanently and the lowering of energy-intensive companies’ tax refunds will continue in 2023, as previously decided.
The tax relief on the heating biogas will be moderately reduced by imposing on it an energy content tax equivalent to the EU minimum tax.
Tax on waste
The level of tax on waste will be increased (+€10 per one tonne of waste, from €70 to €80) and its tax base will be expanded. Starting 2023, the waste containing gypsum would be also subject to waste tax. The changes that will come into force in 2023 will increase the waste tax revenue by €1.5 million.
Excise duty on soft drinks
The government is changing the excise duties on soft drinks in a health-based direction. In practice, this means lower duty on sugar-free and low-sugar soft drink, while the excise duty on drinks containing more sugar (8 grams/dl or more) will increase. The taxation of drinks containing 5 to 8 grams of sugar/dl will remain unchanged.
It is assumed to be 6 different excise duty classifications instead of the current 2 categories:
- 0 – 0,5 g/100 ml: 9 snt/l
- 0,5 – 2,5 g/100 ml: 16 snt/l
- 2,5 – 5 g/100 ml: 24 snt/l
- 5 – 8 g/100 ml: 32 snt/l
- 8 – 11 g/100 ml: 40 snt/l
- > 11 g/100 ml: 48 snt/l
The changes to the tax base will reduce the tax revenue from the soft drink excise duty by approximately € 2 million.
The amendments are intended to enter into force at a time determined by a Government Decree, after the confirmation of the compliance of the proposed soft drink excise duty model with EU state-subsidy restrictions has been received from the European Commission.
The Government's proposal to the parliament on amending the law on soft drink tax HE 280/2022 (in Finnish)
Fairway dues and lottery tax
The halving of fairway dues and temporary reduction of the lottery tax will continue.
Constructive dividend. Hidden dividends
According to the amendment of the tax law, the constructive dividends will be taxed entirely as earned income from the beginning of 2023.
The Government's proposal to the parliament for legislation on expanding the taxation of hidden dividends HE 227/2022 (in Finnish)
Capital gain taxation of indirect real estate investments
The tax base will be expanded with respect to capital gains accrued by foreign investors that have invested into the Finnish real estate indirectly via another company, be that company Finnish or foreign one.
According to the government proposal, the capital gains received from the disposal of shares of a foreign real estate holding company (in Finnish, kiinteistöholdingyhtiö) and shares of a limited partnership (in Finnish, kommandiittiyhtiö) investing in real estate would also be considered as income received from Finland. The profit received from the transfer of assets managed for the benefit of another person would also be income received from Finland.
The amendment to Section 10 of the Income Tax Act / Tuloverolaki 30.12.1992/1535 (in Finnish)
The rights to deduct interest
An amendment to the Act on the Taxation of Business Income (in Finnish, Laki elinkeinotulon verottamisesta 360/1968) changes the rules concerning deductions based on balance-sheet comparison. The latest change involves a limitation of the maximum amount of interest payments for which a company can get a deduction. This deduction rule cannot now be used in situations where the consolidated balance sheet indicates that at least 20% of interest payments have gone to parties that own a significant part of the group’s shares. Another change allows for more extensive deduction rights for companies that carry out work related to development of infrastructure.
The Government's proposal to the parliament on amending § 18 b of the Act on the Taxation of Business Income HE 202/2022 (in Finnish)
Research and Development combined deduction
The new tax incentive for research and development enters into force from the beginning of 2023. The combined deduction consists of a basic additional deduction based on the amount of research expenses and an increased additional deduction based on the increase in expenses.
Legislative initiative into a law on additional deductions in taxation based on research and development expenditure and on the amendment of Sections 12 and 12f of the Tax Accounting Act and Sections 124 and 124b of the Income Tax Act, as well as related laws LA 69/2022 (in Finnish)
Tax-exempt allowances for business travel expenses
Tax-exempt domestic full per diem allowance and kilometre allowance increase due to high inflation. The Tax Administration has confirmed the amount of tax-exempt domestic full per diem allowance at 48 euros (business trips in Finland) and the amount of partial per diem allowance at 22 euros for the year 2023. The tax-exempt kilometre allowance is 53 cents per kilometer when using your own car, and the meal allowance (employer-provided meal money) is 12 euros.
Read more: "Finnish Tax Administration: kilometre and per diem allowances"
Social insurance contributions
Changes to social insurance contributions for 2023: Vero.fi
More information on taxes and its changes at Finnish Tax Administration website.
The full information and the source text can be found at Veronmaksajat website.
Published 12.01.2023, FINREPO
