Important tax changes in Finland in 2021

According to the Finnish Government's Draft Budget and as a result of previous decisions, the following taxation changes are coming in 2021:

Taxation of earned income

According to the government's draft budget, the index of wage and salary earnings, which measures the rise in the nominal earnings of full-time wage and salary earners, will be increased by 2.5% in 2021. Thus, nominal earnings are expected to increase by 2.5% in 2021.

At the same time, the employee's social security contributions will increase slightly. The Unemployment insurance contribution will increase by 0.15 percentage points and the health insurance daily allowance contribution will increase by 0.18 percentage points. The earnings-related pension insurance contribution and health insurance health care contribution remain unchanged.

In general, payroll taxation will increase slightly and employees' taxation will be tightened by 0.2–0.3 percentage points at various wage levels in 2021.

The tax rates for pensioners will also remain roughly unchanged.

Tax deductions for home loan interest

In 2021, 10% of the interest on home loan will be deductible from taxes, which is at 5 percentage points less than in 2020. The right to deduct home loan interest will be gradually cut so, that in 2023 there will no longer be a right to deduct at all. In 2022, only 5 % of home loan interest will be deductible.

Employee benefits

The tax value of all-electric cars used as company's cars will be reduced by 170 euros per month for the years 2021-2025.

The charging advantage for electric cars at the workplace and at public charging points is provided as a tax-free benefit for the years 2021-2025. The charger for a company's electric car would be considered as a part of the optional equipment for the company car.

Taxation of an employer-subsidized commuter ticket would be simplified by setting the maximum limit for the tax-free benefit at EUR 3 400, while removing the part between EUR 300 and EUR 750 which is considered as taxable income. Currently, employer-subsidized commuter tickets are a tax-free benefit for employees up to 300 euros as well as from 751 to 3,400 euros.

The bicycle (for official use) is provided with a tax-free benefit of up to EUR 1,200 per year.

Fuel taxes

As set out in the Government Programme, the tax increase on heating fuels will enter into force at the beginning of the year 2021, which tightens energy taxes by a net amount of EUR 105 million per annum. The heating costs of an oil-heated detached house / private house (consumption 2,200 liters / year) will increase by approximately EUR 74 per year with the tax increase. The heating costs of a district-heated detached house / private house increase by an average of approximately EUR 38 per year.

The tax subsidy for paraffinic diesel (5 cents / l) would disappear out gradually by 2023; in 2021, the tax subsidy will be cut by 1 cents / l.

Alcohol tax

Excise duties on alcoholic beverages will be increased by EUR 50 million in accordance with the government's program. If the increase is passed on entirely to prices, it will raise the price of the alcoholic beverages.

Tobacco tax

Tobacco and nicotine products tax will gradually increase during the Government's forthcoming term of office. Tobacco taxation will be increased semi-annually also in 2021. Tobacco tax increase made in 2020-2021 will bring about half of the EUR 200 million planned in the government program, i.e. EUR 100 million.

The tax increases in 2021 will raise the price of a pack of tobacco by a total of about 45 cents.

VAT registration threshold

The VAT registration threshold will be raised from EUR 10,000 to EUR 15,000 from the beginning of 2021.

Update (26.12.2024): Starting January 1, 2025, companies will be required to register for VAT if their turnover exceeds €20,000, with the turnover now being calculated based on the calendar year instead of the accounting period.

Industrial electricity tax

The Government takes measures to support industries: electricity tax will be reduced to the minimum level allowed by the EU in 2021. At the same time, the tax refund for energy-intensive industries (EIIs) will be phased out within a four-year period so, that from the year 2025 companies will no longer be entitled to a refund.

Mileage allowances and per diem allowances

The full per diem allowance for trips longer than 10 hours within Finland is 44 euros and partial per diem allowance for trips longer than 6 hours within Finland is 20 euros. Per diems for trips to other countries depend on country. Meal allowance also known as 'Meal money' is 11.00 euros and kilometer allowance (or mileage allowance) is 44 cents per kilometer.

The full information and the source text can be found at Veronmaksajat website.