The government outlined a tax package that will strengthen general government finances by about EUR 100 million. Additional tax revenue will be generated from measures to strengthen and expand the tax base and from combating tax avoidance. The State budget revenue for 2022 is estimated at EUR 57.9 billion, of which tax revenue will account for EUR 48.7 billion. The revenue estimate is based on the August forecast of the Ministry of Finance. Tax revenue is expected to grow by approximately 8,1 % in comparison with the budgeted figure for 2021.
According to the Finnish Government's budget session and as a result of previous decisions, the following taxation changes are coming in 2022:
Taxation of earned income
According to the Government Programme, the index adjustments to earned income taxation will be implemented in such a way that the projected general increase in earnings level does not increase taxation. Thus, there will be no increase in taxation of earned income.
The total level of employee's social security contributions will decrease slightly, as the health insurance health care contribution will decrease by 0,15 percentage points, the health insurance daily allowance contribution will decrease by 0,18 percentage points and the unemployment insurance contribution will increase by 0,1 percentage points. The employee's earnings-related pension insurance contributions remain unchanged.
In 2022, the municipal tax will increase in 16 and decrease in 12 municipalities. The municipal tax rate will remain unchanged in 281 municipalities. The average municipal tax rate will also remain unchanged at around 20%.
In general, payroll taxation is expected to ease slightly from 2021 levels, employees' taxation will be lightened at about 0,1 percentage points. The tax rates for pensioners are also decreasing by approximately the same amount.
The unemployment insurance contribution will be withheld only if the employee is an adult. The change concerns wages payable as of 1 August 2022.
IN DETAIL: Estimation of the changes in payroll taxation, 2021-2022
| Salary 2021, euros / month | Tax rate 2021,% | Tax rate 2022,% | Change in tax rate, % - points | Easing , EUR / year |
|---|---|---|---|---|
| 2 385 | 22,9 % | 22,8 % | - 0,1 % | 30 |
| 3 578 | 30,8 % | 30,7 % | - 0,1 % | 45 |
| 5 963 | 38,9 % | 38,8 % | - 0,1 % | 75 |
| 9 541 | 45,7 % | 45,6 % | -0,1 % | 120 |
Tax credit for household expenses
The maximum tax credit for household expenses will be increased from EUR 2 250 to EUR 3 500 and the reimbursement (compensation) percentage from 40 to 60%. These changes apply to cleaning, household, care and nursing work in 2022-2023 and the abandonment of oil heating in 2022-2027.
For other renovation, maintenance and improvement work, the household deduction remains unchanged.
Tax deductions for home loan interest
In 2022, only 5 % of the interest on home loan will be deductible from taxes, while in 2021 you could be able to deduct 10% of the home loan interest. The right to deduct home loan interest will be gradually cut so, that in 2023 there will no longer be such a right at all.
IN DETAIL: Cutting of tax deductions for home loan interest in 2022, Examples
Home loan 100,000 euros
| Mortgage interest rate, % | Mortgage interest rates, € / year | Tax benefit 2021, € / year | Tax benefit 2022, € / year | Impact of change, € / year |
|---|---|---|---|---|
| 0,40 % | 400 | 12 | 6 | -6 |
| 0,80 % | 800 | 24 | 12 | -12 |
| 1,0 % | 1 000 | 30 | 15 | -15 |
| 2,0 % | 2 000 | 60 | 30 | -30 |
Home loan 300,000 euros
| Mortgage interest rate, % | Mortgage interest rates, € / year | Tax benefit 2021, € / year | Tax benefit 2022, € / year | Impact of change, € / year |
|---|---|---|---|---|
| 0,40 % | 1 200 | 36 | 18 | -18 |
| 0,80 % | 2 400 | 72 | 36 | -36 |
| 1,0 % | 3 000 | 90 | 45 | -45 |
| 2,0 % | 6 000 | 180 | 90 | -90 |
Mortgage stock average interest rate 0.79%; July 2021; source: Bank of Finland
Company car
The taxable value of low-emission company cars will be reduced by EUR 85 per month for the years 2022–2025. The change applies to the cars with measured CO2 emissions of 1-100 g / km, which in practice means hybrid and natural gas cars.
Alcohol tax
The reduced rate for low-alcohol will be extended to beer with a strength of 2.9-3.5%. Previously, the reduced tax rate has been applied to beer with a strength of 0.6-2.8%. At the same time, the reduced tax rate will be heightened to make these changes tax-neutral.
Thus, the changes will lightly tighten taxation on beer with a strength of 0.6-2.8%; and slightly ease the taxation on beer with a strength of 2.9-3.5%.
IN DETAIL: Estimation of the effects of alcohol tax changes in 2022
| Alcohol tax change | +-0 m. € |
|---|---|
| Beer, 33 cl, 0.6 % | +1 € |
| Beer, 33 cl, 2.8 % | +4 € |
| Beer, 33 cl, 2.9 % | -12 € |
| Beer, 33 cl, 3.5 % | -14 € |
Tobacco tax
The tobacco tax will also be increased semi-annually in 2022 and 2023. The increases in tax levels are intended to collect a total tax revenue of EUR 117 million.
The increases in 2022 (January and July) will affect the price of a cigarette pack 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%.
Car and vehicle tax
Fully-electric cars (all-electric vehicles) will be exempted from the car tax and their basic annual vehicle tax will be increased by EUR 65 per year. The increase in annual vehicle tax does not apply to all-electric vehicles previously taken into use. The car tax exemption and vehicle tax increase apply to cars registered after October 1, 2021.
Peat and paraffinic diesel
As agreed at the government spending limits discussion, the limit for tax-exempt use of peat fuel will be increased to 10 000 megawatt hours. The change applies to all generating plants. In addition, will also be provided a floor price mechanism for peat.
The reductions in the tax relief for paraffinic (synthetic) diesel and the tax refund for energy-intensive companies will continue in 2022, as previously decided.
Biogas
A tax levy will be placed on biogas used in transport. The use of biogas for heating, on the other hand, remains tax-free. If biogas does not meet the sustainability criteria, it will be subject to tax whether it is used for heating or for transport.
At-home Covid tests temporarily exempted from VAT
Both home tests sold in Finland and home tests imported from abroad will be temporarily exempted from VAT. The purpose of the VAT exemption is to lower the price for home tests and thereby make self-testing easier. Thus, the price of a 5-euro home test would be reduced by about 1 euro.
The legal act is in force for the period from 1 January 2022 to 31 December 2022.
Fairway dues and lottery tax
The halving of fairway dues will continue. Lottery tax will be reduced.
Electricity tax
Data centres, heat pumps and electric boilers that generate heat for the district heating network will be transferred to the lower electricity tax category II. Data centres outside the district heating network that meet the criteria for energy efficiency and energy utilisation and building-specific heat pumps of industrial size are also entitled to a reduced electricity tax. The electricity tax reduction also applies to recirculating water pumps in geothermal heating plants. The changes will be brought into effect from the beginning of 2022, provided that the necessary approval has been secured from the European Union.
Recycling industry and fish farming
The recycling industry will be transferred to the industrial electricity tax category from the beginning of 2022. Fish farming will be included in the agricultural energy tax refund system, that will reduce the electricity tax to the industrial electricity tax category, provided that the necessary approval is obtained from the EU.
Incentive for cooperation in research activities
Companies may make an additional tax deduction of 150% in their taxation for 2022-2027 for research and development expenditure that is based on research and development cooperation between companies and research organisations.
Changes in Finnish taxation that have to come into force on a later, 2023 - 2025
- Mine and capital gains tax:
In 2023, will be imposed a separate mine tax and a capital gains tax for individuals that will broaden the Finnish tax base because capital gains on the sale of assets accumulated in Finland will be taxed in Finland even in situations when assets are relinquished while living abroad.
A mine tax will be introduced instead of an increase in the electricity tax category in mining operations. 60 % of the mine tax revenue will be directed to the municipalities where the mines are located. The target tax revenue is EUR 25 million per year. - Real estate investments of foreign funds:
Gains derived from the real estate investments of foreign funds will be taxed as broadly as possible from the beginning of 2023. - Excise duty on soft drinks:
Preparation aimed at introducing a health-based tax will be launched. This new tax is aimed at promoting public health. Health-based tax will be imposed on food, based on the content of sugar, hard fat and salt.
The excise duty on soft drinks will be amended in a health-based direction, the changes enter into force in 2023. At the same time, it will be assessed whether berry and fruit juices can be excluded from the scope of the tax. The changes relate to the preparations for the subsequent introduction of a broader health-based tax. - Investment in machinery and equipment:
To support growth and investments, the Government is extending the temporary double depreciation rules for machinery and equipment to 2024–2025.
See also:
Kilometre and per diem allowances in 2022
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 and Finnish Government website.
Published 16.11.2021 (updated 08.12.2021, 13.01.2022), FINREPO