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Taxation of enterprises in Finland

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Taxation of enterprises in Finland

You are planning a new business project in Finland. What you have to know about peculiarities of Finnish taxation? Articles presented on this page reveal the current issues of taxation in Finland, determined by legislative acts and regulations. Useful links and resources give you an overview of the main principles concerning this important aspect of business planning.

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Main content

  1. Taxation of a private entrepreneur in Finland
  2. Business Taxation in Finland
  3. Corporate income tax
  4. Tax prepayment: companies and corporations
  5. Value-added tax (VAT) in Finland
  6. Value-added tax obligation
  7. Value added tax exemptions and VAT-free operations
  8. VAT register and identifier of the enterprises in Finland
  9. Online VAT calculator. Calculate VAT in Finland

Taxation of a private entrepreneur in Finland

Receiving their first income, many entrepreneurs start to surface with a lot of questions related to taxation. Taxation means the order of interaction of an entrepreneur with the tax service. In order to simplify the understanding of the taxation system in Finland and to understand how it is carried out, we will give some main tips and general explanations within the framework of this topic. You can get all needed information at Finnish Tax Administration website and Ministry of Finance website.

The result of the business of private entrepreneur is the difference between taxable income and tax-deductible expenses . These deductions reduce the total amount of taxes you must pay.

The result of business activity is divided into two parts: entrepreneur' earned income and capital income based on company’ net worth. Both incomes are taxed separately. Net worth is the difference between the assets and liabilities of the business.

Business Taxation in Finland

The revenue of the private businessman is taxed as an entrepreneur's income.

The profit from the business partnership is taxed as a co-owner's / shareholder's income in accordance with the taxation regulations for the shareholder/ co-owner. Business partnerships may be in the form of general partnership or limited partnership. Abbreviations: AY (Avoin yhtiö - general partnership) and KY (Kommandiittiyhtiö - limited partnership)

Communities, such as joint-stock company/limited company, are separate taxpayers who pay their corporate income tax. Abbreviations: Oy (Osakeyhtiö - limited company) or Oyj (Julkinen osakeyhtiö - public limited company).

The dividends are taxed as income of a shareholder.

Corporate income tax

The corporation tax is the income tax paid by limited companies and other entities. This tax is equal to 20% of the taxable income of the corporation.

The taxable income of the corporation is the difference between taxable income and tax-deductible expenses.

Thus, corporations which have to pay corporation tax are the following: limited liability companies, cooperatives, statutory corporations, associations, institutions, foundations and housing companies.

The corporation tax liability of the general government, non-profit public associations and institutions is limited to their business and real estate income.

Tax prepayment: companies and corporations

Income from business activities or other income-generating activities must be subject to tax prepayments (prepay).

An enterprise has to pay advance tax on their expected profit. Entrepreneur follow up his income in the course of year and correct the previously made estimations if necessary. Thus, when you start a business, you have to estimate your future income and expenses. Then you submit your data to the Tax Administration and receive Tax prepayment decision and payment instructions.

Limited liability companies and cooperatives taxed at 20% of income.

Associations (yhdistys) and foundations (säätiö) pay income tax depending on whether it is a non-profit organization or not.

A non-profit association or foundation pays income tax:

  • from business activities at 20% of income
  • from real estate or agriculture at 8.87% of income

Other associations or foundations pay income tax at 20% from all its activities.

Value-added tax (VAT) in Finland

Anyone who engaged in the business, for example, sells goods or services, rents or performs similar activities has to pay value-added tax (VAT). Value Added Tax Law / Arvonlisäverolaki 30.12.1993 / 1501 (in Finnish) ; and (in English) ; also Value Added Tax, Tax Administration

  1. The sales are always taxable unless otherwise specifically provided by law
  2. VAT is a consumption tax
    • the consumer pays the amount of VAT on the cost of the product or service and the entrepreneur pays it to the State. It means that entrepreneur is VAT-liable.
  3. The Finnish VAT Act applies to:
    • the sales of goods and services in the form of business
    • the importation of goods, imported goods
    • Intra-EU acquisition of goods/ purchase of goods from EU countries

Value-added tax obligation

A limited liability company and co-operative must register in the Tax Administration Register as VAT payer if:

If the financial period is shorter or longer than 12 months, the turnover is converted to 12 months' turnover.

Value added tax exemptions

There are some activities mentioned in the legislation that are tax-exempted. (Chapter 4 of the Value Added Tax Law).

  • for example, sales of real estate or health/medical services and social welfare services
  • if the company sells exceptionally such kind of goods or services, it is not obligated to pay VAT.

VAT-free operations

The company does not pay VAT if it has minor activity in business operations:

  • The minimum level of company's activity is determined by the turnover of the 12-month period.
  • The turnover has to be not more than EUR 20 000 (from year 2025)

However, the company may register as VAT payer, if it wishes so to do.

VAT register and identifier of the enterprises in Finland

1. When a company is registered as VAT payer in register, it has the seller's Business ID (Business Identity Code /Y-tunnus). The business ID or corporate identity code (Y-tunnus) is the identifier used by the authorities to identify the company or entity. The business ID consists of eight digits, the last of which is a verification number, such as 2166512-5. The Business ID is given by PRH (Trade Register) or the Tax Administration.

2. In trade between EU countries, the VAT number consists of the Finland's country code FI and the company's Y-identifier or Y-ID, excluding the dash preceding the last digit. For example, if the company's ID 2166512-5, then the VAT number is FI21665125. Verification of VAT numbers, Tax Administration

3. You can register your company and get Business ID by making a start-up notification online or using paper form (Y-form).

  • In the case of establishing a new company, you have to use Y1 – form.
  • If the company already has a business ID, registration will be made using the Y4 notification form.
  • A limited liability company can also be registered electronically through the YTJ service.

Submit a start-up notification:

4. Enrollment in the VAT register must be made before the taxable activity begins.

In the Y-form you have to mention the actual date when your company starts the VAT activity.

You can make registration as soon as you start to make purchasing for your VAT activity.

Tasks for thinking. Taxation, Value Added Tax (VAT).

The following tips can help to prepare business plan, define business strategy and achieve goals:

  • Find out if your business is liable to pay VAT?
  • Try to explain why your company has to pay VAT or not liable to pay it.
  • Make Value-added tax calculations. You can use our Online VAT calculator.

Online VAT calculator. Calculate VAT in Finland

You can easily calculate VAT using our online calculators in English or in Russian

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