Business taxes: Tax guide for new entrepreneurs

The start-up notification and official registrations

When you set up a company, submit a start-up notification and request entry into the Tax Administration’s registers. If you submit the notification electronically, the Business ID will be issued to you without delay. 

The start-up notification and official registrations

Income tax and prepayments

The profits of your business are subject to income tax. The way you pay this tax is in the form of prepayments. This means payments you will already need to pay during the ongoing year.

The amounts will be based on an estimate you provide concerning your company's future profits. The final income tax for the year will be determined later, when the accounting year has closed and details on the year’s profits have become available. The paid-in prepayments paid will be taken into account in the final tax assessment.  

The Tax Administration does not impose prepayments automatically. Instead, you must request it based on the results of your estimate. 

Log in to MyTax to ask for prepayments. It is advisable to do this as soon as you start your business operation and as soon as you can make an estimate concerning the year’s profits. After you have sent the request, you will receive a prepayment decision. This is the Tax Administration’s decision that determines the instalments and the due dates. You will also receive instructions for payment.

During the year, as you conduct business, you should monitor how the estimate you had given is matching with the actual profits. If they do not match, you can use MyTax to request your company’s prepayments to be determined again. If by the end of the year, too little prepayment has been made, you will have to pay the missing amount in the final tax assessment. In the reverse case, if too much has been paid, you will receive a refund. 

Do not leave any of the prepayments unpaid. If the amount is too high, request a change in MyTax. A late-payment interest will be collected on any unpaid prepayments. 

Read more about prepayments

The effect of the business entity’s legal form on income taxes

The form of the company affects the way income tax is paid.

Businesses based on self-employment (T:mi) and self-employed agricultural activities

If you operate trade or business as a self-employed person (perhaps having a business name (toiminimi; firma) registered) or as an agricultural operator, the profits coming from your business/agriculture are your personal income. You must pay income tax, either with a prepayment schedule or by withholding, based on a tax card. The amount of income tax will depend – in addition to the taxable profits of the business/agriculture – on all other income for the tax year such as any wages you receive from other sources, any start-up grant you receive, and the amounts of tax that your employer or payor had withheld.

If you have a small business, you can submit a request for a tax card where the withholding percentage rate would include both your earned income and capital income from business. 

In general, income from business activities will be considered earned income for the business owner. It is subject to progressive income tax, in other words, the percentage of income tax increases as the income increases.

If, in addition to its activity in business, your company also is an owner of property or assets, some of the income may become taxed as capital income.

General partnerships, limited partnerships

If you are partner in a partnership, its profits are treated as your personal income. You need to pay prepayments. How much you need to pre-pay depends on the taxable profits from the partnership’s business and on all your other income during the tax year, too, including wages you receive from other sources, any start-up grant you receive, etc.

A limited liability company

If the business entity’s legal form is limited liability company (osakeyhtiö; aktiebolag), the income tax is 20% of the company’s profits for the year. The company’s profits do not affect your personal tax assessment. You – as an individual taxpayer – would need to pay tax only if you draw dividends or salaries from the limited company that you own.

Value added taxes

The value-added tax (VAT) is a consumer tax payable on almost all goods and services.

If the net sales (= turnover) exceeds €20,000 over the course of a calendar year, the company must have a VAT registration. As a result, the company will be VAT taxpayer.

Read more about VAT and how to register for VAT

After your company has become a VAT-registered company, you can add the value-added tax to the selling price of the services or goods that you sell. You will have an obligation to issue a receipt or an invoice to all your customers, and the value-added tax must be indicated clearly.

The VAT that you charge this way is not your company’s revenue. Instead, you need to declare it as value-added tax, collected on selling, and pay it on to the Tax Administration. This is done once during every VAT reporting period. Your tax reporting period can be one month, one quarter or one year. If it is one year, it means that you need to file and pay VAT once a year.

For the majority of goods and services, the percentage rate of VAT is 25.5%. The VAT rate is 10.5% and 10.0% for certain distinct products and services.

Read more about VAT

Income tax returns, financial management and accounting

As a businessperson you are responsible for the company’s management and accounting. This means that you make sure that the books and records are kept in a timely manner. You also need to make sure that all tax returns and tax payments are made on time.

You have the option to manage these issues yourself – or engage the services of an accountant or accounting firm. However, although you might outsource your accounting work, the legal responsibility for the tax-return submittals and payments will still fall on you.

Basics of accounting and management: bookkeeping, the accounting period, the tax period

What are the tax returns you need to submit?

There are different kinds of tax returns related to business: 

The income tax return

Send the company’s income tax returns on time. This also applies to times when you have no activity. Read more: Tax returns 

The VAT return

If your company has a VAT registration, you need to submit a VAT return for all reportable tax periods. This also applies to times when you have no activity. As soon as you have submitted the company’s application for VAT registration and the company becomes VAT registered, you have the duty to file VAT returns. Read more: Instructions for completing a VAT return

Employer’s contributions

Submit the required reports on employer contributions to the Incomes Register. When your company is registered as an employer paying wages regularly, you have to send the reports even for periods when no wages had been paid. Read more: Instructions for filing and paying employer contributions

Making wage payments – your role as an employer 

Whether you can pay wages to yourself depends on the legal form of your company. You become treated as an employer if you pay wages to someone.

Business or agriculture based on self-employment: you cannot draw salaries or wages out of the company

If you are a self-employed professional, a business operator (T:mi) or an agricultural operator, you cannot pay wages to yourself. Instead, you can make withdrawals from your company's bank account (yksityisotot; privatuttag). There is no need to withhold a tax from the private withdrawals. Instead, the profits coming from your business/agriculture are subject to tax, and you pay the tax in the form of prepayments.

Being a self-employed person you cannot pay wages to your spouse or to your child under the age of 15. If your spouse participates in the work of your business/agriculture, the profits may be divided between your spouse and yourself. If you do so, you must indicate the proportionate split between the two of you on the income tax return.

There is no need for you to obtain a registration as an employer if your company has no other people working for it, except yourself and your spouse or child (whose age is under 15 years).

Limited companies, general partnerships, limited partnerships: to draw salaries and wages is possible

You can pay wages to yourself if the company’s form is one of the following: a limited liability company, a general partnership, or a limited partnership In addition, you can have your company give you fringe benefits. You might consider a telephone benefit, a lunch benefit or a company car benefit.

If you decide to draw salaries or wages to yourself, you need to have a tax card for wage income. 

Your company may also pay you certain reimbursements for business travel expenses. Tax-exempt reimbursements include per diem allowances, kilometre allowances, and others.

Further information 

Instructions for requesting a tax card for wage income

Kilometre and per diem allowances

Fringe benefits

When to request registration as an employer?

For purposes of taxation, an employer can be either regular or “casual”, meaning one that pays out wages on a short-term basis, for example, to a temporarily employed worker. Submit an application for registration with the register of employers only if you are a regular employer. You are a regular employer if, for example, you pay wages to at least 2 workers on a permanent basis.

Read more about the register and when you need to get a registration

Do you need more guidance for fulfilling the responsibilities of an employer?

Your responsibilities depend on how the money your company pays to people is classified: wages (salaries) – or non-wage compensation payments (trade income). 

See instructions on employer obligations

Official permits, excise duties

If you conduct business in goods representing certain product types, you must additionally pay excise duties on them. Examples of goods subject to excise taxation:

• Alcohol
• Tobacco
• Soft drinks
• Beverage containers
• Electricity 
• Fuel 

If you import, manufacture or distribute these products, you must pay excise duties. In general, to conduct business or trading in these sectors will also require that you have an excise-duty authorisation or registration.  

Read more about excise taxation

Further guidance, direction and support