The income taxation on companies depends on the company form. The income tax on limited companies and cooperatives, also known as corporate tax, is paid as business taxation. The tax rate is a fixed 20 per cent of the company’s profit. The income tax on private traders, general partnerships and limited partnerships is paid on the entrepreneur’s business income in their personal taxation. The tax rate is then progressive, meaning that the greater the profit, the greater the tax.
In other words, the taxation on self-employed individuals with a Business ID is not separated from their personal taxation, whereas limited companies and their owners are separate taxable entities.
Income tax on companies is paid in the form of tax prepayments. The Tax Administration determines the amount of the prepayment based on the company’s taxable income in the previous financial year. For new companies, the owners themselves estimate the turnover and the taxable income in the first financial year. Tax prepayments are made monthly or at longer intervals. In principle, companies are on the prepayment register.
Light entrepreneurs pay earned income tax like salaried workers. Invoicing services levy the tax according to the withholding tax percentage rate on their tax card. For freelancers working without a Business ID, the principals have to withhold prepayments. If “registered light entrepreneurs” or freelancers without Business ID are on the prepayment register, they make their tax prepayments independently.
There are two income types in the income tax system: capital income and earned income. Capital income is income generated through the possession of wealth, for example, gains from selling assets, dividends and rental income. All income other than that generated through the possession of wealth, such as salaries and pensions, is categorised as earned income. The taxation of earned income is progressive. Capital income has a fixed tax rate: up to 30,000 euros, it is 30 per cent and, after that, 34 per cent.
Capital income can equal 20 per cent of a company’s net worth. Net worth is calculated by subtracting a company’s liabilities from its assets. For private traders and partnerships (general partnership and limited partnership), 30 per cent of the salaries paid to outside employees is added to the net worth.
The final tax sum is determined based on the tax return. Companies have to file their tax return to the Tax Administration once a year. Companies report their income and expenses, assets and liabilities and other required information for the past financial year or tax year. You file tax returns online in the MyTax service.
Companies pay the final tax on their profit, i.e. their operating income. Profit is calculated by subtracting business expenses and depreciation expenses from the company’s turnover.
In addition to paying earned income tax, capital income tax and remitting value-added tax, company activities involve many other taxes and statutory payments. These can include real estate tax, transfer tax and public broadcasting tax. Furthermore, companies may need to pay various statutory payments that are directly related to their activities but are not called taxes. These payments include processing fees for environmental permits and other administrative fees.
Private traders running a small-scale business can manage their own bookkeeping and tax returns, but, for a larger-scale business, you should hire a professional bookkeeper or bookkeeping company.
Filing tax returns – businesses and corporate entities
https://www.vero.fi/en/businesses-and-corporations/taxes-and-charges/income-tax-returns/