Persons carrying on trade with a business ID, that is, private traders, are taxed as natural persons based on their total earned and capital income. In addition to income from your business, these include potential earned and capital income from other sources.
Private traders do not pay themselves salary that would be taxable, but they can make private withdrawals from their company’s assets. A private withdrawal simply means that an entrepreneur draws money from their company account for their private use. It is not the same as paying themself salary. You can make these private withdrawals whenever you want to, and they are not taxed separately.
When an entrepreneur draws money for private use from the company account, it does not decrease the taxable profit of the company name. Therefore, these withdrawals are not accepted as a tax-deductible cost. The tax is based on an estimate of the profit for the financial year and paid as a prepayment. The final tax sum is based on the accepted tax return.
The amount of the tax prepayment depends on the estimated profit of your company. If your profit exceeds 10,000 euros, you have to pay monthly tax prepayments. The tax authority estimates the profit based on the previous year’s profit or, if the company is new, the owner’s estimate.
A private trader’s income can be split into earned and capital income based on the company’s net worth. Capital income is the share that amounts to 20 per cent of the company’s net worth, and the rest is earned income.
For the earned income share, the private trader pays tax according to their earned income tax rate. Capital income has a fixed tax rate (30%) and a portion exempt from tax (0%).
A company’s net worth is calculated by subtracting its liabilities from its assets. If the entrepreneur has employees (besides themselves), 30 per cent of the sum paid in salaries is added to the net worth.
When submitting their tax return, entrepreneurs can may request that, instead of the default 20 per cent, the share of the company’s net worth taxed as capital income be reduced to 10 per cent or that all of the company’s income be taxed as earned income. This is worthwhile if your earned income tax rate is less than 30 per cent, which is the tax rate on capital income when the amount of that income is less than 30,000 euros.
A private trader’s earned income can be split between spouses if they both have worked in the company. Capital income is shared between spouses according to the shares they own of the net worth of the business. Earned and capital income are shared equally between spouses if no other account is presented.
The taxation on general and limited partnership is similar to that of private traders, but their profit is shared between the partners and taxed as income shares. Income shares are distributed to be taxed as partners’ capital income or earned income according to their share of the partnership’s net worth in the previous tax year.
Tax return – persons carrying on trade with a business ID
https://www.vero.fi/en/businesses-and-corporations/taxes-and-charges/tax-return–business-operators-and-self-employed-persons/
National earned income table 2022 (in Finnish)
https://www.veronmaksajat.fi/Palkka-ja-elake/Valtion-tulovero/valtion-tuloveroasteikko-2022/#b9550f8c