Both entrepreneurship and light entrepreneurship have their pros and cons. They are discussed in different sections of this Guidebook. In this section, we compare these two modes of business in light of value-added tax, insurances, depreciation expenses and the work requirement.
Entrepreneurs take a risk, but they can also benefit from tax advantages better than light entrepreneurs. So, when your entrepreneurial activities are established and you have plenty of assignments and customers, entrepreneurship is economically more sensible – and if your business fails, you can always return to light entrepreneurship.
Value-added tax (VAT)
Value-added tax is included in all invoices sent through invoicing service companies, because the companies are liable to pay VAT and remit the payments to the state. However, light entrepreneurs themselves are not liable to pay VAT. Therefore, they cannot make VAT deductions from their expenses or get a VAT relief. Only companies can register as VAT taxpayers. These things may not be significant in small-scale business, but everyone has assess their economic impact for themselves personally.
Accident and liability insurances
Entrepreneurs get their accident and liability insurances from an insurance company, after which the insurances are valid as per the contract; no additional notifications are necessary. Some invoicing service companies provide their customers with accident and liability insurances, adding the cost of these to the service price. Insurances are only valid if you make a worknote before starting each assignment. Light entrepreneurs should carefully explore how insurance policies are handled in the invoicing service they use.
Depreciation expenses in taxation
Entrepreneurs and companies can deduct investments from their taxable profit as depreciation expenses. Light entrepreneurs cannot do this. They can, however, report deductions for the production of income. You can find more information on depreciation expenses and deductions in The Gig Work Guidebook section “Entrepreneurship”.
Work requirement and unemployment insurance
When it comes to what is known as the work requirement, light entrepreneurs are in a peculiar position. If a light entrepreneur is considered an entrepreneur in the context of unemployment benefits, light entrepreneurial work is not counted towards the work requirement applicable to employees. In practice, this means that, to get earnings-related unemployment allowance, light entrepreneurs have to meet the unemployment fund’s work requirement based on their previous employment relationship.
Later on, you cannot meet the unemployment fund’s work requirement by working as a light entrepreneur. So, if you remain unemployed or a part-time light entrepreneur after the maximum payment period of earnings-related unemployment allowance, you have to apply for the unemployment allowance at Kela.
Light entrepreneurs can take out an unemployment insurance from the Unemployment Fund for Finnish Entrepreneurs. However, the membership fee for this fund is higher than for the fund for salaried workers. This is due to the fact that entrepreneurs fund a bigger share of their unemployment insurance themselves than do salaried workers.
Value added tax
https://vm.fi/en/value-added-tax
https://www.vero.fi/en/businesses-and-corporations/taxes-and-charges/vat/
VAT relief for small businesses
https://www.vero.fi/en/businesses-and-corporations/taxes-and-charges/vat/vat-relief-scheme/
What is the work requirement?
https://www.kela.fi/web/en/what-is-the-work-requirement-?inheritRedirect=true
When can I claim earnings-related allowance?
https://www.tyj.fi/en/if-you-become-unemployed/terms-and-duration/