Tax Withholding

An employer has a duty to carry out the withholding of tax from the employee’s salary and remit it to the tax administration.

The salary subject to tax withholding includes the normal salary as well as the monetary value of any fringe benefits that the employee enjoys. The Finnish Tax Administration prescribes the taxable values of fringe benefits each year by an Official Decision of the Finnish Tax Administration. Compensation of expenses directly related to working, such as travel expenses is not under tax withholding because it is not considered to be pay. The withholding of tax is carried out by deducting the tax to be withheld from the employee’s monetary salary.

The tax withholding percentages and income limits are set out in the employee’s tax deduction card. The tax withholding percentage is 60% if the employee has failed to provide the employer with a tax deduction card and the employer has not obtained the details of tax withholding in respect of the employee from the tax administration.  An employee’s obligation to provide a tax deduction card to the employer depends on whether the employer uses the interface service (VeroAPI).

When compensation for work or a task is paid in a form other than salary (work compensation), the payer must verify whether the recipient is registered in the prepayment register. Withholding tax must be deducted from work and usage compensation if the recipient is not included in the prepayment register. If there is uncertainty as to whether it is the duty of the employer to withhold the tax from the employee’s salary or whether it is the employee’s duty, this may be ascertained from the Business Information System of the National Board of Patents and Registration and the Tax Administration. If the person who is undertaking the work is entered in the prepayment register, the employer does not need to withhold tax.

The tax withholding must be paid to the tax administration on the 12 day of the month that follows the pay. In addition, a monthly report must be submitted to the tax authority detailing self-assessed taxes paid, salaries paid, and withholding taxes withheld.