Taxation in Oulu, Finland
What are the tax rates in Oulu, Finland? How are corporations taxed? Here’s Teleports overview of personal, corporate and other taxation topics in Oulu, Finland.
Personal taxation in Oulu
Effective personal income tax rate
| Annual income | $25,000 | $40,000 | $80,000 | $125,000 | $200,000 |
|---|---|---|---|---|---|
| Rate | 2% | 7% | 15% | 21% | 25% |
Teleport city rankings for personal income tax
Personal taxation puts Oulu in position 155 of all Teleport Cities.
Basis
Finnish residents are taxed on their worldwide income. Nonresidents are taxed only on Finnish-source income as defined in the Income Tax Act, and income and gains from immovable property located in Finland.
Residence
An individual is resident if he/she has a principal place of abode in Finland or he/she spends more than six months in Finland (either within a calendar year or straddling two calendar years). A temporary absence (up to two to three months) will not break the continuity of the six-month period.
Filing status
Each taxpayer is provided with a pre-filled tax return by the tax authorities; joint filing or assessment is not available.
Rates
Progressive national income tax rates up to 31.75% apply to earned income.
Deductions and allowances
Deductions for acquiring and maintaining income can be made from taxable income. Certain deductions are applicable only from earned income (e.g. commuting
Taxable income
Finland operates a dual income tax system for individuals, under which income is divided into earned income and capital income. Earned income is subject to national income tax, municipal income tax, church tax (if the individual is a member of either of the two state churches) and social security contributions. Income below EUR 16,700 is not subject to national income tax; progressive rates up to 31.75% apply above this amount. However, municipal income tax, church tax and social security contributions apply to income below EUR 16,700.
Capital gains
Capital gains are taxed as income from capital at a flat rate of 30% applicable to income up to EUR 30,000, and at 34% on income exceeding that amount.
Other taxes on individuals
Real property tax
A general rate ranging from 0.37% to 1.55% is levied on the taxable value of real property. Rates vary by municipality and special rates may apply (e.g. for second homes).
Inheritance/estate tax
Inheritance tax is levied at progressive rates up to 36%, depending on the family connection between the deceased and the inheritor.
Other
A 1.6% tax is levied on transfers of Finnish securities, and a 4% tax is levied on transfers of Finnish real property and certain leasing rights to Finnish real property. Transfers of shares in real estate-rich companies or holding companies of real-estate-rich companies are subject to a transfer tax of 2%. Some exemptions are available.
Social security
The employer is required to withhold 5.70% of an employee’s gross salary for pension insurance contributions (7.20% for employees aged 53 and over) and 1.15% for unemployment insurance contributions. A health insurance premium of 2.10% also is payable by the employee, which is included in the individual’s personal tax withholding percentage.
Compliance for individuals
Penalties
Penalties apply for noncompliance (e.g. late filing) at
Filing and payment
Each individual receives a pre-filled tax return from the tax authorities. If the return is incomplete or the individual does not agree with the return, it must be amended within a specific period. The tax return filing due dates are 4 and 13 May for tax residents and 13 May for nonresidents (although nonresidents usually are not required to file a return). Tax on employment income is withheld by the employer for each pay period. A taxpayer can make a prepayment to cover the final tax.
Corporate taxation in Oulu
Teleport city rankings for corporate income tax
Corporate taxation puts Oulu in position 77 of all Teleport Cities.
Basis
Residents are taxed on worldwide income; nonresidents are taxed only on Finnish-source income or income attributable to their Finnish permanent establishments. Foreign-source income derived by residents is subject to corporate tax in the same way as Finnish- source income. Branches generally are taxed according to the same principles applicable to subsidiaries.
Taxation of dividends
Dividends received by a Finnish resident company from another Finnish company generally are exempt from tax with certain exceptions, as are dividends received by a Finnish company from a company in an EU/European Economic Area (EEA) country. Dividends received from all other countries generally are taxable.
Residence
A company is resident if it is registered (incorporated) or otherwise established under Finnish law.
Losses
Losses may be carried forward for 10 years. The right to carry forward tax losses is forfeited if more than 50% of the shares of the company were transferred during or after the year in which the losses were incurred. Further, if more than 50% of the shares in a company that owns at least 20% of the shares in the Finnish loss- making company have been transferred, the relevant portion of the shares in the Finnish loss-making company are deemed be transferred. The carryback of losses is not permitted.
Incentives
Finland has adapted its incentives regime to the EU’s regional and structural policy objectives and state aid rules. Certain areas in Finland are eligible for EU-financed incentives in some form.
Foreign tax credit
Foreign tax paid may be credited against Finnish tax assessed on same profits, but the credit is limited to the amount of Finnish tax payable on the income. The credit may be carried forward for five years.
Taxable income
Corporate tax is imposed on a company’s profits, which consist of business income, passive income and capital gains. Normal business expenses may be deducted in computing taxable income. Complex rules govern the depreciation of assets.
Capital gains
Capital gains generally are treated as ordinary income and taxed at the standard corporate rate of 20%. However, gains on qualifying holdings are exempt if certain conditions are satisfied (see under “Participation exemption”).
Holding company regime
See under “Participation exemption.”
Other taxes on corporations
Social security
The employer is required to withhold social security, pension insurance contributions and unemployment insurance contributions from the gross salary of its employees.
Transfer pricing
Affiliated companies and permanent establishments are required to comply with the arm’s length principle. The tax authorities may adjust the profits of a Finnish company if the taxpayer has entered into a transaction under conditions that differ from those that would have been agreed upon between unrelated parties. Any profits that would have accrued to the company but for the non-arm’s length terms may be included in the company’s profits. Transfer pricing documentation is required.
Thin capitalization
There is a general limitation on the deductibility of intragroup interest expense. Interest expense on loans between related parties may be deducted only up to 25% of the company’s adjusted taxable income. There are certain exceptions to this rule: (1) net interest expense up to EUR 500,000 is fully deductible (but if the net interest expense exceeds EUR 500,000, the entire expense is subject to the limit); (2) the limit does not apply to interest expense not exceeding the interest income derived by the company paying the interest (i.e. interest expense is fully deductible up to the amount of interest income); and (3) the limit does not apply if the company can demonstrate that its equity balance sheet (equity/assets) ratio is equal to or greater than that of the group.
Controlled foreign companies
A foreign entity can be deemed a CFC if the entity is controlled directly or indirectly by Finnish residents. A nonresident entity is deemed to be controlled by Finnish residents if one or more residents jointly own directly or indirectly at least 50% of the capital of the foreign entity or its total voting power, or if one or more residents are entitled to at least 50% of the yield on the entity’s assets. The net income of a CFC is taxable income for the Finnish shareholder, regardless of whether the net income is distributed to the shareholder, if:
Transfer tax
A 1.6% tax is levied on transfers of Finnish securities, and a 4% tax is levied on transfers of Finnish real property and certain leasing rights in Finnish real property. Transfers of shares in real estate-rich companies or holding companies of real-estate-rich companies are subject to a transfer tax of 2%. Some exemptions are available.
Real property tax
The municipal authorities levy a real property tax of between 0.37% and 4%. The tax is deductible for corporate income tax purposes.
Other
There is a broad substance over form doctrine in Finnish tax law and practice.
Compliance for corporations
Consolidated returns
Consolidated returns are not permitted; each company is required to file a separate tax return. However, profits may be transferred between eligible Finnish companies through a group contribution regime. The companies must engage in business activities, there must be at least a 90% direct or indirect holding between the entities and the ownership must have lasted for the full tax year.
Penalties
Penalties apply for failure to file, late filing or filing of a fraudulent return.
Rulings
A taxpayer may request a ruling from the tax authorities on the tax consequences of a specific transaction. Such rulings are binding on the authorities, but not on the taxpayer.
Tax year
The financial year is used. If two or more financial years end during the same calendar year, the years are combined for tax purposes.
Filing requirements
A company is required to file its return within four months of its financial year end. Advance corporate tax is paid monthly.
Other taxation in Oulu
Value added tax
Filing and payment
VAT returns and payments generally are due on a monthly basis. Quarterly or annual reporting and payments may be available in certain cases.
Rates
The standard rate is 24%, with reduced rates of 14%, 10% and 0% applying in certain cases.
Taxable transactions
VAT is levied on the sale of goods, the provision of services and certain other transactions.
Registration
If the turnover of the business activities in a certain financial year does not exceed EUR 10,000 (increased from EUR 8,500 as from 1 January 2016), VAT registration usually is not required and no VAT is levied (although this threshold does not apply to foreign entrepreneurs that do not have a fixed establishment in Finland). If the financial year is not 12 months, turnover of the financial year is proportioned for 12 months. If the turnover of the taxable person in a particular financial year is less than EUR 30,000 (increased from EUR 22,500 as from 1 January 2016), the taxable entity may be entitled to partial VAT relief.
Investment basics
Accounting principles/financial statements
Finnish GAAP/IFRS. Financial statements must be prepared annually.
Principal business entities
These are the public and private limited liability company, general and limited partnership and branch of a foreign corporation.
Withholding tax
Dividends
Dividends paid to a nonresident company are subject to a 20% withholding tax, unless the rate is reduced under a tax treaty or an exemption applies under the EU parent-subsidiary directive. If dividends are paid to an EEA resident shareholder, domestic nondiscrimination provisions may lower the withholding tax rate to a level corresponding to similar domestic distributions.
Interest
Interest payments to nonresidents generally are exempt from tax in Finland.
Royalties
Royalty payments made to a nonresident are subject to a 20% withholding tax, unless the rate is reduced under a tax treaty or an exemption applies under the EU interest and royalties directive.
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