Household services include repairs, construction or building work, taking care of small children, and cleaning the rooms. Households may either pay a business company or a worker on their own payroll to have this work done. Please note that the household must take care of all the usual obligations of an employer if an employment contract is made with someone.
When a household arranges for someone else to provide services, including home repair, construction, building, day care work, cleaning etc., the service provider will fall into one of the three following categories, each having an important impact on the tax responsibilities of the household:
- Prepayment-tax-registered independent contractor (business company or self-employed professional);
- Independent contractor with no valid registration;
- Individual worker, who starts working for the household as its employee.
When the contract is made between the household and the service provider, it is important to ascertain whether the worker or workers will be working as employees or as independent contractors. If they are workers, it is an employment contract, and any compensation paid will be taxed as wages. If they are independent contractors, the household will simply pay for the services provided by the company/individual, and pay the amounts showing on their invoices, with almost no other obligations.
When dealing with independent contractors, it is important to find out whether they have a valid registration for prepayment (ennakkoperintärekisteröinti; registrering för förskottskatt). The amount paid to the independent contractor should cover full social security, other overhead costs and VAT.
If the household signs an employment contract with a worker directly, the household must take care of all the usual obligations of an employer, including insurance coverage to protect the worker. If the worker shows a tax card to his employer, he works as an employee – not as an independent contractor. Barring a few minor exceptions, the usual obligations of an employer are no different for a household than for any other employer.