5 Business tax return – Business operator/self-employed person Detailed instructions 2018

The term ‘business’ here refers to carrying on a business or a trade. A business operator or self-employed person uses this tax return form (tax return form 5) to report business income, expenses, assets and liabilities. Business income is calculated in accordance with the act on business tax (360/1968).

If you are correcting a tax return you have previously submitted, please file an entirely new return to replace the original one. Re-submit all the details you filed before. It is not enough to only fix an incorrect detail or to add a new one.

General instructions

  • Fill in all the lines of the tax return form and supplement forms for which you have information to report.
  • If more than one accounting period has ended during the calendar year 2017, use a single tax return form and supplement forms to report the information on all the accounting periods.
  • Report asset details on the basis of the last accounting period ended.
  • Enter the amounts to the cent.
  • Report the income and expenses attributable to agricultural activities on the tax return form for agricultural activities (form 2), income and expenses attributable to forest-based activities on the tax return form for forest-based activities (form 2C) and income and deductions relating to other activities in connection with filling in the individual's pre-completed tax return form.
  • The business tax return form and the related supplement forms can be filed, for example, in MyTax. A personal online banking user ID or a Katso ID is required for e-Filing. 

Go to MyTax

See the instructions for MyTax

1 Taxpayer identification and the tax year

Name

The name of the business operator or self-employed person.

Business ID or personal identity code

The Business ID or personal identity code of the business operator or self-employed person.

Tax year

Enter on the form the tax year for which the tax return is filed.

Accounting period

Enter your accounting period on the form. Amendments to the accounting period must be made via ytj.fi website by using Form Y6 ‘Notification on amendments and on termination of business’.

If more than one accounting period has ended during the tax year, use a single tax return form and the relevant supplement forms to report the information on all the accounting periods.

Line of business

Enter the line of business based on the Standard Industry Classification of Statistics Finland:

  • The numerical code for the line of business
  • The name of the line of business.

Amendments to the line of business details must be made via the ytj.fi website by using Form Y6 ‘Notification on amendments and on termination of business’.

Additional information provided by (name)

Give the name of a person who can, if necessary, provide additional information regarding the tax return to the Tax Administration.

Telephone number

Give also the telephone number of that person.

Request for refund of tax paid on foreign income

Check the box if the company has paid taxes in a foreign country during the tax year and you are claiming a refund for the foreign taxes paid. Provide more detailed information on Form 70 (Claim for relief for double taxation).

Double-entry bookkeeping

Check the box if you use double-entry bookkeeping.

2 Calculation of taxable income

Report taxable income and tax-deductible expenses in the Tax assessment column of section ‘Calculation of taxable income’.

Report in the Accounting column any income and expense items in which the amount recorded in the accounts may be different from the taxable amount or the amount to be taken into account in the tax assessment. If the tax return form has both an ‘Accounting’ column and a ‘Tax assessment’ column for an income item or an expense item, fill in both columns even if the amounts are exactly the same.

Report on this form only information relating to the business activities of a business operator or self-employed person.

2.1 Business income

Income from business activities comprises all the income you have received, in cash or as a monetary benefit, from business-related activities.

Report sales income on a net basis, without VAT.

Net sales

The net sales for the tax year. Net sales comprise the sales income from primary operating activity minus the discounts granted, VAT, and other direct taxes based on sales volumes.

If you use single-entry bookkeeping, report the sales income without VAT and subtract the sales adjustment items from the income.

Grants and subsidies received

This line is only used to report grants and subsidies relating to business activities (from the Ministry of Economic Affairs and Employment, Ministry of the Environment, Tekes, etc.) which have been recorded in the accounts using the direct method.

Any relief for VAT that you may have been granted is also reported on this line.

Other business income

Other taxable business income including, among others,

  • Capital gains on fixed assets
  • Damages received
  • Other types of taxable business income not reported as business income elsewhere in section ‘Calculation of taxable income’.

Income-entry for private use, if expenses for private use have been deducted in the accounts

Private use of car

Report on this line the portion equivalent to the private use of car if the costs arising from private use of car are included in deductible expenses in the accounts.

The private use of car includes, for example, trips between dwelling and workplace. Report any travel expenses incurred from the trips in connection with filling in your pre-completed tax return form.

Itemise business-related vehicle expenses on page 3, section 6 (Itemisation of costs of passenger vehicles and vans included in fixed assets or leasing agreements, and other vehicles partly in private use.

Private use of goods

The original acquisition cost, without VAT, of goods taken into private use.

Other private use

The portion attributable to private use of using a business-related telephone, real estate unit, holiday home or boat.

If you are using a business-related real estate unit for private purposes, report here the portion of the expenses and depreciation expenses attributable to the real estate unit due to private use.

Example: 60% of a real estate unit owned by a private business operator is used as a workshop and 40% as the business operator's own dwelling. The interest expenses attributable to the real estate unit are €8,000. The depreciation expense for the building is €2,000. The other expenses attributable to the building are €3,000 in total. The portion added to the company’s business income under 'other private use’ is €5,200, i.e. 40% of the total expenses, which are €13,000.

Do not report cash withdrawals here. Report cash withdrawals and cash investments in section 7 ‘Cash withdrawals and cash investments as recorded in accounting’.

Dividends and surplus

The taxable portion of dividends and surplus on business source of income is determined on the basis of whether the payor of the dividends or surplus is a publicly traded company or a non-publicly traded company.

Dividends:

  • Dividends received from publicly traded companies are 85% taxable business income and 15% tax-exempt income. 
  • Dividends received from non-publicly traded companies are 75% taxable business income and 25% tax-exempt income.

Surplus:

  • The surplus funds distributed by a publicly traded co-operative are 85% taxable business income and 15% tax-exempt income.

    A co-operative is a publicly traded co-operative if, for example, its participations or securities are traded in the stock exchange. There are no publicly traded co-operatives in Finland at the moment.
  • The surplus funds distributed by a non-publicly traded co-operative are 25% taxable business income and 75% tax-exempt income up to €5,000 in total. When the surplus funds exceed €5,000, the excess portion is 75% taxable business income and 25% tax-exempt income.

    In other words, surplus funds are taxed more leniently up to €5,000 in total. This tax relief is personal and applied only once in a tax year. 

    If the business operator or self-employed person has received surpluses on several sources of income, tax relief is applied in the following order:
    1. surplus on personal source of income
    2. surplus on agricultural source of income
    3. surplus on business source of income.
  • If you are running a business with your spouse, you can also use your spouse’s remaining tax relief in your tax return for the business activities.
  • Please note, however, that surplus refunds, which are tax-deductible for co-operatives, are fully taxable income for the recipient of surplus funds.

Dividends from listed companies

The total amount of dividends you have received from publicly traded companies.

Taxable portion 

85% of dividends received from publicly traded companies are taxable business income. Enter the taxable portion on this line.

Dividends from non-listed companies

The total amount of dividends received from non-publicly traded companies.

Taxable portion

The taxable portion of dividends received from non-publicly traded companies.

75% of dividends received from non-publicly traded companies are taxable business income.

Surplus from listed co-operatives in Finland and other EU/EEA member states, and in non-EEA countries with which Finland has signed a tax treaty

The total amount of surplus received from publicly traded co-operatives.

Please note that there are no publicly traded co-operatives in Finland at the moment.

Taxable portion 

The taxable portion of surplus received from publicly traded co-operatives.
85% of the surplus funds distributed by a publicly traded co-operative are taxable business income.

Surplus from non-listed co-operatives in Finland, other EU/EEA countries and non-EEA countries

The total amount of surplus received from non-publicly traded co-operatives. 

Taxable portion 

The taxable portion of surplus received from non-publicly traded co-operatives. Of the above-mentioned surplus, 25% is taxable business income and 75% tax-exempt income up to €5,000 in total. 75% of the part that exceeds the €5,000 limit is taxable capital income and 25% is tax-exempt income.

Interest income and other financial income

Report on this line, for example, interest income on receivables and any exchange rate gains you have received.

Relieved write-offs and reserves

Itemised deductions are made if the amount of reserves has decreased from the previous tax year.

Report on this line, for example, an operating reserve or any excess (unused) replacement reserve recorded in the accounts.

Itemise the reserves entered in the accounts also on Form 62 (Reserves, revaluations and depreciation of fixed assets).

If you only have an operating reserve, report it in the tax return form section 14 (Operating reserve). If you do this, you do not need to fill in Form 62.

Other taxable income

Other taxable income not recorded in the profit and loss account for the accounting period.

Total taxable business income

The total amount of taxable business income.

2.2 Tax-exempt income in the profit and loss account

The total amount of other tax-exempt income recorded in the profit and loss account.

Other tax-exempt income includes, for example, refunds on the electricity, telecommunication, water, sewage or district heat network connection fees you have paid to the entity in charge of the network's maintenance.

This is conditional on the refund being paid to you, or on your ability to transfer the benefit gained from the connection fee to a third party.

Report on this line also any interest on deposit accounts subject to the provisions of the act on tax withheld at source from interest income.

Do not include tax-exempt items in the other income items reported in section ‘Calculation of taxable income’.

2.3 Business expenses

Deductible expenses are the expenses incurred in acquiring or maintaining business income. If you are VAT-liable, enter your business expenses in the tax return form without the VAT included in the purchase prices. If you are not VAT-liable, enter the expenses with VAT.

Purchases and changes in inventory

Report on this line the acquisition cost of assets that have been disposed or transferred during the accounting period.

To calculate the acquisition cost, adjust the amount of purchases in the accounting period with the inventory changes to finished and unfinished products. Calculate the inventory change according to the following formula: beginning inventory + purchases in the accounting period – ending inventory.

External services

The expenses arising from external services.

Staff expenses

Wages, salaries and fringe benefits

The wages, salaries and fringe benefits you have paid.

Pension and other contributions

The pension and other contributions you have paid.

Other contributions include, for example, insurance premiums and other charges arising from arranging pension, sickness and disability benefits and other types of benefits or rights for employees and their relatives.

Depreciation

The planned depreciation and depreciation differences burdening operating income on the accounts.

If you have only depreciated movable fixed assets, provide an itemisation in section 5 (Depreciation on acquisition cost of movable fixed assets).

If you have also depreciated other types of fixed assets, provide itemisations on them all on Form 62 (Reserves, revaluations and depreciation of fixed assets).

Deductible portion 

The portion deductible as depreciation.

Depreciation, increased depreciation, additional depreciation and any tax relief depreciation, as defined in the act on business tax (§ 24, § 30–34 and § 36–41).

Report also any depreciation expenses from previous years that have not been deducted for tax purposes (“reserved depreciation”) and which you are claiming a deduction for this year.

The total amount of depreciation expenses must not exceed the maximum limit for depreciation laid down in the act on business tax.

Property taken into use under a leasing agreement is not eligible for depreciation for tax purposes.

Itemise previous years’ undepreciated costs and the depreciation expenses that were not approved on Form 12A (Unclaimed depreciation). 

Entertainment expenses

The total amount of entertainment expenses as shown by accounting.

Deductible portion 50%

50% of entertainment expenses are deductible. Enter the deductible portion on this line.

Rental expenses

The rents you have paid, for example, rents paid for facilities.

Other deductible expenses

Report on this line other deductible business expenses that are included in the profit and loss account for the accounting period and have not been reported as business expenses elsewhere in the tax return form section 2 ‘Calculation of taxable income’. Such expenses include:

  • Travel expenses
  • Vehicle expenses
  • Leasing fees.

Report the additional deductions you have made on the basis of travel and vehicle expenses in section 2.3 (Additional deductions) of the tax return. Itemise additional deductions in section 9 (Itemisation of increased living expenses due to temporary business travel) and section 10 (Itemisation of private car use for business purposes) of the tax return.

Interest expenses

The interest expenses deducted in accounting.

Deductible portion 

The deductible portion of interest expenses.

Not all interest expenses are deductible from business income. Interest is not deductible if the entrepreneur's equity recorded on the balance sheet is negative due to withdrawals for private use and the private withdrawals have been financed with loans. In such a case, it is deemed that part of the loans used for business purposes has been used to finance cash withdrawals for private use made by the business operator/self-employed person. This part of the interest is not deductible as a business expense.

Do not enter here any surtax, penalty interest or interest on residual tax as these are not tax-deductible.

If you use double-entry bookkeeping, calculate the excess amount of interest that is not deductible, if any, in section 11 (Calculation of non-deductible interest expenses). Subtract this amount from the total amount of interest expenses, i.e. the amount entered on the previous line (Interest expenses). The amount of non-deductible interest expenses can never be higher than the amount of interest expenses attributable to business activities.

If you use the single-entry accounting method, report on this line the loan interest expenses attributable to business activities that you have deducted in the accounts. Do not fill in section 11 (Calculation of non-deductible interest expenses).

Other financial costs

Other financial costs as shown by accounting.

Such financial costs include:

  • Loan management fees
  • Bank overdraft facility fees
  • Bank guarantee commissions
  • Credit insurances
  • Mortgage costs
  • Recovery costs
  • Exchange rate losses.

Increases to reserves

Increases in voluntary reserves, as shown by accounting.

Report increases in reserves only if the amount of reserves has increased from the previous year. Itemise the reserves entered in the accounts also on Form 62 (Reserves, revaluations and depreciation of fixed assets).

If you only have an operating reserve, report it in section 14 (Operating reserve) of the tax return form for business operators and self-employed persons. You do not need to fill in Form 62.

You can create an operating reserve if you have paid wages during the accounting period. The operating reserve can be at most 30% of the wages paid within the 12 months preceding the end of the accounting period.

The replacement reserve defined in § 47 of the act on business tax, the warranty reserve defined in § 47, and the increase in operating reserve defined in § 46a of the same act are, under certain conditions, tax-deductible.

Additional deductions

Report here the total amount of additional deductions.

Itemise additional deductions in section 9 (Itemisation of increased living expenses arising from temporary business travel) and section 10 (Itemisation of private car use for business purposes) of the tax return. Add together the amount on line ‘Total’ in section 9, column 6 (Additional deduction) and section 10, subsection 7 (Additional deduction). Enter the total amount of additional deductions on this line.

Deductible expenses not recorded in the accounts

All business-related tax-deductible expenses that are not included in the profit and loss account for the accounting period.

Report, for example, a home office deduction or the portion of the realised costs of using your own apartment for business purposes from the expenses attributable to business activities if these have not been deducted in the profit and loss account. Itemise the expenses in the tax return section 8 (Itemisation of use of private residence for business purposes).

Report also on this line, for example, any business-related training deductions. Provide an itemisation and explain the grounds for the deduction on Form 79 (Training deduction – Business).

Total deductible business expenses

Enter on this line the total amount of tax-deductible business expenses as reported in section 2.3 (Business expenses).

Non-deductible expenses

Report as non-deductible expenses the items deducted in accounting that are not tax-deductible. These items must not be included in the deductible expense items reported in section ‘Calculation of taxable income’.

Direct taxes

The difference between income taxes paid and tax refunds.

This line is not to be used, for example, to report real estate taxes allocated to a real estate unit used for business purposes. Real estate taxes are to be entered on line ‘Other deductible expenses’ in the ‘Business expenses’ section.

Fines and other penalty fees

Fines, financial sanctions and other penalty fees are not tax-deductible.

For example, a tax increase, surtax or penalty interest cannot be deducted for tax purposes – regardless of on which tax they are imposed.

Other non-deductible expenses

Other expenses recorded in the accounts that are not deductible from business income for tax purposes.

Such expenses include, for example, the voluntary pension insurance payments made by an entrepreneur or their spouse. These are deductible in connection with filling in the individual's pre-completed tax return form.

Report on this line any mandatory YEL insurance payments made, which have been recorded in the accounts but have not been deducted as business expenses and you are claiming a deduction on them in connection with your pre-completed tax return.

Please note: If these payments have not been deducted as business expenses, you also have the option of transferring them to be deducted in your spouse’s tax assessment.

Enter revaluation decreases on shares included in fixed assets on this line, as they are not tax-deductible. Revaluation decreases are deductible on shares other than securities, as well as on land areas other than those included in fixed assets only if the fair value of such property at the end of the tax year is substantially lower than the undepreciated acquisition cost (§ 42, act on business tax).

Do not enter on this line any expenses for which an income-entry has been made for private use in section 2.1 of the tax return.

Business profit

Report business income here if it is positive.

Business income is positive if the amount of taxable income for the tax year is higher than the amount of deductible business expenses.

Business loss

Report business income here if it is negative.

Business income is negative if the amount of deductible business expenses is higher than the amount of taxable income for the tax year.

3 Request for deduction of loss from capital income

Negative income for tax year 2018 is either treated as allowable business losses, or it can be transferred to be deducted in part or in full from the capital income of the business operator/self-employed person.

  • If you want the Tax Administration to treat the negative income for tax year 2018 as business losses, the Tax Administration deducts the allowable losses from business profits over the next ten years as the income is generated.
  • If you want the Tax Administration to deduct the total losses for the tax year from future years’ profits, do not fill in section 3 (Request for deduction of loss from capital income).
  • If you want the Tax Administration to transfer the loss to be deducted in full or in part from capital income, fill in section 3 (Request for deduction of loss from capital income).

Amount of business loss deductible from capital income

If you want the loss for the tax year to be deducted in full from capital income, report the total amount of loss here. The loss for the tax year can also be deducted in part from capital income. In such a case, the remaining part of the loss for the tax year is deducted over the next ten years from the income generated through business activities.

If spouses run the business together, the request for deduction of loss from capital income is deemed to be a joint request. The Tax Administration divides allowable losses to be deducted from the spouses’ capital income on the basis of their percentage share of work done for the business according to what has been reported in section 4 (Division of business income between spouses) on line ’Working at point of service (percentage)’.

4 Division of business income between spouses

If spouses are running a business together, business income is divided to be taxed as capital income to both spouses.

The earned-income portion of business income is divided between the spouses according to their percentage share of the work done for the business.

The capital-income share of business income is divided between the spouses according to their percentage shares of the net worth of business.

Enter the percentage shares of net business assets on line ‘Share of net business assets (percentage)’ and the percentage shares of work done for the business on line ‘Working at point of service (percentage)’. Fill in your own percentage shares in the ‘Entrepreneur’ column and your spouse’s in the ‘Spouse’ column.

The Tax Administration calculates the capital-income portions and earned-income portions from business income on the basis of the information you provide, and divides the earned income and capital income between you and your spouse.

5 Depreciation on acquisition cost of movable fixed assets (§ 30 and 31, act on business tax)

Depreciation on acquisition cost of movable fixed assets

Fill in this section if the only type of fixed assets you have is movable fixed assets. If your fixed assets also include types of assets other than movable fixed assets, itemise depreciation on Form 62 (Reserves, revaluations and depreciation of fixed assets). Fill in also the tax return section 2.3 (Business expenses), subsection ‘Depreciation’, line ‘Deductible portion’.

Movable fixed assets are treated as a whole. Add to the amount reported on line ‘Undepreciated acquisition cost at start of tax year’ the fixed assets you have acquired during the tax year (from line ‘Increase during tax year’) and subtract from this amount the selling prices and insurance indemnities you have received. Enter the selling prices and insurance indemnities received also on line ‘Selling prices and insurance indemnities’. You can depreciate the remaining acquisition cost at 25% for the current tax year.

The maximum total amount that can be depreciated for tax purposes is the amount that has been recorded in accounting for the current or previous tax years.

If the acquisition cost of a current movable fixed asset is €850 or less, i.e. it is deemed a small acquisition, the acquisition cost can be depreciated in full in the year in which the asset was taken into use. The maximum limit for depreciation of small acquisitions in a tax year is €2,500.

Example: You purchase a van for business use which costs €30,000. Your company has no other fixed assets. Do the depreciation calculation in this section of the tax return. At most per tax year, the van can be depreciated at 25%, which is €7,500. Enter the purchase price of the van, €30,000, on line ‘Increase during tax year’ and the annual depreciation expense, €7,500, on line ‘Depreciation for the tax year’. When you subtract from the €30,000 purchase price the depreciation expense of €7,500, you get the depreciated cost, which is €22,500. Enter the depreciated cost on line ‘Undepreciated acquisition cost at end of tax year’.

Remember to enter the depreciated cost of €22,500 on line ‘Undepreciated acquisition cost at start of tax year’ in the tax return form you file the next tax year. 

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6 Itemisation of costs of passenger vehicles and vans included in fixed assets or leasing agreements, and other vehicles partly in private use

A vehicle is included in the fixed assets of a business if the amount of kilometres driven for business purposes is more than half of the total kilometres driven during the tax year. Report in this section:

  • Costs of passenger vehicles and vans included in fixed assets
  • Costs of vehicles other than passenger vehicles and vans, if the vehicles were partly in private use during the tax year
  • Leased vehicles, if the leasing agreement lasts more than three months.

In this section, do not report the costs and kilometres of fringe benefit cars in employee use.

Itemise here which types of vehicles are included in fixed assets. Report the total kilometres driven with the vehicles and other details:

  • Business use
  • Private use 
  • Total kilometres (= business use + private use)
  • Total expenses (= actual costs + depreciation or leasing fee)
  • Expenses on average per kilometre (= total expenses divided by total kilometres)
  • Private use as a share of total expenses (= private use kilometres multiplied by kilometre expenses on average)

Check the box according to whether the vehicle use data is based on a driver's log or other clarification.

Check the box also according to whether the private use expenses have been or have not been deducted in accounting. If the private-use portion of the expenses has been deducted as an expense in accounting, check the box ‘Private use expenses deducted in accounting (page 1)’ and report the private use expenses in section ‘Calculation of taxable income’, subsection 2.1 ‘Income-entry for private use, if expenses for private use have been deducted in the accounts’, line ‘Private use of a car’ (specify on page 3, section 6)”. If private use expenses are not included in items deducted as business expenses, check the box ‘Private use expenses not deducted in accounting’.

Example: The actual vehicle expenses amount to €10,000. For the tax year, the vehicle was depreciated at €3,000. The total vehicles expenses are €13,000 (line ‘Total expenses’). During the tax year, 35,000 km have been driven with the vehicle, of which 20,000 km were business use and 15,000 km were private use. The average cost of vehicle use is €0.37 per km (= €13,000 divided by 35,000 km). When the 15,000 km of private use is multiplied by the average cost (€0.37 multiplied by 15,000 km), you get €5,500 as the private-use portion of total expenses (line ‘Private use as a share of total expenses’). If all vehicle expenses have been deducted in accounting, check the box ‘Private use deducted in accounting’ and transfer the €5,500 to section 2.1, line ‘Private use of a car’ on page 1 of the tax return.

7 Cash withdrawals and cash investments as recorded in accounting

Only fill in this section if you use double-entry bookkeeping.

Report cash withdrawals from the business and cash investments to the business. Report the information for the calendar year.

8 Itemisation of use of private residence for business purposes

Only fill in this section if you have used your own apartment for business purposes.

A residence is included in private assets if at least half of the area of the residence is used for purposes other than business activities. The information required to be reported on such a residence includes

  • Total area of residence (m2)
  • Area used for own business purposes (m2)
  • Rent, housing company loan payment or maintenance fee for real estate unit
  • Own business activities as a share of the aforementioned expenses.

On the basis of the area used for business purposes, calculate the portion of expenses attributable to the area in business use.

If the expenses have not been recorded in the accounts, transfer the portion of the expenses attributable to own business purposes to section 2.3, line ‘Deductible expenses not entered in the accounts’. If the expenses have been entered in the accounts, report them in section 2.3, line ‘Other deductible expenses’.

The portion of expenses attributable to own business purposes is also reported in the tax return section 2.3:

  • If the expenses have been entered in the accounts, add them to the amount reported on line 'Other deductible expenses’.
  • If the expenses have not been entered in the accounts, add them to the amount report on line ‘ Deductible expenses not entered in the accounts’.

Example: The total area of the residence is 90 m2. Of the total area, the area of the room used for own business purposes is 9 m2. The rent paid for the residence is €1,000 per month, i.e., €12,000 per year. The portion of the expenses attributable to own business purposes is 9 m2/90 m2 x €12,000 = €1,200. This is entered in the tax return under ‘Own business activities as a share of the aforementioned expenses’.

A private residence is not taken into account in the calculation of the net assets of a business operator/self-employed person (Supreme Administrative Court decision 1998/3248). Read more about the deduction of workspace-related costs.

9 Itemisation of increased living expenses due to temporary business travel

A business operator/self-employed person is entitled to an additional deduction for tax purposes on the basis of temporary business travel or using a private car for business purposes (§ 55, act on business tax). The additional deduction based on temporary business travel is itemised in this section of the tax return (section 9) and the additional deduction based on private car use is itemised in section 10 (Itemisation of private car use for business purposes).

The maximum amounts for the additional deductions are the same as the maximum amounts for kilometre allowances and per diem allowances. See the limits in the Tax Administration's cost allowance decision (Decision of the Tax Administration on allowances for travel expenses in 2018). The deductions based on increased living expenses are granted, where applicable, in accordance with the grounds specified in the decision’s sections 6 and 10–13.

If you have deducted increased living expenses or private car use expenses in accounting and the total amount of the expenses exceeds the maximum amount for additional deduction when calculated according to the cost allowance decision, the actual costs will be deducted in the tax assessment. As a result, no additional deduction can be made in the tax assessment, so do not fill in this column.

Increased living expenses can be used as basis for an additional deduction for a temporary business-related trip outside the primary area of operation. If the trips have been made to a place of business outside the primary area of operation, there is no entitlement for deduction.

1 Type of travel

Use the dedicated lines to enter information on travel in Finland that lasts more than 10 hours, travel in Finland that lasts 6–10 hours, and travel abroad. Travel in Finland that lasts more than 10 hours entitles to a deduction that equals the amount of per diem allowance, and travel that lasts 6–10 hours entitles to a deduction that equals the amount of partial per diem allowance. Travel abroad entitles to a deduction that equals the amount of foreign per diem allowance.

2 Number of travel days

Enter the number of travel days in this column.

3 Maximum amount/travel day

Report in this column the maximum amounts (to the cent) per travel day of deductions for travel in Finland:

  • Travel in Finland, more than 10 hours: €42.00
  • Travel in Finland, more than 6 hours: €19.00

The maximum amount per travel day of deductions for travel abroad is the same as the amount of foreign per diem allowance. As the amount of per diem allowance varies between countries, the maximum amount of deduction per travel day is not entered on the form. All you need to do is enter the total maximum amount for ‘Travel abroad’ in the ‘Total maximum amount’ column.

4 Total maximum amount

Calculate and report the total maximum amount of deduction for all travel days. Enter the information on each travel type on their own lines.

To calculate the maximum amount of deduction for travel abroad, multiply the total travel days in each country with that country's foreign per diem allowance and add together the amounts of all the countries. Check the maximum amounts of per diem allowance abroad in the Tax Administration's decision (Decision of the Tax Administration on tax-exempt allowances for travel expenses in 2018).

5 Deducted in accounting

Enter on each line the portion of the expenses that you have deducted in accounting.

6 Additional deduction

Calculate the amount of additional deduction: subtract from the total maximum amount the portion of the expenses that you have deducted in accounting. If you have not deducted any of the increased living expenses in accounting, enter on this line the same amount that you entered in column 4 (Total maximum amount).

Add the total amount of additional deduction to the amount entered on page 2, subsection 2.3 (Business expenses), line ‘Additional deductions’.

10 Itemisation of private car use for business purposes

Only fill in this section if the car is included in private assets, i.e. at least 50% of the total kilometres driven have been for other than business purposes (e.g. private car use, car use attributable to sources of income other than business, and car use for other income-generating activities). The use of this type of car entitles to an additional deduction for tax purposes.

A car is included in business assets if business use accounts for more than half of the kilometres driven. No additional deduction is given for the use of a car included in business assets; the car's actual costs, from which the portion of private use has been subtracted, are deducted as business expenses.

1. Car use data is based on

You are only entitled to an additional deduction if you have kept a driver’s log on all business-related trips.

Record in the driver’s log the following information:

  • The start and end date and time of the trip
  • The starting point and destination of the trip
  • The odometer reading when the driving started and ended
  • The length of the trip
  • The purpose of the trip
  • The user of the car
  • The total amount of kilometres driven with the car during the year.

If you have only made a single trip or if the distances driven are small, you can provide another type of clarification in place of the driver’s log. The clarification must contain the same information that is recorded in a driver’s log.

Do not send the driver’s log or the clarification as an attachment to the tax return. The Tax Administration will ask you for them, if necessary.

2. Total kilometres

The total amount of kilometres driven with the car during the tax year.

3. Business use

The amount of kilometres driven for business purposes.

4. Maximum amount/km

The maximum amount of deduction is €0.42 per kilometre. The amount per kilometre may be increased in certain situations.

For information on special situations, see the Tax Administration decision (Decision of the Tax Administration on tax-exempt allowances for travel expenses in 2018).

5. Total maximum amount

Calculate and enter here the total amount for the deduction.

6. Deducted in accounting

Report the amount you have deducted in accounting.

7. Additional deduction

Calculate the amount of additional deduction: subtract from the total maximum amount the portion of the expenses that you have deducted in accounting. If you have not deducted any of the increased living expenses in accounting, enter on this line the same amount that you entered on line 5 (Total maximum amount).

Add the additional deduction to the amount entered in the tax return on page 2, subsection 2.3 (Business expenses), line ‘Additional deductions’.

11 Calculation of non-deductible interest expenses

Fill in this section only if you use double-entry bookkeeping.

If the equity of a business operator/self-employed person is negative due to cash withdrawals for personal use and a loan was needed to cover the private withdrawals, part of the loans is allocated to financing the private withdrawals instead of business activities. The interest on such loans is not deductible as a business expense.

Calculate in this section the portion of interest expenses that you cannot deduct from business income due to negative equity. Subtract this portion of non-deductible interest (section ‘Interest expenses relating to business income source not deductible if equity is negative due to cash withdrawals for private use’) from the total amount of interest expenses relating to business income source (tax return form section 2.3 (Business expenses), line ‘Interest expenses’). The amount of deductible interest expenses cannot exceed the amount of interest expenses on business income. Report the difference in section 2.3, subsection ‘Interest expenses’, line ‘Deductible portion’.

Transfer the calculated adjusted negative equity to the ‘Calculation of net worth’ section 12.2 (Business liabilities), line ‘Adjusted negative equity’.

Interest expenses relating to business income source not deductible if equity is negative due to cash withdrawals for private use (§ 18.2, act on business tax)

  • Add the revaluation increase included in equity to the balance sheet end-of-year negative equity. 
  • Then, subtract the loss for the accounting period, as well as any losses from previous accounting periods that cannot be covered by retained earnings.
  • Multiply what is left of the negative equity with the basic interest rate plus one percentage unit at the balance sheet date.
  • The result is the amount of interest that cannot be deducted as an expense from business income.
  • This non-deductible interest is deducted from the total amount of interest on business income in section 2.3, line ‘Interest expenses’.

The basic interest rate for 2018 was -0.25%.

There may be restrictions on the deductibility of interest also if the equity is positive due to a revaluation increase.

If the interest calculated on the basis of residual negative equity is deductible pursuant to the provisions of the income tax act, you can deduct from your capital income in your pre-completed tax return. More detailed instructions on how to deduct interest are available in the Guide to filling in a tax return 2018 (individuals).

12 Calculation of net worth

The net worth of business is calculated for use in the business operator's/self-employed person’s tax assessment. The Tax Administration uses the value of net worth to divide business income into a capital-income portion and earned-income portion.

The value of the net worth in 2017 is used in the tax assessment for tax year 2018. If the business was started in tax year 2018, the capital-income portion is calculated by way of exception on the basis of the net worth of business at the end of tax year 2018.

Report the information on the net worth of the business in section 12 (Calculation of net worth). Report the assets and liabilities of agricultural activities on the tax return for agricultural activities (tax return form 2). Other assets and liabilities have been entered in your pre-completed tax return. If corrections need to be made to the pre-completed information, report them in connection with the pre-completed tax return by using Form 50B, ‘Capital income and deductions from capital income’.

Tax liabilities and tax receivables

Calculated tax receivables, as defined in the Accounting Act (chapter 5, § 18), are not deemed as assets, and calculated tax liabilities are not deemed as liabilities, in the calculation of net worth. This means that any income taxes owed that have not been ordered to be paid will also not be taken into account in the calculation of net worth.

12.1 Business assets

To enter assets in the calculation column, use the amount of the acquisition cost not depreciated for tax purposes. Exceptions to this have been separately specified in these instructions.

Fixed assets

Real estate, buildings and structures

A real estate unit comprises a land area and the buildings located on it. According to § 6 of the income tax act, real estate also refers to a building, structure or other facility located on another owner's land, which can be handed over to a third party without consulting the landowner so that the right of possession for the land is also transferred.

Itemise the real estate, buildings and structures included in fixed assets on Form 18B (Fixed assets – Real estate). Transfer the aggregate amount of real estate from Form 18B to this line on the tax return (Real estate, buildings and structures).

To enter the value of each real estate unit, use the acquisition cost not depreciated for tax purposes or the comparison value for 2018, whichever is the greater of the two. Do the comparison and select the value individually for each real estate unit.

Machinery and equipment

Report in this line the value of machines and equipment. The value of the machines and equipment is the portion of the acquisition cost that has not been depreciated for income tax purposes.

Fixed asset securities

Itemise the securities included in fixed assets and financial assets on Form 8B (Securities and book-entries relating to business source of income – Business partnership and business operator/self-employed person). The purpose is to compare which is the greater of the two: the acquisition cost not depreciated for income tax purposes or the comparison value of fixed-asset and financial-asset securities. Compare the amounts entered on the last line of Form 8B (‘Total fixed assets’ and ‘Total financial assets’). If the acquisition cost not depreciated for income tax purposes is the greater of the two, report on this line of the tax return the amount of undepreciated acquisition costs from line ‘Total fixed assets’ on Form 8B. If the comparison value is the greater of the two, report the total amount of comparison values from the same line. 

  • The comparison value for apartment shares acquired before 2006 (shares in a housing company and mutual real estate company) is the taxable value of 2005. Apartment shares acquired on or after 1 January 2006 do not have any comparison value, which is why in such cases the acquisition cost not depreciated for income tax purposes is also entered in the ‘Comparison value’ column.
  • The comparison value of a publicly traded security is 70% of the end-of-day price of the security on the balance sheet date of the business operator/self-employed person.
  • The comparison value of a mutual fund share is 70% of the fair value at the end of calendar year 2016.
  • The comparison value of a non-publicly traded share is the comparison value of the share specified in the tax decision of the company in question.

Other fixed assets

The value of assets included in other fixed assets. Other fixed assets include, among others,

  • Gravel and sand pits
  • Ore and mineral deposits
  • Quarries
  • Peat bogs
  • Railway
  • Dams
  • Bridges
  • Basins.

Current assets

Goods

Commodities acquired from an external supplier, intended to be sold ‘as is’. If you are engaged in wholesale or retail trade activities, the packaging materials acquired for the purpose of selling the goods can also be added to goods.

Other current assets

Assets included in other current assets. Other current assets include, among others, materials and supplies, and self-manufactured products.

Financial assets

Accounts receivable

Long-term and short-term receivables, instalment account receivables, and other similar assets.

Cash (in hand, no bank deposits)

Cash in hand related to the business activities of a business operator/self-employed person. Deposits that are tax-exempt or subject to tax-at-source are not recorded as assets on the tax return form, so do not add them in to the amount reported here.

Financial asset securities

Itemise the securities included in fixed assets and financial assets on Form 8B (Securities and book-entries relating to business source of income – Business partnership and business operator/self-employed person).

The purpose is to compare which is the greater of the two: the acquisition cost not depreciated for income tax purposes or the comparison value of fixed-asset and financial-asset securities. Compare the amounts entered on the last line of Form 8B (‘Total fixed assets’ and ‘Total financial assets’). If the acquisition cost not depreciated for income tax purposes is the greater of the two, report on this line (Financial assets securities) of the tax return the amount of undepreciated acquisition costs from line ‘Total financial assets’ on Form 8B. If the comparison value is the greater of the two, report the total amount of comparison values from the same line.

The comparison value of a publicly traded security is 70% of the end-of-day price of the security on the balance sheet date of the business operator/self-employed person. The comparison value of a mutual fund share is 70% of the fair value at the end of calendar year 2018. The comparison value of a non-publicly traded share is the taxable value specified in the tax decision of the company in question.

Other financial assets (no bank deposits)

Report on this line the items included in financial assets that have not been processed and reported on the other lines of this section. Enter on this line, for example, other receivables, such as the next year’s rent that a tenant has paid in advance.

Please note that bank deposits that are tax-exempt or subject to tax-at-source are not entered as assets on the tax return form.

Total business assets

The total amount of business assets.

12.2 Business liabilities

Current liabilities

Report on this line current liabilities. A liability is deemed current (short-term) if it is due for payment within a year or less.

Calculated tax liabilities, as defined in the Accounting Act (chapter 5, § 18), are not deemed as liabilities in the calculation of net worth.

Non-current liabilities

Report on this line non-current liabilities. A liability is deemed non-current (long-term) if it is due for payment after a year or more.

Subtract adjusted equity from total liabilities

Adjusted negative equity

Report on this line the amount of adjusted negative equity that you have calculated in section 11 (Calculation of non-deductible interest expenses) of the tax return.

Total business liabilities

Add together the current and non-current liabilities and subtract from the resulting amount the amount of adjusted negative equity.

12.3 Net worth of the business

Division into capital income and earned income

Business income is divided into a capital-income portion and an earned-income portion to the business operator/self-employed person. The Tax Administration divides the business income for tax year 2018 into a capital-income portion and earned-income portion on the basis of the net worth of the business in 2017.

The capital-income portion equals a 20% return on the net worth of the business in 2017. The capital-income portion can also be deemed as a 10% return, or the business income can be taxed in full as earned income. The business operator/self-employed person must separately request for these calculation methods to be used in their tax assessment. The request can be made in section 17 (Request for division of business income) of the tax return.

A non-standard accounting period (longer or shorter than 12 months) affects the size of the capital-income portion.

Before the calculation of the capital-income portions, 30% of the wages subject to withholding tax that you have paid over the 12 months preceding the end of the tax year are added to the net worth.
If the business income includes capital gains on real estate or securities included in fixed assets, the share of capital gains from the business income is always deemed as capital income, regardless of the value of net worth.

The income tax rate for taxable capital income is 30%. However, for the portion of capital income that exceeds €30,000, the income tax rate is 34%. Earned income is taxable on the basis of a progressive scale; in other words, when taxable income increases, the tax rate increases.

Positive net worth

Subtract from the total amount of business assets (line ‘Total business assets’) the total amount of business liabilities (line ‘Total business liabilities’). If the resulting amount is positive, report it here.

Negative net worth

Subtract from the total amount of business assets (line ‘Total business assets’) the total amount of business liabilities (line ‘Total business liabilities’). If the resulting amount is negative, report it here.

13 Type of equity

Only fill in this section if you use double-entry bookkeeping. If the amount of equity is negative, enter a minus sign (–).

Equity, start of year

Report on this line, for example, the profit or loss from previous accounting periods. If the amount of equity was negative at the start of the accounting period, enter a minus sign (–).

Cash withdrawals and cash investments (for private use)

The difference between the cash withdrawals and cash investments for private use made during the accounting period. Enter the difference with a minus sign (–) if the amount of cash withdrawals during the accounting period is higher than the amount of cash investments.

Profit/loss for the year (as shown by accounting)

Report on this line the profit/loss for the accounting period as recorded in the profit and loss account: Enter the profit for the accounting period with a plus sign (+) and the loss for the accounting period with a minus sign (–).

Equity, end of year

The amount of positive or negative equity, as at the end of the accounting period. Enter the negative equity with a minus sign (–).

14 Operating reserve

Report in this section the amount of operating reserve for the tax year 2018. If you only have an operating reserve, report it only in this section. You do not need to fill in Form 62.

You can create an operating reserve if you have paid wages during the accounting period. The total amount of operating reserves created in the tax year and the unpaid operating reserves created in previous years must not exceed 30% of the wages paid during the 12 months preceding the end of the accounting period. If the reserve has been created for the maximum amount but less than the estimated amount of wages were paid, an income-entry is made on the reserve. Report relieved write-offs and reserves in subsection 2.1 ‘Business income – Relieved write-offs and reserves’ of the ‘Calculation of taxable income’ section.

Example: The operating reserve for 2017 was €30,000. In total, €80,000 of wages subject to withholding tax were paid during the 12 months preceding the end of the accounting period 2018. 30% of this amount is €24,000. In 2018, an income-entry is made for the operating reserve as relieved write-offs and reserves in the amount of €6,000 (€30,000 – €24,000) in subsection 2.1 ‘Business income – Relieved write-offs and reserves’ and the remaining €24,000 is entered in section 14 (Operating reserve).

15 Wages paid

Report all the wages subject to withholding tax that were paid during the 12 months preceding the end of tax year 2018.

In the Tax Administration's calculation of the capital-income portion from the business income to be divided, 30% of the amount of wages you report here are added to the net worth of business.

Example: The business operator’s accounting period is 1 July – 30 June. In total, €20,000 of wages has been paid during the accounting period 1 July 2017 – 30 June 2018 (= tax year 2018). Since the accounting period is 12 months, the total amount of wages paid during the accounting period – €20,000 – is reported in section 15.

16 Capital gains derived from fixed-asset securities and real estate

Report in this section the capital gains on securities and real estate included in fixed assets. Capital gains means the positive difference between the selling price and the acquisition cost not depreciated for tax purposes. Add the amount of capital gains to the income that you report in section 2 ‘Calculation of taxable income’ of the tax return.

At the least, an amount equivalent to the amount of capital gains on fixed-asset real estate and securities is deemed as capital income. A separate itemisation must therefore be provided on the above-mentioned capital gains.

Do not enter here the portion of capital gains that has been transferred to a replacement reserve.

17 Request for division of business income

Business income is capital income up to the amount equivalent to 20% of the net worth of the business in the previous tax year.

If you request for business income to be divided on the basis of 10% of net worth rather than 20%, check the box for the first option: ‘Request for maximum amount of capital income to be set at 10% of net worth’. If you request for business income to be treated fully as earned income, check the box for ‘Request for jointly taxable income to be fully treated as earned income’. In this section, only one of the boxes can be checked. From a tax accounting point of view, the most advantageous option is determined on the basis of the earned income of both the business operator and their spouse and the related deductions.

Please note that if the spouses are running the business together, the request for division of business income (checked box in section 17) is deemed as a joint request by the entrepreneur and the spouse.

Date, signature and telephone number

If you are filing your tax return on paper, remember to sign the tax return form. Enter also the date of signing the tax return. You may also give your telephone number.