What you need to know when starting up your own taxi service

Tax Administration Bulletin, 7/2/2018

The recent amendments of the laws governing the operation of taxis do not have an impact on the tax obligations of a business owner. Independent taxi drivers are expected to report their income to the Tax Administration. The Tax Administration follows the developments in the taxi business now that the new laws are in force.

Any violations of fiscal rules will be dealt with. No changes are made to how returns must be filed and taxes must be paid to the Tax Administration.

The Tax Administration observes the effect of the legislative changes and is very interested in the future development of the taxi service industry. Enforced tax control may be necessary if operators fail to follow the rules of fair competition. We have access to many types of information that we can compare and cross-check in order to learn more about the activities of the operators.  If necessary, we may work together with other public authorities and administrative sectors. 

Independent taxi drivers are treated as self-employed business operators, liable to pay income tax on their earnings. Their fare income must always be reported, regardless of whether the taxi ride was arranged by an outside intermediary or not. Reporting the income voluntarily saves independent drivers from having to undergo an audit or being subjected to tax penalties, increases, or late-payment charges afterwards. In some cases, leaving out fare income from a filed tax return may even be considered a crime.

Drivers who offer their passengers a receipt show the passenger that their taxi is an honest operator – the driver is aware of his or her responsibilities in the Finnish society. For this reason, the passengers of a taxi should always ask for a receipt.

Do you want to become an independent taxi driver? Steps to take

Taxi services are always treated as being produced by a business enterprise. The form of the enterprise can be one of the various permissible legal forms (limited-liability company, partnership, etc). You must be registered as a self-employed individual in order to get a business name (T:mi). In addition, you must have the necessary permits that entitle you to drive a taxi.

1) Register as a self-employed business operator

Sign up for a Business ID and become self-employed individual. Complete the application form on ytj.fi.  When completing the form, you should also ask for entry in the registers maintained by the Tax Administration. Guidance for new businesses: tax.fi/newbusiness.

2) Apply for the necessary licences to operate taxi services

Under Finnish law, you must have a taxi service licence. For more information, visit the website of Trafi.

3) Have your vehicle registered

If you drive a motor vehicle as a taxi even part-time, you must ensure that it has a proper registration for licensed operation. Registration for licensed operation may have an impact on what kind of technical inspection and motor insurance will be required.

4) Keep a driver’s log

Your role as a professional operator of transport services requires that you keep a driver’s log. It must contain clear records of the following: (a) The fare income you receive, divided into amounts paid to you in cash, amounts of credit payments, and other, miscellaneous income amounts (b) The kilometres driven since the start of the current year, divided into taxi-service kilometres against payment, kilometres necessary for your operation but not paid for by your customers, and kilometres driven for private and miscellaneous purposes. If your vehicle has a taximeter that prints out receipts, your driver’s log can be replaced by the reports generated by the taximeter.

5) Offer a receipt to your passengers

If you represent a company or if you are a self-employed individual, you must automatically offer a receipt to all paying customers. Receipts may also be offered in electronic format. Enter all the payment transactions in a bookkeeping system.

6) Report your income on the business tax return form, and deduct your business expenses from the income

Your taxable income must contain all the income you receive for giving lifts to passengers. Report it on Form 5, the business tax return. For purposes of taxation, you have the right to deduct the expenses that relate to your operation, which you have paid in order to generate business income. Examples of deductible expenses include fuel, car repair, and car wash expenses. You must deduct expenses proportionally, i.e. you cannot deduct more than the percentage of the expense that actually was used for your taxi operation.

7) File a tax-deduction claim for the vehicle you use as the taxicab

You are allowed to deduct depreciation against your taxes if the taxicab vehicle is part of the assets of your business enterprise. Motor vehicles are regarded as being part of your business assets if more than half of the kilometres driven with them during the year is business-related. However, if your taxicab is not a business asset, you are allowed to claim an additional tax deduction based on the kilometre count of business driving. The records of your driver’s log help you to provide evidence regarding the business-related driving. More information on depreciation expenses on business assets and on travel expenses and how to deduct them.

8) Pay the VAT and make sure to use your VAT deductions

You must register as a VAT taxpayer if you estimate that your annual turnover goes over the threshold of €10,000 (during your accounting period – normally the calendar year). Even if you don’t reach the threshold, you can ask for registration in the VAT Register. If you are VAT registered, you must add 10% VAT to all passenger fares that you collect. If you also offer your customers transport services of goods, you must add 24% to these fares.  Registration for VAT also entitles you to deduct the VAT that is included in the purchases you make for your taxi business. Deductible VAT may consist of the VAT you pay when you buy fuel or the VAT on a repair invoice. However, if the vehicle is used for taxi business and other taxable business purposes as well as for private purposes, the deductions may be only made for the part that concerns taxi business. As a VAT taxpayer, you must submit a tax return on VAT on your initiative and pay it in accordance with the tax period you have. Extension of tax periods is available to small business.

9) Request car tax relief if your vehicle fulfils the requirements

The reduced car tax currently in force for taxicabs will be gradually abolished by 1 July 2022. The current requirement is that when the vehicle is registered in Finland for the first time it is entered in the register as a vehicle intended for taxi service, and that its primary use is operation as a taxicab.

The reduced car tax for taxicabs 

Date of vehicle registration

Reduction from the car tax on a taxicab

               - 30 June 2018

maximum €4,800

1 July 2018 - 30 June 2019

maximum €3,000

1 July 2019 - 30 June 2020

maximum €2,400

1 July 2020 - 30 June 2022

maximum €1,200

1   July 2022 -

No  reduction

The reduction is adjusted downwards if the vehicle had been operated in other countries before its Finnish registration. Full exemption from car tax is granted for a vehicle, registered in Finland for the first time with the specific registration entry for operation as a taxi, which primarily is used as a taxi, and for which the following requirements are met as well: the vehicle must also be adapted for disabled passengers, or approved for transporting children to school or daycare. Additionally, it has to be approved for transporting at least six passengers (plus the driver), and one or more of the passengers can travel in a wheelchair. 

 

(3) Have your vehicle registered – this section was updated on 17 September 2018.
The section 8) was updated on 25 October 2018.