Corona situation: What to do if you are laid off from workNews, 3/20/2020
In addition to other worries caused by the coronavirus pandemic, many people now also have to think about their tax matters in a new way. Companies may have to lay off many of their employees.
The following examples show how lay-offs can affect your taxes.
These example calculations are based on a person born in 1970 who lives in Helsinki, with a municipal income tax rate of 18%, and belongs to the Evangelical Lutheran Church. His monthly pay is €3,000. His total wage income for the year is €37,500. The withholding rate on his tax card is 17.5%. He pays a total of €6,510.47 of taxes on his year’s pay.
Example: Laid off for 1 month. If the person is laid off for a month, he will receive less wage income for the year. His total annual wage income will be €34,500. During the time he is laid off, he receives €1,700 of earnings-related unemployment allowance from his unemployment fund. This makes his total income for the year €36,200. He pays a total of €6,065.68 of taxes on his income. The tax rate for his wages and earnings-related unemployment allowance remains almost the same, at 17%.
Example: Laid off for 3 months. If the person is laid off for three months, he will receive less wage income for the year. His total annual wage income will be €28,500. During the time he is laid off, he receives €5,100 of earnings-related unemployment allowance. This makes his total income for the year €33,600. He pays a total of €5,178.87 of taxes on his income. The tax rate for his wages and unemployment allowance is significantly lower, 15.5%
If you are a member in an unemployment fund, you can apply for earnings-related unemployment allowance from your fund. The withholding rate on earnings-related unemployment allowance paid during the lay-off is 25%, unless you provide your unemployment fund with a revised tax card that better reflects your situation.
If you are not a member in an unemployment fund, you can apply for basic unemployment allowance or labour market subsidy from Kela, the Social Insurance Institution of Finland. The withholding rate on benefits received from Kela is 20%. You can also send a revised tax card to Kela if you want to change the rate.
How to request a revised tax card:
- Get your latest payslip. You can also use the wage income details for this year that you can see in MyTax.
- Estimate the amount of pay you will receive during the rest of the year as accurately as you can. You will also need to know how much you will receive in unemployment allowance or other benefits during the lay-off. Make sure that you know the amount before you request the tax card.
- Request a revised tax card in MyTax: Tax cards and prepayments > Request a new tax card.
- See instructions for requesting a tax card for wages and for benefits