Income tax rate for limited liability companies and for other corporate entities is 20 %.
Residents are taxed on their worldwide income. A company is resident if it is registered or established under Finnish Law. Foreign companies are liable to pay income tax in Finland if they have a permanent establishment in Finland (general rule).
Corporate tax is paid on the company’s profit. The profit is what remains after deductible expenses are deducted from the company’s income that is subject to tax.
Taxpayers are expected to make advance payments on their projected income. It is recommended that taxpayers carefully examine their tax prepayment calculations. If the calculation shows a projected income amount that is different from currently projected income, taxpayers are entitled to request a change for prepayments.
Capital gains are generally treated as ordinary income (tax rate 20 %).
Tax losses are carried forward and offset against taxable income within the next 10 tax years.
Notice also! Group companies may even out their taxable profits and losses under the preconditions set out by law (group contribution).
Capital gains derived from the sale of shares are tax free if the shares that are sold are part of fixed assets, the seller company owns at least 10% of the share capital of the entity and the shares have been held for at least one year.
However this does not apply to real estate companies, housing companies or companies whose main function is to own real estates.
If the capital gain from the sale of shares is tax free, correspondingly the capital loss from the sale is non-deductible. A fixed asset is an item that is not purchased with the intent of immediate resale, but rather for productive use within the entity.
Dividends received by a Finnish company are, with certain exceptions, exempt from tax when the company paying the dividend is a resident in Finland or in EU/EEA country. Otherwise the normal corporate tax of 20 % will apply.
Foreign-sourced income may be taxable in the source country as well as in Finland, which may lead to double taxation situation. Finland has comprehensive network of tax treaties. At present, Finland has signed income tax treaties with more than 70 countries.
The Finnish Tax Administration, when assessing Finnish corporate income tax, eliminates double taxation by using mainly a credit method.
The Finnish tax laws determine the maximum available credit. Taxes that exceed the maximum credit can be used later during the five following years for any taxes payable on foreign income of the same type or source within the limits of maximum available credit.
A limited liability company must file a tax return within 4 months of the end of the last calendar month of its accounting period.