The deduction for entrepreneurs — operators of trade or business

The deduction called “entrepreneur deduction” (yrittäjävähennys; företagaravdrag) is given to self-employed individuals who operate trade or business. It is 5% of the business profits for the year. The Tax Administration calculates the deduction automatically. You can see the deduction on your tax decision.

How the deduction is calculated

After any losses allowable from previous tax years have first been subtracted, the Tax Administration makes the 5-percent deduction from the tax year’s business profits. The deduction for entrepreneurs is made before the income is divided into earned income and capital income for purposes of assessing the self-employed person’s taxes.
The deduction is only granted against the profit generated by the operation of the trade or business. Its size is restricted to never exceed the amount of the profit itself. Because of this rule – in case of business loss instead of profit – the granting of the deduction will not increase the amount of the loss recorded for the tax year.