Negligence penalty for a third-party filer regarding annual information return obligations of tax year 2023

This is an unofficial translation into English. The official guidance is available in Finnish and Swedish, the national languages: VH/2700/00.01.00/2023.

1 Scope of application of the guidance, and a third-party filer’s obligations to provide information

This guidance concerns the grounds for imposing a negligence penalty under § 22 a of the act on the assessment procedure (Laki verotusmenettelystä 1558/1995) as regards a third-party filer’s obligations to provide information under chapter 3 of the said act.

The grounds for imposing negligence penalties are discussed especially in respect of such annual return information that is collected for natural persons’ pre-completed tax returns. Every year, the Tax Administration sends individual taxpayers a pre-completed tax return, which is based on annual return information submitted by third-party filers, such as payors. Pre-completed tax returns have an important role in the tax process. In order that the pre-completed tax return would be useful, the information that third-party filers submit to the Tax Administration must be correct, submitted in the right method and at the right time. The annual return information is also used in the tax assessment of corporate taxpayers.

A negligence penalty laid down in § 22 a of the act on the assessment procedure can be imposed if a third-party filer neglects its obligation to provide information. The amount of penalty depends on the amount of reportable information, for example, because the amount of missing or incorrect information has a notable effect on the accuracy of the taxpayer’s pre-completed tax return.

This guidance is not applied to negligence penalties imposed in the following situations:

• The guidance does not apply to the obligation to report information to the Incomes Register in accordance with the act on the income information system (Laki tulotietojärjestelmästä (53/2018)). With regard to the Incomes Register, the guidance on the negligence penalty regarding the submission of information to the Incomes Register (VH/377/00.01.00/2021) is applied. The guidance is available in Finnish and Swedish.
• Further, this guidance is not applied to a negligence penalty imposed by virtue of § 39 of the act on the assessment procedure for self-assessed taxes (Laki oma-aloitteisten verojen verotusmenettelystä 768/2016), nor to a negligence penalty for neglecting to submit a recapitulative statement, which is imposed by virtue of § 168 a of the Value Added Tax Act (1501/1993) . In these cases, the guidance on penalty fees in self-assessed taxation (VH/20016/00.01.00/2020) is applied. The guidance is available in Finnish and Swedish.
• This guidance is not applied to negligence penalties imposed in situations referred to in § 17 a–f of the act on the assessment procedure (FATCA and DAC2/CRS, DAC6, DAC7). For these situations, a separate guidance has been issued: A third-party filer's negligence penalty regarding certain reporting obligations related to international exchange of information (VH/2701/00.01.00/2023)
• This guidance is not applied to the payment service providers’ obligation to provide information under § 29, subsection 7 of the act on the assessment procedure for self-assessed taxes. For this, a separate guidance has been issued (VH/2702/00.01.00/2023)

The Tax Administration’s decision on the general obligation to provide information (available in Finnish and Swedish) provides in greater detail for third-party filers’ obligation to report annual information for purposes of tax assessment. The filing deadline and filing method are specified in § 43 and § 44 of the decision (VH/5385/00.01.00/2022).

Rules regarding the filing deadlines and methods are also found in the following decisions issued by the Tax Administration (available in Finnish and Swedish):

• Tax Administration decision on the obligation to report information in the construction sector (VH/1950/00.01.00/2019), and
• Tax Administration decision on the general obligation of interest payors referred to in the act on tax-at-source imposed on interest income (Laki korkotulon lähdeverosta 1341/1990) to provide information (A70/200/2016)

2 Filing deadline

The annual information return must arrive at the Tax Administration by the filing deadline. If the due date for filing falls on a Saturday, Sunday or other holiday, the return must arrive at the Tax Administration on the next business day at the latest.

In principle, annual information returns must be filed by 31 January 2024.

The following annual information returns have a due date other than January 31:

• Annual information returns on interest on interest income subject to tax at source must be filed by 15 February 2024
• Annual information returns on shareholder loans must be filed by 24 February 2024

If you cannot file the annual information return by the due date, you can request an extension.

3 Method of reporting

The Tax Administration's decision on the general obligation to provide information (VH/5385/00.01.00/2022) lays down the method of filing for different annual information returns. In principle, the information can be filed electronically in the Tax Administration’s electronic reporting services, or by using the Tax Administration’s paper form. However, certain returns can be filed only electronically. More detailed information about the returns to be filed electronically and about the special situations in which returns must be filed electronically can be found in the provisions on the method of reporting laid down in the decision on the general obligation to provide information.

4 Extended time for filing based on an application

If you want to request an extension of time for filing an annual information return, you must submit an application to the Tax Administration before the end of office hours on the original due date of the annual information return at the latest. If the application arrives after that, it is considered to have arrived late and will not be processed. Only for a special reason can an extension be granted for an application that has arrived after the filing deadline.

An extension of time for filing an annual information return can be requested orally or in writing. If the due date for your annual information return is 31 January 2024 and you ask for an extension by phone, you may be granted an extension until 5 February 2024. If you need a longer extension of time, you must submit a written application. If you file a written application and justify your request, the Tax Administration may grant you an extension up until 9 February 2024. If the final due date of the annual information return is 24 February 2024, the application must be submitted in writing. The annual information return must arrive at the Tax Administration by the postponed deadline granted on the basis of your application.

A free-form application for an extension must contain the following information:

• date
• name of party with reporting obligation
• Business ID or personal identity code
• annual information return for which an extension is requested
• new deadline requested
• reason(s) why an extension is requested
• contact information of the party with reporting obligation or of their representative

5 Overall regulation regarding negligence penalties

If a party with an obligation to file an annual information return neglects the obligation, a negligence penalty under § 22 a of the act on the assessment procedure may be imposed. The penalty may be imposed for neglecting a general or a specific obligation to provide information.

The amount of penalty depends on how serious the neglect is. The penalty is determined as hundreds of euros, so the minimum penalty is €100. The party with obligation to provide information must always be heard before a negligence penalty may be imposed.

The negligence penalty imposed on the party with obligation to provide information may not be more than €2,000 if

1. there is a minor omission or error in the return or in other information or document submitted to fulfil the obligation to provide information or another obligation under chapter 3 of the act on the assessment procedure, or in the procedure followed, and the party required to provide information has not corrected the matter although a request to do so has demonstrably been sent;
2. the party required to provide information has submitted a report, information or document late without a valid reason; or
3. the party with obligation to provide information has submitted the information by using a method other than decreed by law or specified by the Tax Administration.

If there are substantial omissions or errors in a return, other information or a document submitted by the party to fulfil the obligation to provide information or another obligation under chapter 3 of the act on the assessment procedure, or in the procedure followed, or if the party has not corrected the matter until after a request to do so had demonstrably been sent, a negligence penalty of no more than €5,000 can be imposed.

If the party with obligation to provide information has intentionally or through gross negligence submitted a substantially incorrect return, other information or document to meet the obligation or has failed to submit a return at all, or if the party has intentionally or through gross negligence substantially neglected another obligation under chapter 3 of the act on the assessment procedure partly or in full, a negligence penalty of no more than €15,000 can be imposed.

When imposing the negligence penalty, the Tax Administration takes into account the amount of information that the party is obliged to report.

No negligence penalty is imposed on a natural person or a death estate unless the neglect relates to an obligation to provide information about business activities or agricultural or forestry operations.

The negligence penalty is not deductible as expense in taxation.

Interest for late payment is collected on an imposed and overdue negligence penalty in accordance with § 5 a of the act on surtax and penalty interest (Laki veronlisäyksestä ja viivekorosta 1556/1995). The interest for late payment accrues from the day following the due date stated in the decision up until the date of payment. The interest for late payment on an overdue negligence penalty is not deductible in income taxation.

A negligence penalty can be imposed both for neglecting the obligation to provide information and for neglecting other obligations, such as due diligence obligations.  The negligence penalty is specific to a return and to a data flow.

6 Determination of a negligence penalty

A negligence penalty is imposed separately on each annual information return that is missing, substantially incorrect or filed late, and for failure to reply to the Tax Administration’s request for additional information in an acceptable way.  When the negligence penalty is determined, it is possible to take into account the total number of the filer’s cases of neglect and missing recipient itemisations, the number of times the filer has been requested to submit the missing annual information return, the economic value of the reportable information, and the actual filing date of the annual information return. A negligence penalty can also be imposed if the annual information return is not submitted in the method specified by the Tax Administration. If the annual return information is not filed by 7 March 2024 or at all, the penalty will be increased.  In the case of repeated neglect, the amount of negligence penalty will be increased.

7 Negligence penalty amount

The negligence penalty is determined in accordance with the table below whenever there are no special reasons for reducing or increasing the amount. In general, the amount in determined based on the euro-value of the party's reportable information or on the number of recipient itemisations in the annual information return, whichever is higher.

If a party with obligation to provide information has intentionally or through gross negligence submitted a return, other information or document that is substantially incorrect or has not submitted a return at all, or if they have intentionally or through gross negligence neglected some other obligation under chapter 3 of the act on the assessment procedure either partly or in full, the amount of negligence penalty is always at least twice the amount indicated in the above table but    no more than €15,000. The limit of €15,000 is applied separately to each year of payment and each return.

For a justified reason, it is possible to reduce the negligence penalty or not impose it at all. A justified reason is, for example, if the neglect is minor in view of the circumstances.

8 Determining the financial value of information

The financial value of the reportable information in accordance with the table in section 8 (Negligence penalty amount) is determined for different annual information returns based on the following items:

9 Adjustment and appeal

The parties with obligation to provide information and the Tax Recipients' Legal Services Unit can appeal against a decision made by the Tax Administration on the negligence penalty by submitting a written claim for adjustment to the Assessment Adjustment Board.

The claim for adjustment must be submitted within 60 days of the date when a notice of the Tax Administration’s decision was received. For the Tax Recipients’ Legal Services Unit, the appeal period is 60 days from the date of decision.