Prepayments of tax for 2018: Individual taxpayers – natural persons
- Date of issue
- 1/1/2018 - Until further notice
This instruction has been replaced: Income and deductions used in the calculation of prepayments for 2019
Taxpayers must make prepayments on any receipts of income that are not subject to withholding.
Your prepayments are related to both earned income and capital income. The Tax Administration database on assessment of all taxpayers' taxes for the 2016 taxable year serves as the base for the official decisions that define the total prepayment for the 2018 taxable year. Nevertheless, the following exceptions have been made in the official calculations:
- Projected income from business sources has been increased by 10.0%
- Projected rental income has been increased by 5.0%
- Projected wage income, including tip income within certain service professions, has been increased by 2.0%, and if income figures for 2017 have been available it has been increased by 1,0%.
The calculations include no further upward adjustments in addition to the above.
If any changes to your prepayments were made during 2017, the income figures for 2018 have thus been available to us and we have made use of them. Similarly, you may have submitted an estimate of your 2018 income, and in that case, we have made use of it as well.
Similarly, for calculations on capital income and earned income, derived from business and farming, the Tax Administration database on assessment for 2016 serves as the base, and alternatively, if changes in prepayment were carried out in 2017, the income figures for 2018 have therefore been available and calculations are based on them.
No income estimates for receipts of surplus on cooperative capital and dividends are included in the calculation of the prepayments if such estimates relate to the taxpayer's latest final tax assessment. The only cases when this type of income is included are firstly, if on the taxpayer's request, changes to prepayments were made in 2017, and secondly, if the taxpayer submitted an estimate for 2018 that included dividends from domestic payers, dividends from stock-exchange-listed foreign payers or profit-surplus income from cooperative societies
Payers must withhold 25.5% on the dividends if they are distributed by a stock-exchange-listed corporation. Regarding the payers of other dividends, the rate of withholding is 7.5% except for any amounts going over the threshold of €150,000 on which payers must withhold 28% on the excess. It should be noted that when payers withhold tax, the percentage rate applies to the entire amount, not just to the taxable portion of the dividends. If you expect to receive dividends distributed by other than stock-exchange listed corporations, we recommend that you ask for a revised tax card to ensure that your withholding is correct. When you ask for the card you should let us know the gross amount of your dividends, divided into two parts; one of which is taxable as earned income, the other — as capital income. Report the part representing 8% of the mathematical value of the shares you hold as the capital-income part. The dividends in excess of 8% of the mathematical value will be taxed as earned income.
Further information on the taxation of dividend income (in Finnish or in Swedish) - Osinkotulojen verotus.
Payers must withhold 25.5% on the profit surplus distributed by a stock-exchange-listed cooperative society. For other cooperative societies, the rate of withholding is 7.5% on the condition that the annual total income consisting of profit surplus is max. €5,000 distributed by the same cooperative. If the annual total exceeds this threshold, the rate of withholding is 25.5% on the excess. It is the obligation of the cooperative society to monitor whether its distributions to a single beneficiary go over the threshold. If you expect to receive profit surplus distributed by other than stock-exchange listed cooperatives, we recommend that you ask for a revised tax card to ensure that your withholding is correct.
Healthcare contributions of self-employed individuals
Healthcare contributions are the two following payments: healthcare payment (Finnish: sairaanhoitomaksu) and the daily-allowance contribution payment (Finnish: päivärahamaksu). The healthcare payment is based on the annual earnings amount reported to the insurance company, because in the case of self-employed business, the payment cannot be based on wages. If the individual concerned is additionally employed by another employer and is paid wage income, all incomes are taken into account in the official decisions that define the total prepayment for 2018. If there are tax deductions, they are included in the calculation as based on the total income, and the result is the net taxable income. Recipients of academic grants, insured as prescribed by MYEL laws, have the receipt of grant included in their income base for healthcare contribution. For wage income and work income, the contribution rate is 0%.
For wage earners – individuals who are not self-employed or MYEL insurance carriers – the base for healthcare contribution, 1.36%, is the taxable income for purposes of municipal income tax. Some taxpayers are recipients of pension, social benefit or other income, which is exempted from the daily-allowance contribution, but includible in the healthcare payment base. For this reason, the rate of the healthcare payment is raised by 0.17% for these taxpayers.
The daily-allowance contribution rate equals 1.53%, and if the taxpayer is not a wage earner, the annual earnings amount reported to the insurance company is used as the base. In the case of self-employed business insured under the YEL laws, the applicable rate of the daily-allowance contribution payment is increased by 0.17%. This contribution is not collected from taxpayers whose wage income plus work income stays below €14,020 a year.
Applicable prepayment rates
- State income tax schedule, 2018
- Income tax rates valid in various municipalities and church parishes, 2018
- Nonresidents' municipal income tax rate 19,75%
- Healthcare payment 0%/1.36% + 0.17%
- Healthcare charge called daily-allowance contribution 0%/1.53% + 0.17
- Public Broadcasting Tax 2,50%
- Income tax rate for capital income (investment income) 30%. For amounts of taxable capital income in excess of €30,000, the capital-income tax rate is 34%.
Acceptance of prepayments as payments of future tax; consequences of delayed payment
Changes will be made in 2018 to the process of how late-payment penalties are imposed.
Starting 2018, the tax authority will accept any paid-in prepayments as payments of the taxpayer's future taxes only to the amount defined by the taxpayer's prepayment calculation.
If the taxpayer fails to make the 2018 prepayments, late-payment interest will be added, starting on the day after the due date – up to the date when the taxpayer pays them. Because an amendment of the law comes into force on 1 November 2018, the Finnish name for the late-payment interest will be changed (from "viivekorko" to "viivästyskorko").
In some cases, the Tax Administration may cancel any unpaid amounts including interest when assessing the taxpayer's taxes for the year if it turns out that the prepayments are not needed for covering the taxpayer's actual tax liability. The 2018 percentage rate of late-payment interest is 7.0%. If the taxpayer has neglected some of the prepayments, Enforcement Units may begin recovery during the tax year instead of delaying the recovery action until the end of the year.
The smallest amount to be prepaid is €170. An Official Decision of the Tax Administration determines the sizes of the installments that must be paid during the year as follows:
|Total Prepayment||Quantity of installments||Due dates fall in|
|€170.00 to €500.00||2||March and September|
|Over €500.00 up to €1,700.00||3||February, July and November|
|Over 1,700.00 up to €10,000.00||6||February, April, June, August, October, December|
|Over 10,000.00||12||All months,
January through December
Further information on the Official Decision on due dates and sizes of income-tax prepayments is available in Finnish and Swedish: Verohallinnon päätös luonnollisen henkilön ja kuolinpesän ennakonkannon alarajasta ja kantoeristä (29.8.2017/605).
Asking for the prepayments to be changed or canceled
As of the 2018 tax year, changes will affect the way individual taxpayers ask for revisions of their prepayments.
On the taxpayer's request, the Tax Administration may revise or even cancel the imposed prepayments for 2018; and this may be done up to the end date of the regular tax assessment.
An example of a good reason for reducing an individual's prepayments would be evidence that indicates a significantly lower income to be expected from his or her business operation. If the entire amount to be prepaid were to be considered unnecessary, the Tax Administration may cancel it. This may be done up to the end date of the taxpayer's regular tax assessment.
If you need to pay a supplementary prepayment, you can only do it until 31 October 2018. Starting 1 November 2018, taxpayers wishing to add to their prepaid sum will have to submit a request for recalculation before the end of the year. After the year has ended, taxpayers wishing to add to their prepaid sum will have to apply for an additional prepayment. The Tax Administration imposes the additional prepayment, and its due date will be during the year after the tax year. There's a requirement to pay interest on an additional prepayment relating to the 2018 tax year if the due date is on 1 February 2019 or later.
To ask for a revised calculation in order to have your payments changed, log in to Tax Card Online, call the telephone number printed on your prepayment invoice, or deliver a completed application form to any tax office. As of November 2018, MyTax will be the e-service to use.
Application forms for tax cards and revisions of prepayments may be picked up at any tax office and are also available for downloading at tax.fi/forms. Don't enclose your bank slips with the application, because they remain valid up to the date when the Tax Administration has given you a new calculation of prepayments — and new bank slips.
If you work as self-employed (= you are an independent contractor), and your clients pay you nonwage compensation (= trade income), they must withhold tax on all payments to you if you are not entered in the Prepayment Register.
The above requirement on withholding only concerns payments to independent contractors, not payments of wages to employees, which are always subject to withholding. Even though the clients must withhold tax on any payments to the independent contractor (who is not registered), there may simultaneously be a decision of the tax authority in force that the independent contractor should make regular prepayments of tax.
However, the Tax Administration may cancel the prepayment decision on request, if you can prove that the amount is too large or financially unjustified.