Reporting data to the Incomes Register: business restructuring

Date of issue
9/28/2020
Record no.
VH/6377/00.01.00/2020
Validity
9/28/2020 - Until further notice

1 Implementation methods of business reorganisation

Business reorganisation can be carried out using different methods, such as a merger, demerger or business transfer.

In a merger, one or more companies are merged into the receiving company or at least two companies form together a new company.

In a demerger, a company’s assets and liabilities (either in full or in part) are transferred to two or more receiving companies. In a complete demerger, the demerged company is dissolved and two or more new companies can be established in conjunction with the demerger.

In a business transfer, a company transfers their assets associated with their business operations as a whole and liabilities associated with the transferred assets, where applicable, to a limited liability company, which continues the business operations. The transfer may take place to a new company established for the business transfer or to an existing company.

The business reorganisation will enter into force after it has been registered in the Trade Register. Following a business reorganisation, the employer will be the company that continues business operations after the reorganisation.

The implementation method of a business reorganisation does not exclusively determine how the submission of reports to the Incomes Register changes or whether it changes at all. Any impact on the reporting obligation always depends on the details of each business reorganisation.

If a company is declared bankrupt, this will also affect the obligation to report data. A bankruptcy estate may, as a substitute payer, pay the wages of employees on behalf of the actual employer. In this case, the bankruptcy estate must report the wages it has paid as a substitute payer, and the debtor, as the actual employer, must report the wages paid by the substitute payer for which the debtor pays social insurance contributions. The actual employer must submit corresponding reports for all reports submitted by the substitute payer. Depending on the situation, the actual employer’s report is either submitted by the bankrupt employer or the party carrying out the bankruptcy process. For more information about bankruptcies, read instructions Reporting data to the Incomes Register: payments made by substitute payer.

2 When the payer or the payer’s Business ID changes as a result of business reorganisation

A business ID may change as a result of business reorganisation or, for example, when the type of business changes.

As a result of a business reorganisation, employees employed by the company discontinued through a business reorganisation may transfer to the company which continues the discontinued company’s operations. The wages of the transferred employees must be reported to the Incomes Register using the receiving company’s business ID starting from the entry into force of the business reorganisation.

A business reorganisation can also be implemented so that a completely new company continues operations with a new business ID (for example, if a completely new company is established in conjunction with a demerger). In this case, the wages of the employees employed by discontinued companies must be reported in the new company’s name starting from the entry into force of the business reorganisation.

When operations are continued with the receiving company’s business ID, the business reorganisation will not have any impact on reporting or correcting the earnings payment data of those income earners who were employed by the continuing (receiving) company before the business reorganisation.

In business transfers and demergers, it is also significant whether the payer’s business ID changes as a result of the business reorganisation.

Wages paid after a business reorganisation must be reported to the Incomes Register normally in accordance with the payment principle. The continuing company must report the payments it has paid to the Incomes Register no later than on the fifth calendar day after the payment date.

Any changed business ID must also be taken into account when paying self-assessed taxes. The self-assessed taxes that have been reported under the new business ID must also be paid using the same business ID’s reference number. The payer must always ensure that the correct business ID’s reference number is used when paying self-assessed taxes.

2.1 Reporting the pension policy number

When a company’s operations are discontinued as a result of a business reorganisation, the pension insurance policy will also end. When wages are paid after a business reorganisation, the wages of the employees transferred to the receiving company must be reported under the receiving company’s pension policy number. If operations are continued in the name of a completely new company (i.e. a new company is established as a result of a merger), the new company must take out separate pension insurance.

2.2 Reporting accident and occupational disease insurance data

The occupational accident insurance company identifier and the accident and occupational disease insurance policy number are only mandatory data if the employer has taken out more than one statutory accident and occupational disease insurance for the employees.

As a result of a business reorganisation, the accident and occupational disease insurance ends and the receiving company’s insurance also covers the functions of the transferred company, starting from the entry into force of the business reorganisation. If operations are continued in the name of a completely new company (i.e. a new company is established as a result of a merger), the new company must take out separate accident and occupational disease insurance.

The insurance must be taken out before the commencement of the employment relationship, which means that the insurance must be valid before the employee starts the job.

2.3 Reporting employment relationship data

An employment relationship is not reported as continuous if operations are continued under a new company’s business ID following a business reorganisation. The date on which the business reorganisation entered into force must be reported as the start date of the employment relationship.

3 Correcting earnings payment data after business reorganisation

The employer or other payer must correct any errors on their reports without delay after becoming aware of the error.

In business reorganisation situations, it may also be necessary to correct previously submitted reports. Corrections are usually made by submitting a replacement report for the original payment date.

If the payer’s customer identifier has changed, any previously submitted report must be corrected using the payer’s previous identifier by submitting a replacement report for the original payment date. Correcting data using the previous identifier requires that the identifier was valid on the original payment date. The pension policy number valid on the original payment date must be reported as earnings-related pension insurance data. If the payer has had several occupational accident insurance policies, the number of the policy valid on the payment date must be reported.

A replacement report can also be submitted through a technical interface if the technical interface’s purpose of use entered in the Incomes Register also includes reporting on behalf of another party. Corrections can be made using the web form of the Incomes Register’s e-service if the authorisations of the discontinued company remain valid. Any Suomi.fi authorisations granted before the company was discontinued remain valid for 12 months after the end of validity of the business ID. If an electronic report cannot be submitted, corrections can be made using a paper form.

After a business reorganisation has entered into force, wages or reimbursements of expenses allocated to a period preceding the business reorganisation are customarily paid. If the payment date follows a business reorganisation, payments must be reported normally using the payer’s customer identifier and the pension policy number valid on the payment date, as well as any accident insurance company’s policy number. Any previously submitted reports do not need to be corrected.

An error in earnings payment data may be related to reporting or payment. A reporting error means that income was paid correctly but reported to the Incomes Register incorrectly. A payment error means that a report was correct considering the income paid, but the amount of the income paid was incorrect. Read more about the correction and cancellation of reports submitted to the Incomes Register.

3.1 Reporting errors

An error occurred during the reporting phase can be corrected by submitting a replacement report for the original payment date using the customer identifier valid on that date. The pension policy number, as well as any accident insurance company’s policy number, valid on the original payment date must still be reported as the pension policy number of the earnings-related pension provider.

In certain situations, a report must be corrected by cancelling the original report and by submitting a new report for the original payment date using correct data. These situations include the correction of the pension policy number or certain insurance data. If a correction is made by cancelling a previous report and by submitting a new report, the pension policy number valid on the original payment date must be used in the new report.

3.2 Payment errors

3.2.1 Too little has been paid – more is paid after a business reorganisation

If the income earner has been paid too little in wages, the original report does not need to be corrected. Instead, the payer must submit a new report on the forgotten payment no later than on the fifth calendar day after the payment date of the new payment.

Example 1: Company K is merged into company T on 1 May 2020. Company T continues its operations using its original business ID and pension policy number. Company K’s previous identifiers are no longer valid after the merger starting from 1 May 2020.

An income earner worked in company K before the merger and now works in company T after the merger. In June, it is noticed that not full overtime pay was paid to the income earner in early 2020.

The error is corrected in conjunction with company T’s payday on 30 June 2020. The missing amount is paid from company T’s account and registered in company T’s accounting.

Example 2: On 1 May 2020, company K merges with company T into new organisation S. The new organisation is given a new business ID and a new pension policy number, and the previous identifiers of neither merged company remains valid after the merger starting from 1 May 2020.

An income earner worked in company K before the merger and now works in organisation S after the merger. In June, it is noticed that not full overtime pay was paid to the income earner in early 2020.

The error is corrected in conjunction with organisation S’s payday on 30 June 2020. The missing amount is paid from organisation S’s account and registered in organisation S’s accounting.

In example 2, data is reported to the Incomes Register using the identifier of the payer (organisation S) and the pension policy number and any insurance policy number valid on that date. The data is reported according to the payment principle: It is not relevant when the unpaid overtime pay was accrued. What is important is when the payment was paid to the income earner. In this situation, it is not necessary to correct any previously submitted reports.

If income had been paid before the merger on 1 May 2020, but it had not been correctly reported to the Incomes Register, a report would have to be submitted using company K’s business ID and the pension policy number and any insurance policy number valid on the original payment date.

3.2.2 Too much has been paid – reporting an overpayment after a business reorganisation

We recommend always reporting overpaid income as an unjust enrichment. Offsetting, i.e. the advance pay method, is not recommended. An unjust enrichment is reported by submitting a replacement report for the original payment date. An overpayment is entered by attaching ‘Unjust enrichment’ data to the original income type.

The processing of a payment as advance pay using an earnings pay report submitted to the Incomes Register is only permitted if the overpayment can be fully recovered on the next payday after the error was noticed.

Example 3: Company K notices that it has paid too much in wages to an income earner between 1 January and 30 April 2020. The error is noticed after 1 May 2020. Company K’s business ID is no longer valid after 1 May 2020. The income earner worked in company K until the merger, after which the income earner has worked in organisation S.

The unjust enrichment must be reported by submitting a replacement report in company K’s name. The business ID, pension policy number and any insurance policy number valid at that time must be entered on the report. The overpayment must be entered by attaching ‘Unjust enrichment’ data to the original income type. 

Read more about an unjust enrichment: Correcting data in the Incomes Register.

3.2.3 An employer’s separate report is corrected at the same time

When an earnings payment report is corrected, and the correction affects the amount of the employer’s health insurance contribution, the employer’s separate report must also be corrected.

If part of the payment has changed into an unjust enrichment, the amount of the employer’s health insurance contribution must be calculated from the amount which does not include any unjust enrichment. The correction must be allocated to the original payment month using the business ID valid at that time.

3.2.4 Too much has been paid – recovery after a business reorganisation

When a company stops operating under its previous business ID and continues its operations under a new business ID, a report on an unjust enrichment and a report on recovery must be submitted using different business IDs. Correspondingly, the pension policy number of the earnings-related pension provider and any accident insurance company’s policy number valid on each company’s payment date must be entered on the reports.

After the income earner has repaid the overpayment, the recovery must be reported using the report on the pay period, during which the overpayment was repaid.

The recovery must be reported using the customer identifier of the company to which the income earner repaid the overpayment. The pension policy number and any insurance policy number valid on the recovery date must be entered on the report.  

Example 4: Company K notices that it has paid too much in wages to an income earner between 1 January and 30 April 2020. The error is noticed after 1 May 2020. Company K’s business ID is no longer valid after 1 May 2020. The income earner repays the overpayment to organisation S’s account during summer. The income earner worked in company K until the merger, after which the income earner has worked in organisation S.

Organisation S reports the recovery using the report on the pay period, during which the overpayment was repaid. The report must include the business ID, pension policy number and any insurance policy number valid on the recovery date. A report on an unjust enrichment must be submitted for the overpayment by correcting the original report as described above.

Example 5: An income earner worked in company K. The employment relationship ended in April 2020. Information about the end of employment was only sent to payroll administration in May, due to final wages were not paid in April. In April, the income earner was overpaid EUR 500 in wages, due to which part of the income earner’s monthly wages needs to be recovered. In May, a holiday bonus and holiday compensation are paid for unused holidays, and a shift differential is paid for evening and weekend shifts (totalling EUR 700).

Company K’s business ID and pension policy number are no longer valid after 1 May 2020. The additional payments are paid from organisation S’s account and registered in organisation S’s accounting.

An unjust enrichment (EUR 500) is reported using a replacement report for the original report in company K’s name. Organisation S reports the recovery using the report on the pay period, during which the overpayment was repaid. The payments paid by organisation S (totalling EUR 700) are reported under organisation S’s business ID in accordance with the payment principle.

Following a business reorganisation, it should be noted that an overpayment paid by a previous company must be recovered in the new company’s name as gross recovery. Net recovery must not be used. This process must be followed if the company recovering an overpayment did not have a valid tax period when the overpayment was paid to an income earner. If a company does not have any tax period to which recovery can be allocated, data will not be summed up correctly in the Finnish Tax Administration’s data system. The sum of self-assessed taxes cannot be negative.

Read more about recovery: Correcting data in the Incomes Register.

4 Correcting absence data after a business reorganisation

If absence data is reported over a period preceding a business reorganisation, it must be reported using the business ID of the company which acted as the employer before the business reorganisation.

Example 6: Information about an income earner’s sick leave in April was late to payroll administration, and it is only processed on the payday in May. The income earner’s total wages for April will not change.

The income earner worked in company K at the beginning of the year. Company K’s business ID is no longer valid after 1 May 2020. Since 1 May 2020, the income earner has worked in organisation S. When the employer reports absence data to the Incomes Register, it must be reported using company K’s business ID, insofar as it concerns absences in April, when company K’s business ID was still valid. If data is reported using organisation S’s business ID, data users may not necessarily find the data.

Full wages were paid for April, although two thirds of total wages should have been paid during sick leave. Part of the wages is recovered due to the overpayment. The overpayment must be corrected as an unjust enrichment. The unjust enrichment must be reported by correcting the earnings payment report and the employer’s separate report submitted by company K in April. Absence data must also be corrected on the earnings payment report for April using company K’s business ID.

Once the income earner has repaid the overpayment to organisation S, a report on recovery must be submitted using organisation S’s business ID.