Interest and increase are added to taxes that are overdue

Late-payment charges vary depending on the type of tax. This article contains guidance and notes on how the consequences of late payment should be calculated. If you pay late, the Tax Administration uses your payment on late-payment interest (or on a tax increase) first, then on the overdue tax.

Late-payment interest for income taxes, self-assessed taxes, inheritance taxes, gift taxes, real estate taxes and transfer taxes

The following types of tax are subject to late-payment interest if you pay them after the due date:

  • income taxes, i.e. prepayments, additional prepayments and back taxes
  • VAT, employer contributions and other self-assessed taxes
  • inheritance tax
  • gift tax
  • real estate tax
  • transfer tax
  • any penalty fees imposed on these taxes.

Log in to MyTax to figure out how much you must pay in interest.

Interest period starts on the day after the due date and ends on payment (you must include both these dates in the calculation). You must calculate and pay the interest as an exact amount, without rounding out the cents, because this type of interest has no minimum.

Its rate is officially defined for every year. For 2019 and 2020, the rate is 7%. The interest is calculated according to the actual number of days in the month and the year.

You must add the interest to the original amount of tax and proceed to pay the entire sum as a single payment, using the same reference information as with the original amount. The Tax Administration uses your payment on late-payment interest first, then on the overdue tax.

Car tax and excise duties: penalty interest or surtax

If you pay your car taxes or penalty fees imposed on them late, you must also pay penalty interest.

You must pay surtax on your own initiative if you pay transfer taxes after their due date. Additionally, if a reassessment has been carried out and you pay an excise duty after its due date, you must add penalty interest to the amount to pay.

To find out how much penalty interest or surtax you must pay, you can perform the calculation yourself with Interest calculator. Because both penalty interest and surtax have the same rate and interest days, you can set the calculator’s parameters in the same way for both.

The interest or surtax period starts on the day after the due date and ends on payment (you must include both these dates in the calculation).

The rate of interest is officially defined for each year. For 2019 and 2020, the rate is 7% for both. The number of interest days is 30 days for each month, and 360 days for the year.

The minimum amount is €3 for both penalty interest and surtax and it applies to each unpaid item separately. For example, if you pay car tax late and you divide the payment in several instalments, each one of these instalments will be subject to at least €3 of penalty interest.

If you are late in paying your taxes, you must add the interest or surtax to the original amount and pay the entire sum as a single payment, using the same reference information as with the original amount. The Tax Administration uses your payment on the interest or surtax first, then on the overdue tax.

If the tax or duty you owe is collected from you, you will receive a decision containing a calculation of the tax or duty, penalty interest, surtax, and any other penalty fees. In this case, the Tax Administration or the Customs has completed a calculation that includes the interest or surtax up to the due date indicated on the decision. Also in this case, you should pay the tax, duty, interest or surtax and any additional penalty fee with the same bank reference information and as a single payment.

Additional prepayments and back taxes – late-payment interest with relief

If the pre-assessed amounts that have been withheld from you or that you have paid as prepayments are not enough to cover your actual tax liability for the year, you must pay back taxes to make up for the deficit. However, you can add to the sum of your prepayments by asking the Tax Administration to calculate an additional prepayment for you. This is an opportunity to reduce your back taxes and the interest that would accrue on them.

The additional prepayment has replaced the previous supplementary prepayment and in the same way, late-payment interest with relief has replaced the interest for late payment charged from corporate entities and the interest on back taxes that have been in use previously.

  • As of the 2017 tax year, these payments have been made by limited-liability companies and other corporate entities, and
  • as of the 2018 tax year, by other taxpayers.

During one month after the tax year has ended, you have the opportunity to add to your paid-in prepayments without having to pay late-payment interest. When the month has passed, i.e. starting the second month after the end of the tax year, the Tax Administration will charge you late-payment interest with relief up to the date when you send us the prepayment. Read more about how to request additional prepayments.

Late-payment interest with relief is also calculated for back taxes. This interest is charged from the first day of the second month following the end of your fiscal year up to the due date of the back taxes.

When your tax assessment for the tax year is completed, €20 is deducted from the interest on back taxes. However, the deduction cannot exceed the total amount of interest. This means that if you only have a small amount of back taxes to pay, you can pay them without late-payment interest with relief. This deduction is not made from late-payment interest with relief imposed on additional prepayments or on back taxes resulting from later tax adjustment.

Please note that if you pay your back taxes or additional prepayment late, you must include late-payment interest in the payment.

The exact amount of interest you must pay is displayed in MyTax and the tax decision. The interest is calculated according to the actual number of days in the month and the year.

The rate of interest is the “reference rate” of the Bank of Finland plus 2 percentage points. However, it cannot be less than 0.5%. For 2019 and 2020, the rate is 2%.

You must add the late-payment interest with relief to the additional prepayment or back tax. Then use the original reference information for making the payment and pay the sum as a single payment.

 

You may also have to pay interest when your taxes are re-assessed

If a reassessment is carried out and you must pay a higher tax, it may cause that an interest is imposed. You must pay it by the due date displayed on the decision.

If you have not complied with your reporting requirement in income taxation – for example, not reported the rental income you have – you will get additional back taxes to pay. In that case, the Tax Administration issues an adjustment decision, which not only contains the tax but also a late-payment interest.

The interest is calculated from the day following the first due date of the back tax until the due date of the tax amount determined by reassessment. In this case, the interest is collected up to the due date determined by the decision even if you were to pay the tax before its due date.

If the taxpayer did not neglect their reporting requirement, e.g. the situation is due to a data-entry error made by the Tax Administration, the interest to be added to the tax is not interest for late payment, it is late-payment interest with relief. However, the periods for which interest for late payment must be paid cannot be relieved. Also in this case, the interest is collected up to the due date determined by the decision even if you were to pay the tax before its due date.

Note: if you pay such a tax after the due date displayed on the decision, you must pay additional interest for late payment.

For VAT, employer's contributions and other self-assessed taxes, the period for late-payment interest begins on the next day after the general due date of the tax period for which tax is being imposed or for which a tax decision is adjusted. However, if you enter corrections to your self-assessed tax return yourself, the Tax Administration will not issue a tax decision. The Tax Administration continues to collect late-payment interest up to the day when you pay the amount.

If too much negative VAT (i.e. VAT that can be refunded to the taxpayer) was refunded, the amount that had been excessive is subject to late-payment interest from the day after the date of refund up to the date when you pay the amount.

If the negative VAT had been used for settling another liability of the taxpayer – such as employer's contributions – and a correction has been made or an adjustment has been carried out that causes the negative VAT to diminish, then the amount that was used on the employer's contributions must also diminish. The amount missing from the employer's contributions balance is subject to late-payment interest, starting on the day after the day when the negative VAT was first used, and ending on the day when you pay the amount. This means that in the end, the consequence of late payment is connected with the tax that had previously been settled with the “excessive negative VAT".

If you have not complied with your reporting requirement in real estate taxation, e.g. not reported all the facts about the property, and an additional real estate tax is imposed, the Tax Administration issues an adjustment decision that contains late-payment interest in addition to the tax itself.

Late-payment interest is calculated from the day after the first due date of real estate tax until the due date of the tax amount determined by reassessment. In this case, the interest is collected up to the due date determined by the decision even if you were to pay the tax before its due date.

Note: if you pay such a tax after the due date displayed on the decision, you must pay additional interest for late payment.