As an entrepreneur (who has a domicile in Finland), your company commits to paying taxes. In addition to company taxation, You should take into account possible regulations related to individual / personal taxation.
A company pays income tax based on the amount of its taxable income. Income tax will be paid as prepayments in advance (calculated from your estimated income) and - if necessary - as arrearas and as supplementary payments. The tax office determines the advance taxes payable by the company on the basis of the company's own estimate, and it sends the business an advance-tax bill and account-transfer forms for the advance taxes. If the final result differs from the estimate, the entrepreneur can apply for an amendment to the advance tax or cancellation of the advance tax completely. If the result for the accounting period shows that too little tax has been prepaid, the tax can be made up by paying a supplementary advance-tax payment. Company form affects the income taxation.
Value added tax (VAT) is generally paid monthly based on your companys sales and purchases. VAT is a tax on consumption, which the seller adds to the sales price of goods or services. In transactions between entrepreneurs, the entrepreneur that buys the goods or services can deduct the VAT that the other entrepreneur has charged the company. This can be done if the product is used in a business that pays VAT.
If a company is entered in VAT register, it will be expected to submit Periodic tax returns to report all VAT information for each taxable period. Furthermore, it will be expected to remit the amount of VAT payable to the Tax Account system. The frequency of submitting Periodic tax returns and making payments is dependent on the agreed length of reporting periods. The alternatives are monthly, quarterly and yearly.
All businesses that sell goods and services are liable to VAT.The sale of services includes, for instance, catering, consulting and transport services. The current VAT % you can find here.
If a business's net sales in an accounting period remains below 10 000 €, it does not need to register itself as liable for VAT. Examples of how to calculate VAT You can find from Suomen Uusyrityskeskukset ry publication“Guide to entrepreneurship” here.
Company form for does not affect the amount of VAT.
In the earlier mentioned publication “Guide to entrepreneurship” by Suomen Uusyrityskeskukset ry, taxation of different company forms is described as follows:
Sole trader (Tmi)
The income earned from a sole trader's business is taxed as his/her own income. Part of the business's income is capital income, and part is earned income. The business's income is divided into earned income and capital income on the basis of the net assets of the business. Capital income is 20 % of net assets for the previous year, and the rest is earned income. Alternatively, the entrepreneur can decide that capital income will only be 10 % of net assets or that all of the business's income is earned income. In the year of foundation of the business, the capital-income share is calculated according to net assets on the last day of the first accounting period.
If spouses work in the business together, the business income is divided between them. The earned-income share of the business's income is divided between the spouses in proportion to their work contribution, and the capital- income share according to their share of net assets.
Tax on the capital-income share is calculated at the rate of 30 % (<30 000 €) and 34 %(>30 000 €). The earned- income share is added to other earned income of the entrepreneur, and the entrepreneur pays tax on the total earned income figure according to the progressive tax scale.
General partnership and limited partnership
A general partnership and a limited partnership are not regarded as separate taxpayers for the taxation of income. They do submit their own tax return, according to which the taxable income of the partnership (the income on which tax must be paid) is calculated. This income is split amongst the partners, and the partners pay tax on this. However, the partners are not taxed on the personal drawings made by them or the share of profit belonging to them according to the accounts.
Part of each partner's income share is capital income and part is earned in- come. The earned income is divided into the earned income and capital income on the basis of the net assets of the business in the previous year and the asset share belonging to each partner.
Tax is charged at the rate of 30 % (<30 000 €) and 34 %(>30 000 €) on capital income. The earned-income share is added to the partner's other earned income, and the partner pays tax on the total earned income figure according to the progressive tax scale.
A sleeping partner in a limited partner- ship generally receives interest from the partnership on the capital invested by him/her. This kind of income is capital income for the sleeping partner.
A limited company is regarded as an independent taxpayer. This means that the limited company's income is taxed as the company's own income, and the company's income does not affect the taxation of individual shareholders. At the moment, a limited company pays tax of 20 % on its income.
A limited company's shareholders can withdraw funds from the limited company either as a salary or as dividends. In addition, the company can issue a loan to shareholders, but the loan is regarded as capital income in the taxation of the shareholder, if it has not been paid back by the end of the year. Tax-free drawings are not possible in a limited company.
Usually it is advisable to work together with a professional accountant company when handling the practical calculations related to tax paying.