What does it cost?
26% corporation tax is paid on annual net profits.
For businesses, normal taxes consist of a corporation tax (profit tax) and a real estate tax. Other taxes consist of an assets transfer tax (formerly stamp duty) and a withholding tax. All major international consulting companies providing taxation planning have offices in Helsinki.
For individuals, there is a progressive income tax as well as inheritance taxes and net wealth taxes. Foreign personnel, if in Finland for longer than six months, also pay the 35% income tax, when their monthly salary exceeds EUR 5882. This ensures that all residents continue to receive top-level public health care, free schooling for children, and other valuable public services.
Teachers and researchers from certain countries may be completely exempt from income/withholding tax, especially when invited by a government organisation, university, or scientific research institute.
A social security payment of approximately 22% of gross salary is payable, even by a foreign employer. Social security provides, for instance, employment services, child day care services and services for the elderly.
Protecting Intellectual Property in Finland is relatively easy and effective. Public funding instruments provide flexible negotiation and agreement procedures. Helsinki provides full services on IP issues. Universities have established their own licensing companies in order to commercialise public research. This, in turn, provides better possibilities for interaction in joint R&D&I programmes.
Finland takes concrete steps to reduce tax burden
Starting in 2003 Finland has taken concrete steps to reduce the tax burden of both individuals and corporations. Realizing that in today's global marketplace that the country needs to compete against lower cost locales, the government has systematically reduced taxes.
One of the first goals was to encourage businesses and entrepreneurship. For this, corporate taxes were slashed by three percentage points in 2005. At the same time the capital gains tax rate was cut by one percent.
In 2006 cuts were made across every tax bracket for individuals. The decreases varied between one and one and a half percent in each bracket. At the same time the wealth tax, a remnant of the earlier socialistic era, was completely abolished.
The tax burden was further reduced in 2007, with tax rates falling between one and a half percentage points across all personal income tax brackets. For 2008 the trend continued. Half a percent cuts were placed across the board for personal income taxes.
Finland has been in the pleasant position of running a budget surplus for several years now, and the booming economy has allowed it to lower taxes, maintain the budget surplus and keep the traditional social welfare network in place.
Other reforms have also taken place. The taxes placed on dividends has been lowered and reformed. Home ownership has been encouraged by favourable tax rules. Saving for retirement in voluntary pensions has also been promoted by tax deductions.
Far-reaching reforms to maintain the strong public finances have also been taken. Some retirement rules have been changed to encourage workers to remain at their jobs longer to strengthen the workforce and relieve the burden of a non-productive population group.