Article 27 March 2014

Taxman tightens the belt

On 26 March 2014, the Finnish government published its agreement on the state economic framework and plans for the public economy for the years 2015–2018. Several key tax increases are in store.

Earned income taxation

If you have annual taxable earned income of EUR 90,000 or more, get ready. Starting in 2014, you fall within the ‘solidarity tax’ range.

In Finland, the solidarity tax is a short-term 2% surcharge on top of regular income tax that was initiated in 2013 and was originally set to continue until 2015. Now it will continue until 2018.

Moreover, the threshold of EUR 100,000 is lowered to EUR 90,000, which effectively captures more taxpayers.

Capital income taxation

Capital income taxation will increase such that the higher tax rate will increase to 33% from the current 32%.

This means in practise that dividends from unlisted companies distributed within the 8% net asset value and EUR 150,000 threshold rules will be taxed with an effective tax rate varying between 7.5% and 8.25%.

Dividends from listed companies will be taxed with an effective tax rate varying between 25.5% and 28.05%.

Housing loan deduction

Remember that nice deduction you received from your home loan? It is about to decrease even further.

The deductibility of the interest on housing loans, which the Finnish government has gradually decreased (85% in 2012, 80% in 2013 and 75% in 2014), will decrease further by 5% annually.

The end result is 50% deductibility by 2018.

Inheritance and gift tax

Inheritance and gift tax will increase such that all tax rates in different brackets will increase 1%.

In addition, the temporary (until 2015) highest bracket for inheritances and gifts exceeding EUR 1 million (currently 19% or 35%, depending on the relationship between the heir/donee and the deceased/donor) will become permanent from the beginning of 2016.

Property tax rates

The lower and higher thresholds for property tax rates will increase. Municipalities decide the actual tax rate between these thresholds.

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