short term contract tax and payment

[sqryn]

Hello to all members.
I need your help in a small issue, I may have been offered a short IT contract in Helsinki area for a one month period. I am a EU resident and I need some advice about the tax amount that I have to pay (or be retained from the employer) from my income.
The income can be gained in 2 ways, either as a regular gross monthly income or a freelancer fee (paid by the hour). The total amount of the freelancer fee is greater than the gross monthly income (about 40-50%).
What are the differences in taxation between these two payment methods? Which of these 2 can leave me with more money in my pockets and what kind of paperwork and registrations do I have to complete in both cases? Do I need to complete the tax papers or this will be done by the employer?
What are the differences between a regular employee and a freelancer ?
I have read some articles on vero.fi website but I am still confused. It seems that for a stay shorter that 6 months there is a general 35% tax on income (after sone 17 eur/day or 510 euro/month deduction) but this applies also on regular employee or also on freelancing activities?
Can you please help me with this decision? Thank you.

[raamv]

your best bet is to call the english helpline for Vero. They ll do it for you automagically and tell you what you owe!!

[sqryn]

I am not in Finland and It will cost me to make an international call I hoped I could fin an answer here.
I have done some research and saw that for a staying smaller than 6 months a fixed 35% tax is applied. I do not know if it is applied also for freelancing activities.
Should I own a company in order to work in Finland as a freelancer? Can the payment of a freelancer be done by an invoice to a person and not to a company?

[Rosamunda]

Here the tax office use the term "freelance" to mean a physical person who works for several different employers. An example would be an English teacher who is being given work at an hourly rate by two, three, four different language schools. The "freelance" status enables that teacher to pay the SAME tax rate with each employer. (Note that normally in Finland a salaried worker would have a principal tax rate with his main employer and then a higher tax rate with any additional employers). That "freelance" teacher would be paid a salary by each of those three language schools based on the actual number of hours worked so, for example, School 1 may pay 40h @ 25euro per hour = 1000 € plus holiday pay (I think this is 8 or 9%) then they deduct tax and TEL (insurance)... this would be in the same format as for any other salaried employee (ie with a pay slip and bank transfer at the end of the month). The other employers (School 2 and School 3 ) would do the same. The tax rate applied by the employers would be based on the teacher's estimated annual income and the tax office will issue the teacher with a tax card which might say "Freelance-prosentti 15 200 euroon asti 15%". The freelance teacher gives a copy of this tax card to his/her employers and they must deduct 15% tax each month.

However, freelance can have another meaning. It can mean that the teacher is "self-employed" and in Finland this usually means a "toiminimi" (TMI) which is a sole trader status. In this case the person would have to register a company name at the Patents Office and if business exceeds (IIRC) 8400 euro/year then VAT registration is also necessary. However, it is possible for a sole trader to operate WITHOUT registration under certain conditions (if you use the search engine on this forum you will find tons of info about establishing a business in Finland with some good links). But, if you work as a toiminimi and you have only ONE client, then your tax rate will be the same as for a salaried worker. There is no immediate tax advantage to having a toiminimi and there are some (small) start up costs. But as an EU resident you are technically able to do this. As a TMI you would raise an invoice to your employer(customer). You would be liable for your own social contributions (I think YEL? is obligatory). You would not have to invoice VAT if your total annual income is below the minimum limit (IIRC approx 8400 euro).

If you already have your own company in your country of residence then I think you could use that to invoice your client in Finland for any work you may do. Discuss it with your client. That way you would avoid Finnish personal taxation (and a lot of unnecessary paperwork).

[sqryn]

Thank you for your answers. I do not have a company/toiminimi and I do not intend to make one. It does not worth making one for just one month either in Finland or in my country. I think I will reach an agreement with the employer one of these days.
So should I understand from the teacher example that I can be payed by hour (as a physical person) and then apply a 35% tax for less than 6 months staying in Finland?

[Rosamunda]

You probably need a Social Security number in order to be paid a salary and get a tax code but I guess there are special terms for temporary residents. There is a fast track now for temporary residents (takes 2-5 days).

http://www.vero.fi/default.asp?language ... RO_ENGLISH

As far as I know the 35% base rate is for highly skilled workers on large salaries (circa 6K€ month)

http://www.vero.fi/default.asp?language ... RO_ENGLISH

You need to check bilateral agreements with your home country (fiscal residence) as in some circumstances you may not need to pay tax.

As said before.... it's best to call the tax office directly.

[paulrenn]

For such a short period as one month, I doubt you have to do anything too "official". Just get paid to your home country bank account and declare the income, and pay tax, where you are resident. But do check with Finnish tax office, just to make sure.

[Hank W.]

No problem, you just get docked 60% at source.

[Mook]

Find a company in your home country that you can bill through. Then you can sort out your tax in youyr home country.

[sqryn]

Thank you all for your messages. I have reached a common conclusion regarding the payment with my employer and it seems that is ok now.
I will be in finland next weeks and maybe I will like it so much that I will want to come again. Or maybe not I hope I will not freeze to death )

[Hank W.]

Just bring waterproof shoes and a mackintosh. It only rained twice this past week, first Mon-Wed and then Thurs-Sun...

[raamv]

*sic* so much for advertising and advising..