Second job vs. full-time freelance/contractor?

[switchblade327]

Moi,

I'm trying to sort things out with my current work situation, which is a bit weird. I'll try to keep it brief:

I am a non EU citizen who was hired fulltime and sponsored by Finnish company but am currently on a 90 day temporary layoff as part of "cooperation" procedures. When I went to resign, I was convinced to stay and work 2-3 days a week and I could freelance the rest of the time. Thankfully, the work I do (3d artist/animator) is in demand and there are other Finnish companies that I can work for as a contractor/freelancer.

So I've been reading up on toiminimis vs Oys, taxes, pensions and all that but I'm getting overwhelmed and the specifics of what to do in my situation aren't well documented.

My options seem to be:
1)Stay "employed" at the company that got me my visa but isn't giving me full time work, set up up a toiminimi as a second job to bill the people I do freelance work for. Would be the easiest option except it seems there is a pretty major "second job" tax in Finland, which doesn't seem to matter how little your first job is paying you.
2)Switch to being a full-time self-employed/TMI, bill the old company just like the new companies. No second job tax but now I need to hire a bookkeeper, lose/buy my own my private insurance, lose my annual vacation days&pay/charge more to compensate and now have to handle my work visa without a company sponsoring me (and my work visa needs to be renewed very soon!)
3)Convince my current employer to let me bill my freelance work though their company so I technically still only have one job. Might be simple for 1-2 clients but could get sloppy as I get more.

Am I missing something? Is one clearly the better option then the others?

Any help or advice would be much appreciated.

Also, as an aside: when doing contracting business as a toiminimi, the rate you quote to the client is the gross/pretax rate, correct? So if you quote a 1000 euros for a job, the client won't have to pay any more then that to you or the government and the tax/social insurance burden on that 1000 is all yours?

[DMC]

I would go with your option 1. Don't underestimate the value of having a Finnish company sorting out the work visa, especially as you are not an EU citizen. I would definitely avoid option 3. You really don't want your existing company involved in your new business; it is nothing to do with them. Also it would prevent you putting anything down as business expenses - but you would still have those expenses.
Regarding what you quote, I'm not sure what is the norm. I don't think it really matters so long as you are clear, so the customer knows what the final bill will be. I always quote a sum "plus tax" so the customer knows that tax will be added to the final bill.

[rinso]

1: relative safe. No problems with residence permit and long term income (although not at 100% level)
2: no job security. income and RP might evaporate overnight.
3: not really an option. employer will have a say in who you work for. also copyright issues.

[switchblade327]

Rinso, #3 was only a possibility because it's a small enough company and I know the owner well; a condition of my not resigning is that I can work for anyone else doing anything else in the time that they're not paying me. But DMC makes a very good point; no business deductions.

As for #2, I'm not too concerned about income drying up since what I do at my experience level is pretty in demand and I'm ok at saving but if it dried up completely, I'd leave Finland for a full time job elsewhere. What it more concerning is what you said about the RP; are those not issued annually for freelancers? Would it be a problem for me (RPwise) to not earn for a month or two and live off of savings?

So with two votes for #1, what should I do about the second job tax (15% or something, I've heard)? Am I just trading being sponsored by a company for a bigger chunk of my income, even though my first job is essentially part-time now? Or am I misunderstanding how that works?

[Upphew]

1)Stay "employed" at the company that got me my visa but isn't giving me full time work, set up up a toiminimi as a second job to bill the people I do freelance work for. Would be the easiest option except it seems there is a pretty major "second job" tax in Finland, which doesn't seem to matter how little your first job is paying you.

Second job tax is not a major one... see:
5000e/kk -> 30% tax -> 3500 to the hand
2500e/kk -> 20% tax -> 2000 to the hand and if you work second job the tax for that is 37,5% -> 2500e/month with that means 1500 to the hand 2000+1500=3500... see the previous line... good thing that you are 3d artist/animator and not coder with needs for maths

You can ask new tax card with proper tax rates.

[Rosamunda]

I agree that #1 is the best choice. There is another possibility though. You don't need to set up a toiminimi. You can work as a salaried freelancer employed by 2 different companies (or more) and you ask vero for a FREELANCE tax card. This enables you to be taxed at the same rate by BOTH your employers. A lot of teachers work this way as they are employed by 2,3 or more language schools and paid by the hour. It could work for you as an interim solution while you build up your client base.

I am not 100% sure what all the conditions are to qualify for a freelance tax card, but I would assume that the main criteria is that none of your employers is actually employing you on a full-time basis. Try sending an email to this place for more information: http://www.intofinland.fi

[switchblade327]

1)
Second job tax is not a major one... see:
5000e/kk -> 30% tax -> 3500 to the hand
2500e/kk -> 20% tax -> 2000 to the hand and if you work second job the tax for that is 37,5% -> 2500e/month with that means 1500 to the hand 2000+1500=3500... see the previous line... good thing that you are 3d artist/animator and not coder with needs for maths

You're right about the math skills but I think I follow your example. But this system seems tailored to the 1st job being the primary source of income, which makes sense but may not be the best case for me. Most of my income would probably come from the freelance work. So if most of my income was taxed with an extra 17%, that could get ugly fast.

So instead of breaking down like this:
2500/kk ->20%tax=2000
+
2500/kk ->37,5%tax=1500

It would break down more like this:
1000e/kk ->-x% tax=?
+
4000e/kk->x + 17,5% tax=?

It's hard to guess the outcome without knowing the rates but it seems the more your income skews toward the second job, the more tax you are paying on the same gross.

Penelope, that's good information but I'm told a freelance tax card is less well known and may make for more confusing billing where businesses are all familiar with how TMIs work. Still, I'll look into it as an option.

[Rosamunda]

A freelance tax card looks like any other tax card. It's a piece of paper with a percentage on it. As far as the employer is concerned, he treats you the same as any other employee.

But it is true that some companies don't want the HEADCOUNT on their books. So they prefer to work with TMIs and Oys (outsourcing) - that way on paper they look more efficient. Also it is easier to pay an invoice than to process a pay slip from a paperwork point of view.

[raamv]

I agree that #1 is the best choice. There is another possibility though. You don't need to set up a toiminimi. You can work as a salaried freelancer employed by 2 different companies (or more) and you ask vero for a FREELANCE tax card. This enables you to be taxed at the same rate by BOTH your employers. A lot of teachers work this way as they are employed by 2,3 or more language schools and paid by the hour. It could work for you as an interim solution while you build up your client base.

I am not 100% sure what all the conditions are to qualify for a freelance tax card, but I would assume that the main criteria is that none of your employers is actually employing you on a full-time basis. Try sending an email to this place for more information: http://www.intofinland.fi

He is non-EU, so could have issues with a salaried free-lancer way of doing things unless his resident permit is granted on those terms ( or extended on those conditions).

[raamv]

to the OP, If your income will be less than €8500 (?) a year, then tmi might be better. Otherwise, you need to start to find a bookeeper.
Another option for you to do is go to your local TE-Keskus ( Depends on where you live) and ask them for advice.
and as Penny suggests, intoFinland in Kampi can help you with immigration issues.

[karel]

If you expect to get more out of your freelance job, go for the TMI or Oy as your main income and get a side income tax card for the "salaried" job.
Or set up a contract with your current employer for a minimum fixed amount of hours/days per week and bill them through your own company. That way you don't need a side income tax card and your employer doesn't have to worry about paying your pension and stuff.

[DMC]

Or set up a contract with your current employer for a minimum fixed amount of hours/days per week and bill them through your own company. That way you don't need a side income tax card and your employer doesn't have to worry about paying your pension and stuff.

That could be a good way to go for an EU citizen, but how would it affect his residence permit, with him being from outside the EU? Some careful checking is needed before giving up the job that led to the residence permit being granted. Also there is a loss of security in that approach. It is easier for the employer to stop using an outside contractor than to stop employing one of their own workers.

[Rosamunda]

and as Penny suggests, intoFinland in Kampi can help you with immigration issues.

...but only on matters dealing with Vero and KELA. They have nothing to do with immigration paperwork (visas etc)

[Upphew]

It would break down more like this:
1000e/kk ->-x% tax=?
+
4000e/kk->x + 17,5% tax=?

It's hard to guess the outcome without knowing the rates but it seems the more your income skews toward the second job, the more tax you are paying on the same gross.

If you do nothing, then you pay initially more taxes, which are then refunded to you next year's december.
If you know that you are going to make 1000e + XXXXe then you could just get new tax card saying primary tax% 7,5 additional 26,5% and be prepared to get raped by taxman 'cause they were expecting to get something along the lines of 30%.

So those first/second job tax rates are just to taxmans way to get his proper cut. You will pay, in the end, same percentage, weather you make 5000e/month, 1000+4000, 4000+1000, 2500+2500 or any combination. It is just that you get your overpaid tax back next years december, or that you pay the tax due in december and february. Taxman doesn't like that latter option tho, especially if you do it on purpose. So best thing to do is call then and get new tax card that suits your situation: http://www.vero.fi/?path=488,755&domain ... nguage=ENG

ps. you can calculate tax% (and even order new card) at: http://prosentti.vero.fi/veropros_tieto ... to2009.asp

[raamv]

and as Penny suggests, intoFinland in Kampi can help you with immigration issues.

...but only on matters dealing with Vero and KELA. They have nothing to do with immigration paperwork (visas etc)

Hmmm Last time I spoke to another organization, I thought they already progressed but apparently not..
But looks like progress is on its way..albeit slowlly...
http://www.infopankki.fi/en-GB/read_ann ... 974d4a9171

In To is a new kind of pilot project that aims to make the early stages of a move to Finland easier. It will be operating in cooperation with other authorities and organizations important to immigrants. During the project the scope for increasing the number of participating organizations at a later date will be looked into.

The point will initially be manned by two people from Kela and the Finnish Tax Administration. In addition to the official languages of Finland (Finnish and Swedish), they will also have a good command of English, Russian and Estonian.

The In To service point will be located on the second storey of the Autotalo building, in the same building as the Kela office in the Kamppi district of Helsinki, Entrance is through the doorway marked A. Opening hours will beMonday to Friday 9.00–12.00 and 13.00–16.00.