Freelancer or Toiminimi / tax deductions

[Serrag]

Hi,

nobody knows what/how-much can you deduct from taxes by working as a freelancer in Finland?

and for a Tominimi?

I would like to start working as an illustrator but I don´t know yet if I should start as a freelancer or with a tominini.

Thanks!

Serrag

[Upphew]

Vero knows what you can deduct... http://www.vero.fi/nc/doc/download.asp?id=5789;120312
My slightly educated guess would be that you can deduct same things and amounts. And you don't usually deduct form taxes, but from the taxable income.

[Serrag]

Thank you!

Yes,
sorry for my poor-technical-language.... mmh so If I can deduct same things and amounts from the taxable income... I am even more confused about which option to take and how this decision will affect my future business...

[Rosamunda]

The big difference between having a freelance tax card and having a toiminimi is VAT. As a freelancer you are basically a salaried employee (with several employers each paying you a wage, tax being deducted at source). With a toiminimi you are no longer an employee but a supplier and you invoice your services to your customers. You will have to do all your own bookkeeping (or pay a bookkeeper to do it) and make your own social contributions (Kela, pension etc). VAT kicks in as soon as turnover hits 8500 euro but you can claim some back if your annual turnover is less than 22500€.

As for deductions.... I agree with the previous poster, there is probably no big difference between a toiminimi and being a freelancer. If you are registered for VAT and paying VAT then you can net out the VAT that you incur on you business-related expenses (eg buying coloured crayons and paper??? ).

I think the choice between freelance and toiminimi is not purely your own call. Some of your employers/customers may prefer to be invoiced for your work rather than have to generate a pay slip for you. If you go down the toiminimi route, make sure you are invoicing your customers for the "fully-loaded" rate (ie the equivalent of a gross salary, rather than the net amount. eg: When I am paid a salary I get holiday pay added in. When I am working through my company I have to include that in the hourly rate I charge.

[Serrag]

penelope thank you very much, You made everything more clear!

as a freelancer I don´t need any bookkeper (so I could save some money) but some clients may prefer to work with a toiminimi...mh... I don´t know why....but- I my mind- to offer an illustration-service as a toiminimi instead as a freelancer sounds more professional and credible...but I don´t know...I didn´t ask to any clients yet

How much can be a bookkeeper - in Helsinki area?
I don´t think I will need a bookkeeper working everyday for me...do you know any "bookkeeping agency"?

Thanks

[Rosamunda]

Well if you are a toiminimi and you choose to use a bookkeeper I guess you can deduct it as an expense. There have been threads on here before (recently) recommending bookkeepers.

I don't think there is anything more "professional" about being a toiminimi versus a freelancer. It's just a choice. My point was that some companies prefer to buy services (ie pay an invoice) rather than employ a freelancer (pay a salary) because it is simpler for them to manage it from an admin point of view.

Typically language schools ask their teachers whether they prefer to be freelancers or toiminimi and they adjust the rate accordingly. Most of the feedback I have got is that it is easier for them if the teachers are toiminimis. But I don't think I have ever heard of a language school refusing to hire freelancers just because of the paperwork.

[filecore]

Well if you are a toiminimi and you choose to use a bookkeeper I guess you can deduct it as an expense.

Again, bear in mind that you're deducting the value of the bookkeeper from the total of your taxable income (so 500 euros per year deducted from your annual income of 30,000 means your taxable annual income is calculated at 29,500, so you're ultimately saving some tens of euros from this). A lot of people misunderstand this "deducting expenses" and read it as "I can get a free bookkeeper because it's a business expense!".

I don't think there is anything more "professional" about being a toiminimi versus a freelancer. It's just a choice. My point was that some companies prefer to buy services (ie pay an invoice) rather than employ a freelancer (pay a salary) because it is simpler for them to manage it from an admin point of view.

Exactly this. Some companies don't like the hassle of "employing" a freelancer, because they still have to deal with social costs, pension payments, payroll matters, and so on. A toiminimi is easier because it's a case of contract -> job -> invoice -> payment -> done.

Back to the original question, I'd probably check with potential employers to see if they're willing to employ you and see what they prefer; most likely, if they're wanting to purchase a complete service, they'll want to subcontract to you as a company (which means getting a toiminimi). As for what you can deduct, and how much, here's a quick guideline of what I do:

- Office supplies (100%) - furniture, paper, pencils, computer etc
- Telephone (80%, the rest is personal cost)
- Internet connection (100% of cost)
- Petrol/bus tickets/taxi (100% if it's business-related trips)
- A proportion of rent/utility bills/electricity/other costs from wherever you use as an office.
- etc

Typically language schools ask their teachers whether they prefer to be freelancers or toiminimi and they adjust the rate accordingly. Most of the feedback I have got is that it is easier for them if the teachers are toiminimis. But I don't think I have ever heard of a language school refusing to hire freelancers just because of the paperwork.

Having worked in a number of language schools around Helsinki for many years, I can tell you that I was a freelancer for that entire time, as were 99% of the other teachers. A couple of teachers were staffers on contracts and there was the occasional toiminimi, but freelancers are (or at least were) the norm.

[Serrag]

Thank you very much!

I will update you soon with my business-adventure:)

p.s.
I guess that if I will hire a bookkeeper he can also advise me what to deduct or not.. isn't it?

[Rosamunda]

Well if you are a toiminimi and you choose to use a bookkeeper I guess you can deduct it as an expense.

Again, bear in mind that you're deducting the value of the bookkeeper from the total of your taxable income (so 500 euros per year deducted from your annual income of 30,000 means your taxable annual income is calculated at 29,500, so you're ultimately saving some tens of euros from this). A lot of people misunderstand this "deducting expenses" and read it as "I can get a free bookkeeper because it's a business expense!".

Yes you're right. I have an Oy so I do deduct it as a business expense, but toiminimi is a slightly different logic from a bookkeeping point of view. I also deduct our membership to the taxpayers association (good place to get advice), magazine subscriptions, books, travel costs, IT stuff (software applications, ink cartridges) etc.

Having worked in a number of language schools around Helsinki for many years, I can tell you that I was a freelancer for that entire time, as were 99% of the other teachers. A couple of teachers were staffers on contracts and there was the occasional toiminimi, but freelancers are (or at least were) the norm.

Interesting... 99% wow! The ones I know are mostly toiminimis. The advantage being that you can also work independently, ie direct with private individuals if work comes your way... you are not limited to working for the schools.


@serrag
A bookkeeper will know what you can deduct and what you can't but on the whole they are not so hot at giving advice. They are basically data-entry clerks with the right software. If you really want tax advice then you might need to pay for a proper accountant. I think there have been some good references posted on here recently, so check those.

[filecore]

Having worked in a number of language schools around Helsinki for many years, I can tell you that I was a freelancer for that entire time, as were 99% of the other teachers. A couple of teachers were staffers on contracts and there was the occasional toiminimi, but freelancers are (or at least were) the norm.

Interesting... 99% wow! The ones I know are mostly toiminimis. The advantage being that you can also work independently, ie direct with private individuals if work comes your way... you are not limited to working for the schools.

Well, to be fair a couple of my main employers had quite a high turnover of staff, and the others were the sort where I wasn't in the premises much (teaching out at companies' own locations) so I didn't get to meet so many of my fellow teachers very often, so perhaps I'm not in the best position to judge. Certainly, I would still say that freelance cards are just as common as toiminimis in that field, and a toiminimi certainly wasn't a requirement, as far as earning enough to live on was concerned. Again, I'm going back a few years now so it may be different these days. I haven't been involved in teaching for more than three years, so doubtless I'm out of date.

[filecore]

@serrag
A bookkeeper will know what you can deduct and what you can't but on the whole they are not so hot at giving advice. They are basically data-entry clerks with the right software. If you really want tax advice then you might need to pay for a proper accountant. I think there have been some good references posted on here recently, so check those.

Go to somewhere like Veronmaksajat or Uusyrityskeskus for advice, depending on the exact question.