As I have my own toiminimi, to teach tennis in the Helsinki / Espoo area, and then have a position to sell future products, and use my knowledge / skills, I wanted to find out more from VERO.
I had a friendly chat with a woman, from the tax office, over the phone, who I hoped could put me in contact with the Head of the Vero Online Tax Calculator to find out how they calculate tax on income (like algorithms, and conditional values), and other 'allowances'.
I couldn't get any answers from the Head, but she emailed me this, which is still pretty useful (which will hopefully help some of you):
From:
"Laura Lehtinen
Senior Tax Clerk
Helsinki Area Tax Office
PO Box 400
00052 VERO
What I would like to know -
A. How is the deduction amount (subtracted from gross income for calculating Municipal tax) is calculated?
B. How is the tax credit (as mentioned on tax card) calculated? I've seen this amount vary a bit when I used the online tax calculator for various fictitious gross incomes.
C. How is the additional percentage for taxation derived?
The calculation of taxes and tax percentages is a very complicated procedure. There is no short way of explaining how the calculation goes. Unfortunately we have very little information in English about how tax cards and taxes are computed, but I will enclose links to the information that we have anyway since you mentioned that you would like to know about these things even in Finnish.
A) The deductions are divided into deductions that can be deducted either in state taxation, in communal taxation or in both. The income tax law consists of 155 paragraphs which tell how the tax should be calculated, which are the deductions, how deductions are calculated, at which stage of calculation they are deducted and from which income the deductions are deducted. I assume your questions concern earned income (salary). On our webb pages we have a tax guide for individuals, where there is information about income and deductions:
http://portal.vero.fi/public/default.as ... odeid=9754
The following deductions can be deducted before the tax is calculated
Deductions that can be deducted in both state and communal taxation:
- standard deduction for work-related expenses (max. 620 euros)
- other work-related expenses
- travel expenses to and from work (if they are more than 750 euros)
- labour market organization membership fees
- mandatory pension insurance contributions (if you are a entrepreneur)
- collective pension insurance contributions (if your employer has taken a special insurance)
- employee pension contributions (5,7% or 7,2%)
- unemployment insurance contributions (0,65%)
- earned-income contribution payment (0,78%)
Deductions that can be made only in communal taxation:
- invalid allowance max. 440 euros(requires a doctor´s certificate).
- earned income allowance (max. 3570 euros)
- low income allowance (max. 2970 euros)
Some deductions are calculated according to your income and the final amount depends on your income for the year. E.g. Low income allowance is max. 2970 euros. If your income after all other deductions is more than 2970 the full deducton 2970 will be reduced with 18% of the amount that exceedes 2970 euros. E.g. If your income after the deductions is 3000 euros, then the low-income allowance deduction is 2964.60 euros (3000 - 2970 x18%= 5.40, 2970 - 5.40 = 2964.60).
In the tax return forms there is an explanation, how most deductions are calculated (see Instruction booklet). Unfortunately not everything is explained in English.
http://vero.fi/en-US/Precise_informatio ... _fo(35588)
B) After you have the taxable amount in state taxation and communal taxation, you can compute the amount of taxes. State income tax is calculated according to a table which can be found under this link (see "Valtion tuloveroasteikko").
http://vero.fi/fi-FI/Syventavat_veroohj ... 015(35390)
E.g. If you taxabel income is 22000 euros, the tax is 8 euros + 6,5% of the amount that exceeds 16500 euros. The state income tax would be 8 + 357,50(22000 - 16500 x 18%)= 365,50.
To this is added the communal tax, the church tax (if you are a member of the church), the healthcare payment and the earned income contribution payment. These are all calculated from the taxable income in communal taxation. The healthcare payment is 1,32 % and the earned income contribution payment is 0,78% of the taxable income. The communal tax and church tax are percentages you can find from the link
http://vero.fi/fi-FI/Syventavat_veroohj ... nti(35049)
(see "Tulo- ja kirkollisveroprosentit") and they depend on the municipality where you live. All these taxes and payments are added and the result is the tax you must pay.
However this is not all. Some deductions are deducted from tax (instead of taxable income) and they must be first deducted before you have the final amount of tax. These tax credits are:
- Earned income allowance from state tax (max. 1025 euros). If there is not enough state tax, this deduction can be deducted from alla other taxes as well.
- disability credit from state tax (max. 115 euros). Requires a doctors certificate.
- child maintenance credit from state tax (max. 80 euros/ child). Requires a contract with social office or a court order where it is stated how much in alimony payment you have to pay.
- Domestic help credit from any kind of tax (max 2400 euros).
- credit from deficit in capital income from any tax (max. 1400 euros). E.g. If you pay deductible interest on a loan for your apartment,65% is deductible and the credit for deficit is 30 of the interest and a maximum of 1400 euros.
- special credit for deficit, deducted from any tax (max. 1400 euros). If you have a voluntary pension insurance but do not have any capital incame, then this is possible. The deduction is 30% of the voluntary pension insurance premium you have paid.
Tax credit fro student loan repayment, deducted from any tax. This requires a decision from Kela.
After this you have the final tax that you have to pay. When you then divide the final tax with your gross income and multiply it with 100, you know your tax percentage.
C. The additional percentage consists of the proportion of state income tax, communal tax, church tax (if you are a member of the church), healthcare payment and earned-income contribution payment. The proportion of state income tax depends on your taxable income in state taxation and the percentage comes from a table under this link (look at stage 7):
http://vero.fi/fi-FI/Syventavat_veroohj ... _pi(35180)
If your taxable income in state taxation is under 16500 euros, the percentage is always 6,5. To this is added the percentage of the communal tax according to the municipality where you live, the church tax percentage according to the rate of church tax in your municipality, the healthcare payment 1,28 % and the earned income contribution payment 0,70%. The result is rounded up or down to the closest half percentage and that is the additional percentage on your tax card."