Toiminimi taxation - business case

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ajdias
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Re: Toiminimi taxation - business case

Post by ajdias » Wed Jun 23, 2021 1:43 pm

I think business taxation is why car leasing is still a thing, you should prob look into it if your goal is to optimize taxation (others may know how or if that applies to sole traders).
Ohuet wrote:
Wed Jun 23, 2021 12:10 pm
Will your taxable "trade income" be 50000 - 40000*25% (depreciation of the car) - 30000 (loan) = 10000 (net equity = trade income?)
That is not at all how it works. The deduction applies to the asset's full cost/value, the loan is not a cost, only the interest you pay on that loan can be deductible.



Re: Toiminimi taxation - business case

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FinlandGirl
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Re: Toiminimi taxation - business case

Post by FinlandGirl » Wed Jun 23, 2021 1:51 pm

Ohuet wrote:
Wed Jun 23, 2021 12:10 pm
What about, in the case of tmi, if you take a loan to purchase an asset. Can you treat it as a liability to reduce the taxable profit?

Let's say your revenue is 50,000 in the accounting period. You want to buy a car for 40,000. You pay 10,000 and borrow 30,000 from the bank. Will your taxable "trade income" be 50000 - 40000*25% (depreciation of the car) - 30000 (loan) = 10000 (net equity = trade income?).
In the long run you would end up deducting most of the car expense twice, which proves that your math is wrong.
Taking out a loan does not change your profit (except interest payments).
FinnGuyHelsinki wrote:
Wed Jun 23, 2021 12:26 pm
I would be worthwhile to go through some entrepreneurship training, see e.g. https://www.te-palvelut.fi/en/employers ... repreneurs . The questions you're asking is the basic stuff you have to know in order to avoid making costly mistakes.
Agreement on that, except that TE is not a good place when looking for competent support.

Reading https://newcohelsinki.fi/wp-content/upl ... 021_EN.pdf is a good idea in any case, and on the last page is a link to the competent local agencies offering support for new entrepreneurs.

betelgeuse
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Re: Toiminimi taxation - business case

Post by betelgeuse » Wed Jun 23, 2021 2:14 pm

ajdias wrote:
Wed Jun 23, 2021 1:43 pm
I think business taxation is why car leasing is still a thing, you should prob look into it if your goal is to optimize taxation (others may know how or if that applies to sole traders).
Leasing has more to do with banks being hesitant to giving loans to many companies (especially new ones). Leasing also simplifies accounting.

FinlandGirl
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Re: Toiminimi taxation - business case

Post by FinlandGirl » Wed Jun 23, 2021 2:42 pm

betelgeuse wrote:
Wed Jun 23, 2021 2:14 pm
ajdias wrote:
Wed Jun 23, 2021 1:43 pm
I think business taxation is why car leasing is still a thing, you should prob look into it if your goal is to optimize taxation (others may know how or if that applies to sole traders).
Leasing has more to do with banks being hesitant to giving loans to many companies (especially new ones). Leasing also simplifies accounting.
Leasing also simplifies getting rid of a car that is only 1-3 years old.

FinlandGirl
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Re: Toiminimi taxation - business case

Post by FinlandGirl » Wed Jun 23, 2021 3:01 pm

Ohuet wrote:
Tue Jun 15, 2021 10:38 pm
Toiminimi entrepreneurs get trade income but what is taxable?

Let’s assume you make 5000+24% vat = 6200 a month, or 74400 per year (60k + 14400 vat)

For example, you need a car for 62000 (incl 24% VAT: 50k+12k vat) to go to your client, so you buy it.

Also, you have spent 5500 (incl 10% VAT: 5k + 500 vat) on groceries at Prisma to cook your business lunches.
The large picture is that all these questions are made under the mistaken assumption that having a business would mean that arbitrary expenses like buying a luxury car and even your personal groceries would be business expenses resulting in lower income tax and VAT refunds.
Ohuet wrote:
Tue Jun 15, 2021 10:38 pm
Let’s say you have a job and this is your side business.
Buying a 62k car that will be solely used for commuting to a client in a side business sounds quite absurd and fraudulent to everyone, including Vero.
Ohuet wrote:
Tue Jun 15, 2021 10:38 pm
You gross income through your employer-employee relationship is 50000 and you pay a progressive income tax.
You are earning more than 100k per year, why are you so desperate to do things that might get you into prison for saving a few Euros on taxes?

Ohuet
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Re: Toiminimi taxation - business case

Post by Ohuet » Wed Jun 23, 2021 6:49 pm

FinlandGirl wrote:
Wed Jun 23, 2021 3:01 pm
Ohuet wrote:
Tue Jun 15, 2021 10:38 pm
Toiminimi entrepreneurs get trade income but what is taxable?

Let’s assume you make 5000+24% vat = 6200 a month, or 74400 per year (60k + 14400 vat)

For example, you need a car for 62000 (incl 24% VAT: 50k+12k vat) to go to your client, so you buy it.

Also, you have spent 5500 (incl 10% VAT: 5k + 500 vat) on groceries at Prisma to cook your business lunches.
The large picture is that all these questions are made under the mistaken assumption that having a business would mean that arbitrary expenses like buying a luxury car and even your personal groceries would be business expenses resulting in lower income tax and VAT refunds.
Ohuet wrote:
Tue Jun 15, 2021 10:38 pm
Let’s say you have a job and this is your side business.
Buying a 62k car that will be solely used for commuting to a client in a side business sounds quite absurd and fraudulent to everyone, including Vero.
Ohuet wrote:
Tue Jun 15, 2021 10:38 pm
You gross income through your employer-employee relationship is 50000 and you pay a progressive income tax.
You are earning more than 100k per year, why are you so desperate to do things that might get you into prison for saving a few Euros on taxes?
Of course I’m not desperate to do any illegal things. That’s why I’m here to clear things up.

Could explain your statement “ Buying a 62k car that will be solely used for commuting to a client in a side business sounds quite absurd and fraudulent to everyone, including Vero.” - this is quite a strong statement which is unsupported by any evidence.

What’s wrong about commuting to a client by a car? If your business premises and clients are 50 km apart but you need to visit each other, what’s fraudulent here to get a car to go to the client’s? There might also be business trips much farther than this to other cities (300-400km). What’s wrong about treating it as a business expense if you have made revenues that allow you to buy a car for say 60k? Why you cannot buy a car for 60k? Why does it have to be cheaper? Give me the law or guidance that would indicate that’s 60k car is a fraud to commute to the client’s or to use for other business trips? For the avoidance, this price is not for a luxury car like Ferrari or Lamborghini. You can get a good Volvo for this price, which in my opinion is more than adequate for a businessman who may require to make long trips.

Of course there is a natural desire to put it under business expenses and to write it off from the sales.

FinlandGirl
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Re: Toiminimi taxation - business case

Post by FinlandGirl » Wed Jun 23, 2021 7:47 pm

Ohuet wrote:
Wed Jun 23, 2021 6:49 pm
Could explain your statement “ Buying a 62k car that will be solely used for commuting to a client in a side business sounds quite absurd and fraudulent to everyone, including Vero.” - this is quite a strong statement which is unsupported by any evidence.

What’s wrong about commuting to a client by a car? If your business premises and clients are 50 km apart but you need to visit each other, what’s fraudulent here to get a car to go to the client’s? There might also be business trips much farther than this to other cities (300-400km). What’s wrong about treating it as a business expense if you have made revenues that allow you to buy a car for say 60k? Why you cannot buy a car for 60k? Why does it have to be cheaper? Give me the law or guidance that would indicate that’s 60k car is a fraud to commute to the client’s or to use for other business trips? For the avoidance, this price is not for a luxury car like Ferrari or Lamborghini. You can get a good Volvo for this price, which in my opinion is more than adequate for a businessman who may require to make long trips.

Of course there is a natural desire to put it under business expenses and to write it off from the sales.
You have to ask your accountant what expenses Vero will actually accept.

There are various pitfalls, like possible taxation implications if you would do a trip that includes both visiting a client in your side business and commuting to the place of your employment.

When it looks like a possible fraud it becomes more likely that Vero will look closer, like reviewing the entries in the driver log of the car.

Ohuet
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Re: Toiminimi taxation - business case

Post by Ohuet » Wed Jun 23, 2021 8:43 pm

FinlandGirl wrote:
Wed Jun 23, 2021 7:47 pm
Ohuet wrote:
Wed Jun 23, 2021 6:49 pm
Could explain your statement “ Buying a 62k car that will be solely used for commuting to a client in a side business sounds quite absurd and fraudulent to everyone, including Vero.” - this is quite a strong statement which is unsupported by any evidence.

What’s wrong about commuting to a client by a car? If your business premises and clients are 50 km apart but you need to visit each other, what’s fraudulent here to get a car to go to the client’s? There might also be business trips much farther than this to other cities (300-400km). What’s wrong about treating it as a business expense if you have made revenues that allow you to buy a car for say 60k? Why you cannot buy a car for 60k? Why does it have to be cheaper? Give me the law or guidance that would indicate that’s 60k car is a fraud to commute to the client’s or to use for other business trips? For the avoidance, this price is not for a luxury car like Ferrari or Lamborghini. You can get a good Volvo for this price, which in my opinion is more than adequate for a businessman who may require to make long trips.

Of course there is a natural desire to put it under business expenses and to write it off from the sales.
You have to ask your accountant what expenses Vero will actually accept.

There are various pitfalls, like possible taxation implications if you would do a trip that includes both visiting a client in your side business and commuting to the place of your employment.

When it looks like a possible fraud it becomes more likely that Vero will look closer, like reviewing the entries in the driver log of the car.
But commuting to the place of my employment is a separate matter, I have a personal car for this. I was talking only about toiminimi activity. Does Vero really analyse that much small businesses (1 person, turnover up to 100k)? I suppose they should be more interested in bigger businesses

FinlandGirl
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Re: Toiminimi taxation - business case

Post by FinlandGirl » Thu Jun 24, 2021 1:26 am

Ohuet wrote:
Wed Jun 23, 2021 8:43 pm
FinlandGirl wrote:
Wed Jun 23, 2021 7:47 pm
Ohuet wrote:
Wed Jun 23, 2021 6:49 pm
Could explain your statement “ Buying a 62k car that will be solely used for commuting to a client in a side business sounds quite absurd and fraudulent to everyone, including Vero.” - this is quite a strong statement which is unsupported by any evidence.

What’s wrong about commuting to a client by a car? If your business premises and clients are 50 km apart but you need to visit each other, what’s fraudulent here to get a car to go to the client’s? There might also be business trips much farther than this to other cities (300-400km). What’s wrong about treating it as a business expense if you have made revenues that allow you to buy a car for say 60k? Why you cannot buy a car for 60k? Why does it have to be cheaper? Give me the law or guidance that would indicate that’s 60k car is a fraud to commute to the client’s or to use for other business trips? For the avoidance, this price is not for a luxury car like Ferrari or Lamborghini. You can get a good Volvo for this price, which in my opinion is more than adequate for a businessman who may require to make long trips.

Of course there is a natural desire to put it under business expenses and to write it off from the sales.
You have to ask your accountant what expenses Vero will actually accept.

There are various pitfalls, like possible taxation implications if you would do a trip that includes both visiting a client in your side business and commuting to the place of your employment.

When it looks like a possible fraud it becomes more likely that Vero will look closer, like reviewing the entries in the driver log of the car.
But commuting to the place of my employment is a separate matter, I have a personal car for this. I was talking only about toiminimi activity.
This makes it even more strange why you want to invest a huge amount of money into a second car that you can use only for your side business.
There are rules how you can deduct costs when using your personal car for your business.
Ohuet wrote:
Wed Jun 23, 2021 6:49 pm
Does Vero really analyse that much small businesses (1 person, turnover up to 100k)? I suppose they should be more interested in bigger businesses
Everything you write sounds like "clever ideas" how to avoid paying taxes, "clever ideas" that won't work.

Your "I am a businessman and and my groceries are business expenses" attitude sounds as if you might end up doing something stupid that could bring you into trouble. And the more obviously stupid something is, the more likely someone will take a closer look.

Upphew
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Re: Toiminimi taxation - business case

Post by Upphew » Thu Jun 24, 2021 9:27 am

Ohuet wrote:
Wed Jun 23, 2021 8:43 pm
But commuting to the place of my employment is a separate matter, I have a personal car for this. I was talking only about toiminimi activity. Does Vero really analyse that much small businesses (1 person, turnover up to 100k)? I suppose they should be more interested in bigger businesses
You do know that you can charge your company for the use of your personal car? 0,44€/km tax free. You know how realtors made money back in the day? They drove a lot.
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Ohuet
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Re: Toiminimi taxation - business case

Post by Ohuet » Thu Jun 24, 2021 9:34 am

I understand that Finland is kind of a communist country if such questions arise in society - the questions that would never arise in a democratic society like UK, for example. If you make money as an entrepreneur, in my opinion it's your matter whether you want to buy a second car for this entrepreneurship or not. For you it's strange to buy a second car for work, for me it's strange to kill your own car for business especially if you need to travel reasonably long distances.


I have seen some Finnish youtube blogger and he was writing off even cigarettes as a business expense. So I wonder why are you allowed to buy a meal in a canteen and write it off as a business expense but you are not allowed to buy cucumbers and tomatoes from Prisma and eat them for your lunch instead of buying a meal elsewhere.

Ohuet
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Re: Toiminimi taxation - business case

Post by Ohuet » Thu Jun 24, 2021 10:01 am

Upphew wrote:
Thu Jun 24, 2021 9:27 am
Ohuet wrote:
Wed Jun 23, 2021 8:43 pm
But commuting to the place of my employment is a separate matter, I have a personal car for this. I was talking only about toiminimi activity. Does Vero really analyse that much small businesses (1 person, turnover up to 100k)? I suppose they should be more interested in bigger businesses
You do know that you can charge your company for the use of your personal car? 0,44€/km tax free. You know how realtors made money back in the day? They drove a lot.
Yes, it's a good thing that you can claim 0.44 Eur/km but you are reducing the lifetime of your own car. I suppose if your revenues allow you to purchase a business car, the question in society or by Vero whether it's "strange or not" should not stand.

FinlandGirl
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Re: Toiminimi taxation - business case

Post by FinlandGirl » Thu Jun 24, 2021 11:02 am

Ohuet wrote:
Thu Jun 24, 2021 9:34 am
So I wonder why are you allowed to buy a meal in a canteen and write it off as a business expense
A normal meal in a canteen is not a business expense.

betelgeuse
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Re: Toiminimi taxation - business case

Post by betelgeuse » Thu Jun 24, 2021 11:04 am

Ohuet wrote:
Thu Jun 24, 2021 9:34 am
I understand that Finland is kind of a communist country if such questions arise in society - the questions that would never arise in a democratic society like UK, for example. If you make money as an entrepreneur, in my opinion it's your matter whether you want to buy a second car for this entrepreneurship or not. For you it's strange to buy a second car for work, for me it's strange to kill your own car for business especially if you need to travel reasonably long distances.
lmao for someone thinking UK is more democratic than Finland (hint: first-past-the-post and the house of lords).

It’s perfectly legal to buy a car to be used only for business purposes. You just need to account for it properly and pay any taxes due.
Ohuet wrote:
Thu Jun 24, 2021 9:34 am
I have seen some Finnish youtube blogger and he was writing off even cigarettes as a business expense. So I wonder why are you allowed to buy a meal in a canteen and write it off as a business expense but you are not allowed to buy cucumbers and tomatoes from Prisma and eat them for your lunch instead of buying a meal elsewhere.
For cigarettes used as part of videos, maybe it would work. Otherwise I doubt it would survive an inspection by Vero.

Ohuet
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Re: Toiminimi taxation - business case

Post by Ohuet » Thu Jun 24, 2021 11:32 am

FinlandGirl wrote:
Thu Jun 24, 2021 11:02 am
Ohuet wrote:
Thu Jun 24, 2021 9:34 am
So I wonder why are you allowed to buy a meal in a canteen and write it off as a business expense
A normal meal in a canteen is not a business expense.
Why is not a business expense? You are having a meal during your working day in the company's canteen. Not sure how it was in Finland but in some other countries, employers were even feeding the employees for free back then. Canteens were run by enterprises and employees were entitles to free meals from the employer as part of their working day. I cannot understand the logic why you cannot treat it as a business expense.

The definition "a business expense is the cost that has been used to generate an income" is quite applicable here. When you are hungry you cannot really produce any physical or intellectual output.


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