Tax and other liabilities through website sale

[IE7BETA]

Read many pages but still not very clear, this issue

I am running my own website, and people around globe are starting to signup, and pay fees (that I am asking for usage of website).

Now what are my liabilities in Finland. Is it enough that I declare all income to tax office? Or is it required that I register as "Private entrepreneur" or have my own Y-tunnus company.

If I already have a permanent job in Finland, will I be taxed more, or flat 30% on private income, or from having Y-tunnus company.

PS - my website is not related to any dating, erotic, health, or politically sensitive issues.

[Rosamunda]

First of all, are you a permanent resident in FInland? Are you an EU national?

You do not have to register a company as long as the annual income is less than 8500 € (but you are fully liable for everything including losses, with no possibility of going bankrupt)

If your income is more than that then you should be registered Y-tunnus and also VAT registered.

If you already have a permanent job then yes, I think you will be taxed more.

Your situation is quite unusual.... I have not read anything on http://www.vero.fi that specifically mentions income from cyberspace. I think you should call them and ask what the procedure is. They are quite helpful, and will give you good advice.

If the income is growing quickly you should think about the different possibilities for establishing a company in order to minimise your tax.

[FFCBOY]

What is your web site?
I may sign up:-)

[Jonathon Martin]

My understanding is that you need a Y-tunnus regardless of whether you earn over €8,500 or not. That is so you can pay income tax. Penelope is right that you don't need to register as a toiminimi but that's not the same as not having a Y-tunnus.

Go to the tax office and have them walk you through the form. They will give you a Y-tunnus for free and then probably get you to join the prepayment regsiter and then they'll send you a bill.

[IE7BETA]

After calling Tax office, and their overall response was that one must declare all income irrespective of source, and in end, Tax office decides how much % to take away.

Nevertheless, in my case VAT is not applicable, since sales are outside Finland.

This brings some possibilities

(1) Declare all extra income as personal, and pay personal % tax (don't know how much would that be) combined with permanent job in Finland

(2) Register a company in Finland, do sales abroad, pay tax here (No VAT).

(3) Register a company in some other country (then pay corporate tax there) & pay myself bonus, on which I again pay personal tax in Finland.

In which case, would the overall tax be lowest? Someone must have done this before

[mCowboy]

After calling Tax office, and their overall response was that one must declare all income irrespective of source, and in end, Tax office decides how much % to take away.

Nevertheless, in my case VAT is not applicable, since sales are outside Finland.

This brings some possibilities

(1) Declare all extra income as personal, and pay personal % tax (don't know how much would that be) combined with permanent job in Finland

(2) Register a company in Finland, do sales abroad, pay tax here (No VAT).

(3) Register a company in some other country (then pay corporate tax there) & pay myself bonus, on which I again pay personal tax in Finland.

In which case, would the overall tax be lowest? Someone must have done this before

the corporate tax is not the highest here, unlike personal income tax. However I find tax office a nuisance to work with, I have my own limited company and I get several letters a month asking all kind of information and my company is not paying any salaries and is a part time venture anyways. Bottomline is that you have to be very careful with the tax office, I've gotten many times contradicting information from them when I called them on different occasions, so double check everything.

If you can register your company in Estonia (low corp tax), and pay yourself the salary there (low personal income tax) and don't pay to Finland, but rather open a bank account in Estonia, with a Visa Electron and just withdraw the money from ATM here in Finland.

[Jonathon Martin]

The taxation rate is progressive so it depends how much you earn with your day job and how much you pay yourself. It also depends what kind of company you set up (i.e. toiminimi or oy).

Option (1) and (2) are the same here if you set up a toiminimi, since all income is taxed as personal. (2) is just more paperwork.

Option (3) might reduce your tax a bit if you earn enough.

To be honest, a good accountant will manage to make your earnings disappear as expenses and you won't need to pay much tax at all!

BTW - careful about the VAT issue. The EU has a tax treaty so you may have to pay VAT even if you sell abroad. You just charge it at the rate the sales take place in and pay to the other country.

[Rosamunda]

If you can register your company in Estonia (low corp tax), and pay yourself the salary there (low personal income tax) and don't pay to Finland, but rather open a bank account in Estonia, with a Visa Electron and just withdraw the money from ATM here in Finland.

It makes no difference whether a bank in Tallinn looks after your money or a bank in Finland. That's just cash flow. Within the EU you will be taxed in the country where you have your principal residence and on all your income. And believe me, the verohallitus makes frequent trips to Tallinn. And.... you will lose on currency conversion anyway.

So, if you have a salaried job (and presumably a Soc Sec number) in Finland then this is where you are taxed. You can set up a company in Estonia and that company will pay corporation tax in Estonia (good luck with the bookkeeping) but if you pay yourself a salary it will be taxed here.

[mCowboy]

If you can register your company in Estonia (low corp tax), and pay yourself the salary there (low personal income tax) and don't pay to Finland, but rather open a bank account in Estonia, with a Visa Electron and just withdraw the money from ATM here in Finland.

It makes no difference whether a bank in Tallinn looks after your money or a bank in Finland. That's just cash flow. Within the EU you will be taxed in the country where you have your principal residence and on all your income. And believe me, the verohallitus makes frequent trips to Tallinn. And.... you will lose on currency conversion anyway.

So, if you have a salaried job (and presumably a Soc Sec number) in Finland then this is where you are taxed. You can set up a company in Estonia and that company will pay corporation tax in Estonia (good luck with the bookkeeping) but if you pay yourself a salary it will be taxed here.

so Cayman Islands it is then...

[Rosamunda]

A better solution (but can't remember all the numbers) is to pay yourself a dividend (not a salary) as a shareholder in your company (it would have to be an Oy). Tax rates on capital income are much lower than on a salary.

There is a book which is quite helpful



Doing Business in Finland

[IE7BETA]

It seems to be getting complicated. Could someone recommend a "cost effective" tax consultant in Finland

Still few questions if someone can answer, as my requirements are such that

- All sales are coming from outside EU, and since amount is not minor, I have to find ways to reduce tax.

- If I set up a "toiminimi", can I "hire" people for short term fixed period, if I hire person whose physical location is outside EU. Would some minimum salary rule apply, since "toiminimi" is registered in Finland? And if so, are there "special forms" available for making such contract.

- With "toimini", is it possible to open Bank Account under name of my "company"? and in other countries as well?

- With "toiminimi", does (and how does) Tax office take into account, fact that I am spending say 40 hrs/week of my "free time" to work on my company. When I could as well have been drinking beer in a bar, as per finnish law )))

Any deductions for that?

[richard berman]

What is your web site address???

[Rosamunda]

It seems to be getting complicated. Could someone recommend a "cost effective" tax consultant in Finland

Still few questions if someone can answer, as my requirements are such that

- All sales are coming from outside EU, and since amount is not minor, I have to find ways to reduce tax.

- If I set up a "toiminimi", can I "hire" people for short term fixed period, if I hire person whose physical location is outside EU. Would some minimum salary rule apply, since "toiminimi" is registered in Finland? And if so, are there "special forms" available for making such contract.

- With "toimini", is it possible to open Bank Account under name of my "company"? and in other countries as well?

- With "toiminimi", does (and how does) Tax office take into account, fact that I am spending say 40 hrs/week of my "free time" to work on my company. When I could as well have been drinking beer in a bar, as per finnish law )))

Any deductions for that?

You should get that book I linked to.... it is a bilingual edition so all the answers are in English and FInnish.

The income you receive from a toiminimi will be taxed the same way as your salary from your proper job. The only difference is that you can deduct some expenses like "home office", supplies etc. The amounts you can deduct are fixed by Vero. The difference between your income and any related allowable expenses is added to your proper-job salary and a global tax rate will be applied.

You can hire employees with a toiminimi but beware of the risks.... you are personally liable for everything (it's safer to have a Oy with limited liability).

All the answers are in that book.

[Jonathon Martin]

"- If I set up a "toiminimi", can I "hire" people for short term fixed period, if I hire person whose physical location is outside EU. Would some minimum salary rule apply, since "toiminimi" is registered in Finland? And if so, are there "special forms" available for making such contract. "

The laws about hiring people are relevant in the country in which you hire them. So no minimum salary rule. As far as Finland is concerned employees in other countries are just an expense. Your obligations to pay payroll tax and so on, are between you and the employees member state.

"- With "toimini", is it possible to open Bank Account under name of my "company"? and in other countries as well? "

Yes. Once you have your Business ID you can open company bank accounts.

"- With "toiminimi", does (and how does) Tax office take into account, fact that I am spending say 40 hrs/week of my "free time" to work on my company. When I could as well have been drinking beer in a bar, as per finnish law Smile)))

Any deductions for that?"

No deductions for that. Finnish tax law cares about income not working hours. Lots of deductions for other things though, so get a decent accountant.

[filecore]

Remember that you MUST pay YEL (social insurance; it's a statuatory regulation) but that you can decide the amount you pay, above a certain minimum, and also that all YEL payments are tax-deductable so don't forget to add them to your tax return as a business expense!