Calculating Taxes, YEL and a "Keep to one side" Percentage

[andycheeseman]

Hi,

Can someone please have a look over these basic calculations I've made regarding an annual income and the essential taxes and considerations I think I need to make.

I'm trying to come up with a basic "put this percent of your sales to one side" rule, but numbers aren't my forte.

I've accounted for standard income tax, municipality tax and YEL insurance.

_ . _ . _ . _ . _ . _ . _ . _ . _ . _ . _ . _ .

ASSUMPTIONS
Registered as Toiminimi.
Gross Profit = €33,000

INCOME TAX RATES
a) €0 - €16,300 = 0%
b) €16,300 - €24,300 = 6.5%
c) €24,300 - €39,700 = 17.5%

_ . _ . _ . _ . _ . _ . _ . _ . _ . _ . _ . _ .

INCOME TAX = €2,042
a) €16,300 at 0% = €0
b) €8,000 at 6.5% = €520
c) €8,700 at 17.5% = €1,522

MUNICIPALITY TAX = €6,105
€33,000 at 18.5% (Helsinki) = €6,105

YEL INSURANCE = €2,160
€10,000 at 21.6% = €2,160


TOTAL OUT = €10,307
31.2% of Gross Profit
Keep €22,693 as Net Profit

[betelgeuse]

Hi,

Can someone please have a look over these basic calculations I've made regarding an annual income and the essential taxes and considerations I think I need to make.

I'm trying to come up with a basic "put this percent of your sales to one side" rule, but numbers aren't my forte.

I've accounted for standard income tax, municipality tax and YEL insurance.

Use this this for personal taxation (includes income tax and municipality tax):

http://prosentti.vero.fi/VPL2015/Sivut/ ... ieli=en-US

Use this to calculate YEL:

http://www.etera.fi/en/pension-insuranc ... rance-cost

[betelgeuse]

Can someone please have a look over these basic calculations I've made regarding an annual income and the essential taxes and considerations I think I need to make.

Value added tax is not mentioned.

[andycheeseman]

Thank you for your reply. For YEL, as I'm planning on returning to the UK within a number of years, so I won't see the benefit of a YEL pension. Also as a self employed person starting out on my own, I'm trying to keep all payments to a minimum. So the closer I can get the minimum amount (around 7000 EUR), the better I think.

Value added tax is not mentioned.

I'll be living in Finland, but exclusively maintaining freelance relationships with my clients the UK (lots of air travel).

As all services are supplied in the UK and I won’t meet the UK VAT threshold; I don't believe I need to account for VAT on my invoices.

A few resources I found...
The Single Market - http://bit.ly/1sgWMcx
Determining Place of Supply - http://bit.ly/1w784f1
European Commission, Where to Tax - http://bit.ly/1y0hVKQ

[betelgeuse]

Thank you for your reply. For YEL, as I'm planning on returning to the UK within a number of years, so I won't see the benefit of a YEL pension. Also as a self employed person starting out on my own, I'm trying to keep all payments to a minimum. So the closer I can get the minimum amount (around 7000 EUR), the better I think.

Once you have contributed to YEL, it will be paid to you regardless of your residence at the time of retirement. The minimum YEL level just went up for 2015 to little over 12k:

http://www.elo.fi/tietoa-elosta/uutiset ... 15-alusta-

If you figure the salary for someone working in your place would be less that the limit, then you do not have to take YEL.

Value added tax is not mentioned.

I'll be living in Finland, but exclusively maintaining freelance relationships with my clients the UK (lots of air travel).

As all services are supplied in the UK and I won’t meet the UK VAT threshold; I don't believe I need to account for VAT on my invoices.

If your clients have a VAT registration then yes you do not need to account for it. You will sell with VAT 0% and the client will report it in the UK. You will need to account for the reverse charge on invoices:

http://www.vero.fi/en-US/Precise_inform ... ces(15591)

The UK limit is irrelevant unless it's deemed your travels would put your tax residence to UK.

[andycheeseman]

If you figure the salary for someone working in your place would be less that the limit, then you do not have to take YEL.

From what figure would you calculate your YEL contribution from?

Also, when it says YEL payments are fully tax deductible; does that basically mean you take that off your gross profit before calculating tax?

The UK limit is irrelevant unless it's deemed your travels would put your tax residence to UK.

I will be fiscally domicile in the UK, but I understand what you mean. I won't be earning enough under UK VAT rules (£81k threshold). Arguably, if I was earning £81k, I could pay someone to worry about this for me

Thanks Betelgeuse.

[betelgeuse]

If you figure the salary for someone working in your place would be less that the limit, then you do not have to take YEL.

From what figure would you calculate your YEL contribution from?

YEL contribution must match the salary you would pay someone to do your job. In practice the pension companies seem to accept what you apply for.

Also, when it says YEL payments are fully tax deductible; does that basically mean you take that off your gross profit before calculating tax?

Yes.

The UK limit is irrelevant unless it's deemed your travels would put your tax residence to UK.

I will be fiscally domicile in the UK, but I understand what you mean. I won't be earning enough under UK VAT rules (£81k threshold). Arguably, if I was earning £81k, I could pay someone to worry about this for me

I will link to the other thread you started:

viewtopic.php?f=37&t=87751#p538782