Total Costs of Life in Finland

[Vermont]

Hi,
I am a US citizen currently living in the US and have been offered a job by a company in Jyvaskyla.
If I accept the position I would move to Jyvaskyla and be there for at least 24 months.
I am married and my wife would stay in the US. We have no children.
My question to the forum is, what are total costs I will need to cover when I live there.
I know about rent, utilities, cars, food, etc. and I am looking specifically for all tax and related expenses that I will have to pay out of my income.
I have searched the forum and used the linked calculator, but it seems as if this does not cover everything.
As I am working through salary negotiations, I want to be as precise as possible.

Let's say my annual salary is 62,500 Euro and I receive a bonus of 1 months salary if I do good work.
Using the linked calculator, my "Base" rate is 31.5% plus 6.35% for pension and unemployment insurance.
Below that it says "Additional Rate" of 43.5%, what is that for?

What other taxes, fees, withholdings, etc do I need to budget for?
If i rent an apartment, do I pay Council Tax?
Road Tax for car?

Thank you in advance for any clarity on this topic. As I say, I searched but was not able to successfully follow the fine points down to a number.

[Rosamunda]

I have searched the forum and used the linked calculator, but it seems as if this does not cover everything.
As I am working through salary negotiations, I want to be as precise as possible.
Let's say my annual salary is 62,500 Euro and I receive a bonus of 1 months salary if I do good work.
Using the linked calculator, my "Base" rate is 31.5% plus 6.35% for pension and unemployment insurance.
Below that it says "Additional Rate" of 43.5%, what is that for?

The additional rate is the one that would be used if you have another job 'on the side' eg if you were to do some part-time work or consultancy for a different employer.

If i rent an apartment, do I pay Council Tax?

Municipal taxes are included in the 31.5% that the tax calculator gave you. You were asked to enter a location in the tax calculator (eg Jyvaskyla) - that is the one used to calculate the local taxes. It doesn't vary a huge amount from one municipality to another.
The Church tax is also included (but you can opt out, the default mode is "in" and the rate is 2%), there was a drop-down box in the tax calculator for that too. Audiovisual/telecom tax (which replaces the old licence fee) is also included.

What other taxes, fees, withholdings, etc do I need to budget for?

I can't think of any other withheld taxes. Of course there is VAT (alv - sales tax) on everything you buy: 24% on nearly everything, 14% on food and 9% on books. Only a few things, like medicines are zero rated. There are real estate taxes for homeowners but presumably you will be renting.

Road Tax for car?

Ask someone else! I have no idea.

Something to check:
The bilateral tax agreement with the States. You will have to declare your income in the USA also, all Americans do. Also, while you are resident in Finland you will have to pay tax on your worldwide income including anything you earn in the States. The bilaterial tax agreement is there to prevent double taxation so it's worth checking it out.

You can send email enquiries on tax and social security contributions to this service which is specifically aimed at people coming to work in Finland. http://www.intofinland.fi/en

[Rip]

Using the linked calculator, my "Base" rate is 31.5% plus 6.35% for pension and unemployment insurance.
Below that it says "Additional Rate" of 43.5%, what is that for?

The base rate (together with pension and other fees) should tell you how much is withheld from your salary (and that pretty well match your final tax bill as well). The additional rate (+ the pension etc.) is basically your approximate marginal tax rate (how many euros form any additional 100 you may make) at that income level. As the tax system is progressive, it is higher than the base rate.

If i rent an apartment, do I pay Council Tax?

As mentioned, municipal tax is included in the rates you already calculated. If you rent your housing the owner (or housing company) takes care of real estate tax.

Road Tax for car?

http://www.trafi.fi/en/road/taxation/ve ... unt_of_tax
Not that much compared to other costs (capital, insurance, fuel, maintenance) of owning a car.

Any prices that you would have seen (that would be relevant for private individuals) would have been with the VAT included.

[riku2]

about the car tax - the annual payment is a minor sum compared to the substantial cost of a car in Finland. I think the cars are about 2x the price or more. Filling it with petrol is many times the cost in the USA, perhaps 4x?

You should check how much holiday you will get in the job. Finland has a strange system in that when you join you earn holiday "this" year to use "next year". Until you have some accumulated holiday you get no paid leave. The earning period is I think 1st april - 31st march. the spending period is 1st May - 30 April.
In the worst case you start work in June 2015: you earn holiday june 2015 - march 2016. During that time you get no paid leave whatsoever (zero holidays). Only from 1st May 2016 will you have paid leave.
if you start work on 1st march 2015. you earn leave for 2014-2015.. a grand total of about two days. Then from 1st May 2015 - 30 April 2016 you have two days paid leave .. and you must take this paid leave during summer 2015 (no keeping it for Jan- April 2016).
Whatever leave you have earned you must take two weeks of it during the summer in one continuous block. This means that if you've earned two weeks for the whole year you must (by law) take it in one go during the summer.

And it will come as a shock for those from english speaking countries that if a public holiday falls on a weekend then the holiday doesn't move to the adjacent friday/money. Eg new years day is on a sunday: no day off work. sunday 1st january would be the public holiday. In the worst case christmas day/boxing day are saturday+sunday. new years day is saturday. In the whole christmas period you get one day off work. Finns don't know how the system works in the UK and USA and just think this way of losing public holidays is normal.

[Beep_Boop]

Since I think everybody has already answered your questions, I'd like to comment on the general situation.
I found it a bit odd that someone from the U.S would move to Finland for a salary on that level. If you're going to work in IT, you usually can get more than double the Finnish salaries post-tax (1.5-.1.8x with ease). Since the contract is 24 months, I find the extra costs you pay in Finland (basic tax, pension, health care contribution, etc.) don't have a good return on investment. In Finland, you'll pay for so many luxuries that you, as a work-based immigrant from the US, will rarely need to have/access.

In any case, best of luck!

[betelgeuse]

I found it a bit odd that someone from the U.S would move to Finland for a salary on that level. If you're going to work in IT, you usually can get more than double the Finnish salaries post-tax (1.5-.1.8x with ease). Since the contract is 24 months, I find the extra costs you pay in Finland (basic tax, pension, health care contribution, etc.) don't have a good return on investment. In Finland, you'll pay for so many luxuries that you, as a work-based immigrant from the US, will rarely need to have/access.

I agree from a cashflow point of view. However, many people have other motivations besides money.

[Querfeldein]

Although others have already answered both of these questions, maybe this will help clarify:

There is no "council tax" like in the UK for renting a flat in Finland. There are municipal income taxes, which, as has been explained, would have been included in the calculation.

The "additional tax" is your marginal tax rate. Finland has a progressive tax system, so your marginal tax rate is always higher than your average tax rate.


Also, if your first year does not start at the beginning of the calendar year, your tax rate (for that year) could be considerably lower, as the percentage is calculated on an annualised income. Hence, if you start in July and work for six months, and your income during that time is, say, €32,000, because of the progressive system, you will have to pay a much lower tax rate during these six months.

[betelgeuse]

Also, if your first year does not start at the beginning of the calendar year, your tax rate (for that year) could be considerably lower, as the percentage is calculated on an annualised income. Hence, if you start in July and work for six months, and your income during that time is, say, €32,000, because of the progressive system, you will have to pay a much lower tax rate during these six months.

This is a good point. However, for Americans it's less beneficials since since lessened Finnish taxes mean more due in US.

[AldenG]

It's best to move at year's end if possible. Your taxes will be a lot simpler.

[Vermont]

Thank you all for the very informative replies. The situation is quite clear to me now.
As some of you have said, this opportunity is not about the money for me. I just need to cover my costs and earn something that makes sense. The value for me of what I will be doing is the experience and challenge.

One remaining question I have about pension payments: If I return back to the US in the future, is any of what was paid in for pension payments reclaimable?

[Rip]

One remaining question I have about pension payments: If I return back to the US in the future, is any of what was paid in for pension payments reclaimable?

Not directly. According to current rules, after you've reached the Finnish retirement age (what ever it will be then, but likely rather close 70...) you can apply for the Finnish earned pension (irrespective any other pension you may get or if you actually have retired). Nominally you should be getting 1.5% of your average salary for each year worked here, but with all the indexing and life expectancy adjustments take that only as a rough first estimate.

[Vermont]

One remaining question I have about pension payments: If I return back to the US in the future, is any of what was paid in for pension payments reclaimable?

Not directly. According to current rules, after you've reached the Finnish retirement age (what ever it will be then, but likely rather close 70...) you can apply for the Finnish earned pension (irrespective any other pension you may get or if you actually have retired). Nominally you should be getting 1.5% of your average salary for each year worked here, but with all the indexing and life expectancy adjustments take that only as a rough first estimate.

Rip, thanks for that. If I understand you correctly, this hypothetical situation is how the rules are currently structured:

I, as a US citizen, but with a Finnish Residence Permit, work in Finland for ten years and pay into the pension fund. I earn 60k euro every year, making my average salary an easy 60k. Because I worked for 10 years, I am eligible for 15% of 60k (9k) per year, once I reach retirement age. It does not matter that I do not live in Finland at this point, I can live out my retirement anywhere.

Do I understand that correctly?

[betelgeuse]

I, as a US citizen, but with a Finnish Residence Permit, work in Finland for ten years and pay into the pension fund. I earn 60k euro every year, making my average salary an easy 60k. Because I worked for 10 years, I am eligible for 15% of 60k (9k) per year, once I reach retirement age. It does not matter that I do not live in Finland at this point, I can live out my retirement anywhere.

Do I understand that correctly?

Yes but with caveats as RIP mentioned. Here's some more info on them. Your exact pension depends on when you retire. Assuming the new rules will be approved and go into effect 2017 here's one calculator for them:

http://www.ilmarinen.fi/elakelaskuri

For a person born in 1960 (10 years left working) they will receive 8892 per year if they retired at 64y 6m. The longer you wait to claim the pension the more they will give you. On the other side the longer the life expectancy the less they will pay:

https://www.tyoelake.fi/en/nainelakemuo ... fault.aspx

[Rip]

I am eligible for 15% of 60k (9k) per year, once I reach retirement age. It does not matter that I do not live in Finland at this point, I can live out my retirement anywhere.

Do I understand that correctly?

'Yes. The rules of course can change several times between now and retirement age and even with the current laws there are yet unknown variables that effect details of the calculation (basically the smaller the mortality of the people that are a few years younger than you has been, the smaller your pension will be)

The earned pension can claimed where ever you live. (There are other "guaranteed pension" part paid for those that are actually living here and did not earn enough pension to survive with it).

[Marsh04]

On the other side the longer the life expectancy the less

Ladies have a life expectancy of 10 years more than men, shouldn't they pay them lesser or pay more to men?