Hiring labor and tax implications

[rob34]

Let's say I met someone who was handy with a hammer and I offered to pay him to build some shelves for me.

What are the tax implications here? The person doesn't run their own business, but I am paying them for their services. What happens if I like their work and want them to build a TV stand and or a coffin for my goldfish?

At what point does tax become a problem?

[raamv]

when you want to claim the labor fee ( 60%) for tax deduction. Otherwise, it practically might not be a problem.
if it is one off..Not an issue..But then you never know.

[rob34]

when you want to claim the labor fee ( 60%) for tax deduction. Otherwise, it practically might not be a problem.
if it is one off..Not an issue..But then you never know.

What if it becomes more regular? Is there a way to handle tax directly, without either party having to declare themselves as either an employer or a place of business?

[Hank W.]

Is there a way to handle tax directly, without either party having to declare themselves as either an employer or a place of business?

Not really, no. And its not the taxes but the social fees and pension that costs.

[Rosamunda]

It is so easy for a sole trader to set him/herself up as a TMI that there is little point in trying to be creative and avoiding it. The new ALV rules mean that VAT accounting is not even an issue in the beginning (there is more on Vero website). Then if the handyman wants to build some shelves for someone else he can do that too.

So IMO, tell him to set up a TMI and then you are just his customer (not his employer). No need for VAT (under 8500 euro per annum, or in certain situations the limit is higher) and all he needs to worry about is his pension and social security (YEL, or is it TEL, I can never remember which). The income tax is his problem, but you cannot really avoid that, as everyone knows.

Tax becomes a problem above 3000 euro which is the lower limit for gift tax (but that is 3000 e in any 3 year period IIRC). The limit is due to go up, not sure when. Anything which isn't trade is a gift.

[Mook]

You should also consider the insurance aspect - what happens if he has an accident while working? (then again, for small things he's just a mate helping you out)

[korppu]

If you know Finnish you can read these:
http://www.vero.fi/nc/doc/download.asp?id=4998;48127
http://www.vero.fi/nc/doc/download.asp?id=6023;49273

There is a service http://www.palkka.fi, that calculates the different costs for you and prepares the payments.