Taxes

Tax refers to the amount of money paid by a taxpayer (e.g., an individual or business). Taxes are mandatory fees that are collected from a number of different sources. For example, tax must be paid on your wage income. Capital income is, for example, when you receive income from an apartment you rent out. Taxes are also paid on this income.

The price of trade goods and even haircuts also include taxes.

Value added tax, or VAT, is a general consumption tax that is levied on the consumption of almost all goods and services. The general VAT rate in Finland is 24 percent.

Taxes help to finance, for example, public services, such as health care.

TAX CARD AND WITHHOLDING

An individual is taxed on earned income as a withholding tax according to the withholding tax rate. The withholding percentage is reflected on the tax card you receive. Often the tax office sends the tax card directly to the employer. The employer withholds the withholding tax in accordance with the tax card and accounts for it directly to the tax authority.

The tax card has a basic percentage that withholds tax up to a certain amount of salary. In the tax card, in the example avbove, this basic percentage is 23,5% and the income limit for it is 2500 € / month. For the part exceeding the income limit, the withholding tax is charged according to the additional withholding percentage. In the tax card of the example, the additional percentage is marked as 42,3%.

Example 1. How much withholding tax was deducted from Paula's salary when Paula's monthly salary income was

a) 2300 € / month

b) 3200 € / month

Solution.

a) As wage income is below the income limit ( 2500 € / month), the tax is withheld only at the basic rate:

b) The wage income exceeds the income limit for the wage period. Up to the income limit, withholding tax is charged at the basic rate:

For the part exceeding the income limit, the withholding tax is charged according to the additional withholding percentage. First calculate the part exceeding the income limit:

and the relevant tax is calculated according to the additional percentage:

Finally, the taxes are added together:

Income tax

The state income tax scale is used to calculate state income tax. The scale is progressive, which means that the relative share of taxes increases as revenue increases.

Income tax scale in 2019

Example 2. A person's taxable income in 2019 was 45 300 €. How much state income tax do they have to pay?


Solution. Income falls into the range of 43 500 € to 76 100 €


The tax at the lower limit is 3 485,75 €

The part of the income exceeding the lower limit:

For the part of the income exceeding the lower limit, the person has to pay a tax of 21,25%.

In total, the person pays income tax

VAT (value-added tax)

Value added tax (VAT) is a tax related to the consumption of goods and services. When you buy new jeans from a store, a 24% tax is calculated on their price.

VAT is always calculated on the tax-free price of the product:

TAX-FREE PRICE OF THE PRODUCT + VAT = TAX PRICE OF THE PRODUCT

VAT is often calculated using the percentage method (24% VAT used here):

TAX-FREE PRICE OF THE PRODUCT · 1.24 = TAXABLE PRICE OF THE PRODUCT

Example 3. The tax-free price of jeans is 16,12 €. Calculate the selling price of jeans (price including tax) when the VAT is 24%.

Example 4. The selling price of a book is € 24.90. The VAT on the book is 10%. How much VAT does the buyer have to pay?

Amount of VAT

Turn on the subtitles if needed

Exercises

1. The tax-free price of a product is 355 € and VAT 24%. Calculate the amount of VAT paid.


2. The tax-free price of a product is 95 € and VAT 24%. Calculate the product's price with tax.


3. Calculate the amount of VAT paid when the price of a product with tax is 53 € and the VAT is 24%.


4. Calculate the tax-free price of a product when its price with tax is 16,80 € and VAT is 24%.


5. In a person's tax card, the basic percentage is marked as 22,5% and the additional withholding percentage as 38,0%. The monthly income limit is 2860,50 €. How much withholding tax is deducted when monthly salary is 2655 €?


6. In a person's tax card, the basic percentage is marked as 22,5% and the additional withholding percentage as 38,0%. The monthly income limit is 2860,50 €. How much withholding tax is deducted when monthly salary is 3145 €?


7. View the attached gift tax table.

a) How much tax will have to be paid if the value of the gift is 4 500 €?


b) How much tax will have to be paid if the value of the gift is 55 000 €?


c) Calculate how much the gift tax is if the value of the gift is 10 000 €.