What Is the Corporate Tax Rate in Finland?
Explore Finland's 20% corporate tax system. Learn how the flat rate applies to a calculated tax base and understand the administrative payment process.
Finland applies a corporate income tax system, levying a single, flat rate on business profits. The corporate income tax rate is 20 percent, though the government has announced a plan to lower the rate to 18% starting in 2027. This rate is applied uniformly to a company’s net income, regardless of whether profits are retained or distributed to shareholders as dividends. Resident companies are subject to this tax on their worldwide income.
Determining Corporate Taxable Income
To calculate the final tax liability, a company must first determine its taxable income. This process begins with the company’s total revenue and involves subtracting various allowable expenses and deductions. The Finnish system allows for several deductions that can lower a company’s taxable profit base before the corporate tax rate is applied.
A primary deduction is for the depreciation of assets. Companies can deduct the cost of machinery and equipment over their useful lives, using a declining-balance method with a maximum annual rate of 25%. For new machinery and equipment, an accelerated depreciation rate of up to 50% may be claimed for tax years through 2025. Depreciation rates for buildings range from 4% to 20%, depending on the building’s type and use.
Businesses can also deduct interest expenses incurred on debt. However, these deductions are limited if net interest expenses exceed €500,000. In such cases, the deductible amount is capped at 25% of the company’s taxable earnings before interest, taxes, depreciation, and amortization (EBITDA).
Research and development (R&D) expenditures are generally fully deductible in the year they are incurred. In addition to the standard deduction, Finland offers temporary incentives for R&D. These include a general additional deduction of 50% on R&D expenses and an extra 45% deduction based on the year-over-year increase in R&D spending. Each of these additional deductions is capped at €500,000 annually.
Tax Payment and Administration
Corporate tax in Finland is administered through a prepayment system. Companies are required to estimate their taxable income for the upcoming year and make monthly advance payments toward their tax liability. These prepayments are based on the company’s previous year’s taxable income, though the estimate can be adjusted during the year if the company’s financial outlook changes.
A final corporate income tax return must be filed within four months after the close of the financial period. This annual filing reconciles the advance payments with the actual tax liability. If the total prepayments exceed the final tax owed, the company receives a refund; if the prepayments were insufficient, the remaining balance must be paid.