When determining the tax burdens falling on the different company types, attention must also be paid to the tax burden of the owner. The joint effect only determines which company form is the most profitable in terms of taxation.
The taxable income is, in all cases, calculated on the net result (profit or loss) shown by the accounts. The annual book profit or loss is nevertheless adjusted with certain supplements and depreciations, since the regulations of the Accounting Act and the Companies' Income Tax Act differ somewhat. For example, while all entertainment costs are entered in the accounts, only 50 % is deductible in taxation. Direct taxes payable by an enterprise are not deductible.
State income tax
The state income tax can be either progressive or proportional. If the tax is determined in accordance with the progressive income tax scale, this means that an increase an income causes a proportionately greater increase in tax. Earned income (such as wages or pension and fringe benefits) is taxed in accordance with a progressive tax scale.
Proportional tax means that a flat tax rate will be applied throughout, irrespective of the amount of the income. Capital income and corporations are subject to a proportional tax rate. In 2011 the tax rate on capital income (for example capital gains) of individuals is 28 per cent. The tax rate of corporations (limited companies and cooperatives) is 26 per cent.
Municipal and Church tax
The municipal income tax is determined according to a proportional tax base. In 2011 the municipal income tax rates vary from 16.25 to 21.5 per cent.
The church tax is also a proportional apportionment tax. The church tax rates vary from 1 to 2 per cent. Church tax is only paid by the members of the Finnish Evangelic Lutheran or Orthodox Churches. Corporations (limited liability companies and cooperatives) always pay the church tax since part of the corporate income tax (tax rate 26 %) is paid to the Evangelic Lutheran and Orthodox congregations.
Assessment of tax
Corporate tax is determined gradually within ten months of the completion of the accounting period of the respective corporation (limited liability company, cooperative, etc.).
National income tax, municipal tax and church tax of other taxpayers (apart from corporations) are assessed annually at the same time, within ten months of the completion of the tax year (accounting period or calendar year) of the taxpayer. Taxes are assessed by the regional tax office in the taxable person's place of residence. Once the assessment has been completed, taxpayers receive a tax notice, which shows the amount of the final tax.
