Private trader’s (sole trader’s) income in Finland is taxed based on the net income (profit) earned from the business activities. Most part of the net income comes from sales after deducting applicable business costs. While it can sometimes be hard for an entrepreneur to make a clear difference between business and personal costs, a professional accountant can help figure it out (see the Accounting Services section of our website for more information). There are certain taxable income deductions an entrepreneur can use (more info in the section below) to decrease the amount of income tax payable and cover some costs of using personal assets in business activities. Still, these deductions need to be planned ahead and their use executed according to specific rules to have the right to claim the deduction. Otherwise, a wrong execution or insufficient documentation can lead to a tax increase, instead of a deduction.

Income tax of a private trader (sole trader) is paid in advance, just like in the case of corporate income tax. During the year, prepayments are made based on estimated profit. After the end of the financial year, a correction is made and additional taxes are paid or extra taxes are returned.

Private trader (sole trader) can  choose to have their taxable income divided into two parts (income taxed as capital income and income taxed based on a progressive personal income tax rate). In case of minor taxable income, a private trader can choose to have all of his/her income taxed based on the progressive rate. In case of higher income, it is worth to consider choosing to tax an amount equal to a maximum of 10% or 20% of net assets as capital income. This choice affects also the spouse, if the private trader income is divided between the spouses.

Feel free to contact our specialist for help. You can find the contact details at the bottom of the page.

Private Trader’s Tax Deductions in Finland

Private trader’s (sole trader’s) tax deductions are quite similar to an employee’s tax deductions.

Though not literally a deduction, the private trader can share their taxable income with their wife/husband if she/he also works in the business.

Usage of a business’ vehicle for personal purposes is a source of additional taxable income, while using a personal vehicle for business purposes is a source for a taxable income deduction. A driver’s log or another reliable source of information is a valuable help in making sure not to pay extra taxes.

Usage of a room or another type of space of a personal home for business purposes can give a right of a taxable income deduction.

Additional incurred living expenses due to business trips can be used as a taxable income deduction (using the rates of daily allowances) in the case of a private trader (not compensated in cash as with employees).

Questions related to the taxation of your business activities? 

Please contact our specialist via phone +358 503 220 600, e-mail: info@kuljus.eu or contact page.