Running a business
Entrepreneurship and running a business comes with a lot of new responsibilities and things to remember. We will now open up those responsibilities as well as other activities related to running your company.

  • Entrepreneurial obligations
  • Benefits
  • Invoicing
  • Entrepreneurial obligations

    Tax administration:

    • Pay company income tax on time using the prepayment register, one-time obligation: If your company’s fiscal year ends and you have not paid income tax during the fiscal year, and it turns out that you have to pay thousands of euros in income tax, the tax administration adds interest to the tax claim. To avoid paying interest, pay income tax before or within one month of the end of the company’s fiscal year.
    • Send VAT reports, recurring obligation: As a business owner, you are responsible for making VAT reports on a monthly basis, not your accountant. In practice, your accountant takes responsibility for reporting and does so on your behalf, but remember that if your accountant does not perform their duties, you are responsible. Therefore, always check before the deadlines whether VAT reports have been made.
    • Send a VAT summary declaration on EU sales, recurring obligation: If you invoice a company operating in the EU, you must provide its details. This obligation is similar to VAT returns in that you are responsible for making the report correct and timely, even if your accountant does it for you.
    • Report wages, recurring obligation: If you raise wages, you must report wages and employer contributions to the incomes register. Your accountant can do this for you or you can do it yourself in the Palkka.fi service provided by the Tax Administration.
    • Take care of accounting obligations every month, recurring obligation: Even if this is not required by law, this is highly appreciated by your accountant. Consider, for example, a software development project where the backlog is cleaned regularly. So it is quite understandable that your accountant would want to handle the transactions and other events of the month while they are still fresh in your mind.
    • Send the financial statements and the company’s income tax return, recurring obligation: Submit the financial statements and income tax return within four months of the end of the fiscal year. Your accountant can do this for you.
    • Provide receipts to your accountant, recurring obligation: First of all because the Tax Administration needs to know what the purchase was for and whether it is related to your main business. VAT is refunded for suitable purchases.

    YTJ:

    • Report changes in company data, one-time obligation: Changes in company data, such as address, must be notified to the YTJ.

    TE services:

    • Apply for the start-up grant, recurring obligation: You must apply for the start-up grant retroactively within two months of the month for which you apply. For example, when applying for the March start-up grant, you have until the end of May to make the application.

     

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    Benefits

    Source: Tax Administration

    You can offer yourself all the same benefits that are available to employees. When you stay within tax-free limits, the benefits are corporate expenses.

    Phone benefit

    Your company can pay your phone bill if you offer it as a monthly phone benefit of 20 euros to yourself. Phone bills are corporate expenses only when you use the phone solely in your business and not in your personal life. If you want to use the same subscription for both personal and business use, you must offer it as a phone advantage of 20 euros.

    Internet

    You can offer yourself an internet connection to your home office through your company. The expense is not taxed if it is intended for work use. You can also use the internet connection for personal use, but entertainment services should not be connected, otherwise the benefit is taxable.

    Vehicles

    Your company can own a car, bicycles, etc., which you can use for commuting, such as going to a customer location and other work-related trips. Since your company owns these vehicles, all repairs and maintenance costs are business expenses that you can pay through your company and like all other business costs, you will receive a refund of VAT later. If you need to use these vehicles for non-work-related trips, ask your accountant if it is a taxable benefit for you and act accordingly.

    Massage benefit

    If you offer yourself a reasonable amount of massage benefit (for example ~€50/month) and that reasonable amount is proportional to your salary, you should be able to offer yourself a massage benefit without any problems. Note, however, that the tax administration official decides what is reasonable and proportionate. So be careful with this benefit.

    Can you offer yourself only benefits?

    Yes, you can, but you must pay yourself enough wages to cover the income tax on the benefits you offer yourself.

    For example, suppose your company paid your phone bill in December and therefore you have to offer yourself a €20 phone benefit. You don’t want extra salary and your tax rate is 10%. 10% of the €20 phone advantage is €2. This means you will need to withdraw enough salary in December to cover this €2 tax due. Therefore, in December your salary must be €2.22. When you deduct 10% of your tax on your €2.22 salary, there is €2 left, which covers the €2 tax on the phone benefit.

    Should you offer yourself benefits over the tax-free limit?

    Sure, you can do that, but in the case of an entrepreneur, it’s the same as withdrawing a salary. Entrepreneurs only pay income tax on their income, so if you pay yourself a salary of €1,000 and your tax rate is 20%, you get €800. If you pay yourself €1,000 as a benefit, you also get €800.

    Who makes sure you don’t cross the tax-free limit?

    Your company (legal entity) must ensure that its owner, you as a natural person, is not offered benefits that exceed tax-free limits. If you are offered benefits above the tax-free limit, it must be reported and the benefits taxed. This is important to remember because as a representative of the company you can order up to €10,000 worth of sports and cultural benefits, but if you use all the benefits during that calendar year, you must declare it and pay tax on a portion of €9,600.

    Invoicing

    When invoicing people, you must include at least their full name and address on the invoice.

    When invoicing a company or individual from outside the EU:

    You do not need to add VAT to the invoice for your freelance services.

    When invoicing a company located in Finland or a private person living in Finland:

    You must add 24% VAT to the total price you charge for your freelance services.

    When invoicing a company located in the EU or an individual resident in the EU:

    • You must add 24% VAT to the total price you charge for your freelance services.
    • However, you can use the reverse charge, i.e. not add VAT, but only when you charge a company located in the EU. Here’s how to do it:
      • Please indicate on the invoice the VAT number of the company located within the EU.
      • Make sure that the VAT of the company you invoice is valid from the VIES service.
      • You must state the VAT rate and exactly how much VAT the company you are invoicing must account for, and that this liability has been left to the company you are invoicing.
      • You must mention the following words verbatim on the invoice: VAT reverse charge mechanism.
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