Finland Crypto Tax

According to various rankings, Finland is among the top ranks in innovative countries of the world with a pretty well-structured taxation framework that allows new businesses to grow alongside society’s stable functioning. All in all, cryptocurrencies in Finland are popular among the masses and viewed favorably by the government.

The Finnish Tax Administration is the authority responsible for collecting taxes and imposing the rules of taxation. The same authority also advises on certain taxable instances and conducts inspections among taxpayers if necessary. If their value is linked to a fiat currency, it does not treat virtual currencies as legal tenders. Instead, they consider them as an asset for tax-giving purposes.

The body is also responsible for ascertaining that international taxation principles are observed and the best practices followed. For example, the recent changes in the EU’s Directive on Administrative Cooperation have introduced reporting of income from crypto activities of the users residing in the EU. This information is exchangeable among all tax authorities within the EU. It is in line with what is called the Crypto-Asset Reporting Framework, which also has just been issued by OECD. Its aim is to improve crypto-taxation and standardization in the case of tax reporting through automation of tax reporting and sharing of information within global tax administrations.

Benefits of the Finnish Tax System

Finland has nearly 80 different international agreements on the avoidance of double taxation. These make cross-border investment much easier. The agreements have priority rights in respect to taxation; however, they are unable to specify certain rules for the taxation of a particular case because every tax authority is obliged to apply a national taxation framework. Of the advantages, often they allow for the adjustment of applicable tax rates, which reduces the burden of taxes. Importantly, the double taxation agreements aim to avoid tax evasion as well.

This data from the dataset shows that Finland is in the frontline in promoting R&D activities and constantly growing funding available, while the goal to be reached by 2030 is 4% of GDP. Under the Act on Research and Development Funding, new rules on R&D tax relief were taken into use on 1 January 2023; according to these, companies could develop their own R&D projects and speed up their activities according to it. According to the new incentive, there is the general additional deduction based on the total amount of R&D expenses and an extra deduction based on an increase in the R&D expenses compared with that in previous years.

The general additional deduction is an amount equal to 50% of the expenses, starting from 5,000 EUR up to 500,000 EUR. The extra deduction is 45%, and such an amount is calculated by ascertaining increased R&D expenses, which can be a salary or purchase of a service. The lower annual limit does not apply for additional deduction, but the deduction is capped at 500,000 EUR per year.

Corporate Income Tax

In Finland, the standard Corporate Income Tax rate is 20%. Finnish tax resident companies and Finnish permanent establishments of non-resident companies are taxable on their income sourced both in Finland and abroad, while non-residents are taxable on their income sourced in Finland. Tax resident means a company incorporated under national law in Finland or, if incorporated elsewhere, its place of effective management is in Finland.

All crypto companies are subject to general taxation rules. This, among others, includes a requirement for filing returns electronically within four months from the end of the accounting period. This is to be paid in advance by the companies either in two or 12 installments during the financial year. In cases where the total amount due does not exceed 2,000 EUR, the payments are to be made during the third and ninth months of the accounting period. When the payable amount is over 2,000 EUR, payment has to be made monthly up to the 23rd of each month.

Crypto businesses are entitled to claim deductions on a wide array of expenses that they incur in the pursuit of taxable income. For instance, they can write off start-up expenses, charitable contributions, and crypto-related expenses like machinery used for mining. Based on demonstrable usage, a qualifying business can write off 25% up to 100%.

Withholding Tax

The rate of withholding tax in Finland ranges between 15% and 35% for foreign corporate recipients and between 30% and 35% for non-resident individuals. In some cases, this can be levied on dividends, interest, and royalties. Over.withholding is refundable upon submission of a refund application with the Finnish Tax Administration.

The following are all exempted from the Withholding Tax:

Interest paid to non-residents

Dividends paid to a company mentioned within the EU’s Parent-Subsidiary Directive, provided it possesses at least 10% of the capital of the company paying such dividend

Under certain conditions, dividends paid to companies that are residents of the EU/EEA

Fees for technical services

Capital Gains Tax

For a company, capital gains become part of the tax base, treated as business income or other income taxable at 20% Corporate Income Tax. Yet, capital gains realized from the sale of shares are also exempt from taxation but provided that the seller, amongst others is not a company specializing in private equity activities, has shared at least 10 percent of the shares for at least one year and those shares formed part of the seller’s capital assets.

The tax rate of Capital Gains Tax applicable for individuals, if the proceeds do not exceed 30,000 EUR, lies within the range of 30%-34% if the proceeds exceed 30,000 EUR. A taxable event for the purposes of Capital Gains Tax is different crypto-related activities, including an exchange of cryptocurrencies for other cryptocurrencies and fiat money, staking, and payment for products or services using cryptocurrencies.

Any losses from selling cryptocurrencies could offset each other for tax calculation purposes. For determining the taxable amount in euros, one has to deduct from the sale price acquisition price and transaction and broker’s fees, applying the FIFO method-meaning, the first cryptocurrency bought shall be the first to be sold.

The acquisition costs are calculated automatically in accordance with the taxation rules and are as follows: If the cryptocurrencies were owned for less than 10 years, then 20% of the selling price. If the cryptocurrencies were owned for 10 years and more, then 40% of the selling price is acquired.

According to EU VAT legislation, the standard VAT rate is 24%. It is imposed on most goods and services sold within Finland, including in most cases crypto companies, which is the reason for their registration as payers of VAT. Companies with small turnover are exempt, but they can voluntarily register.

The benefit of registration as a VAT payer is considered to be applicable in the case where the company purchases large quantities of goods or services subject to VAT for its taxable activities, and the Company intends to deduct the VAT included in the goods acquired or services purchased. A business is small if the annual turnover of the company doesn’t exceed 15 000 EUR. Once exceeded, it would become compulsive for one to be able to register as a taxpayer in Finland.

While, in principle, a range of crypto-related businesses are subject to a value-added tax, crypto exchanges – the exchange with fiat money and vice-versa – do not fall under the object of VAT according to the CJEU decision. The CJEU has stated exemption from value added tax shall be granted to the transfer of fiat money against cryptocurrencies and vice versa by using the provision concerning legal tender. Below follow some examples:

Payroll Taxes in Finland

If a crypto company has employees hired in Finland, it is required to withhold Individual Income Tax and Social Security Contributions from wage compensation paid to such employees. Residents are taxed on the basis of their worldwide income. The national tax is progressive, while the municipal tax is at a flat rate. The topmost national tax rate is 44%, and the municipal tax rate is from 16.5% to 23.5%.

The rates of Social Security Contributions payable by employers are as follows:

Health insurance contribution – 1.53%

Pension insurance contribution – 17.39%

Group life insurance premium – 0.06%

Accident insurance premium – 0.57%

Unemployment insurance contribution – 0.52% for the first 2,251,500 EUR of gross salaries and 2.06% for the portion of the gross salaries exceeding 2,251,500 EUR

How do I pay taxes on crypto in Finland in 2024?

In 2024, Finland continues to develop the regulation of cryptocurrencies and taxation of income derived from their use. Considering the increasing popularity and further integration into the country’s financial system, the Finnish Government and the Tax Administration are trying to build a clear and transparent system for taxing cryptocurrency-derived income.

Cryptocurrency Income-Taxation Main Aspects

In Finland, capital gains from cryptocurrency are liable for tax, which, in other words means, any financial result in selling and trading of cryptocurrency, mining, or received payment for service or goods, should be reported and subjected to tax.

Declaring income

With the declaration of cryptocurrency income, it shall be required that taxpayers should reflect in their tax return all these transactions with cryptocurrencies. All information should correctly reflect dates of purchase and sale of cryptocurrencies, quantity, as well as purchase and selling price with a view to correctly calculating the tax base.

Tax calculation

Thus, the tax base is the difference between the sale and purchase price of the cryptocurrency. Profits are included in the capital gains tax at the approximate rate of 30-34% in Finland in 2024, depending on the amount of income.

Cryptocurrency mining

Income derived from cryptocurrency mining is treated as business income and is subject to tax in conformity with the applicable rate. It is expected that a taxpayer has enough records regarding their expenses concerning equipment, electricity, and other operational expenses which can be deducted against taxable income.

Crypto Currency Exchange

There is a taxable event arising when one cryptocurrency is exchanged for another, whereby a gain or loss from the transaction is computed. The computation is determined by comparing the value of the cryptocurrency at the time it was purchased and the value of the cryptocurrency received at the time of the exchange.

Tax benefits and deductions

Finnish tax law allows for tax deductions in reducing the taxable base, including deductions regarding the production of such income. This can involve mining equipment expenses and other operating expenses.

Tax advice

Given the complexity of cryptocurrency tax regulation and its amendment, the use of professional tax advisors’ services is indicated, which can support the optimization of tax liabilities and avoid declaration errors.

Conclusion:

Taxation of cryptocurrencies in Finland in 2024 requires much carefulness in income declaration and accurate bookkeeping of all cryptocurrency transactions. For this purpose, close observation of the current development of the tax laws is relevant to being timely and properly performing tax obligations.

Table with main tax rates valid in Finland

If you would like to develop your crypto business in one of the most innovative countries in the world, then our team of dedicated and quality-focused legal consultants here at Regulated United Europe (RUE) will be happy for you to provide tailored and value-added support in optimizing your taxes in compliance with applicable legislation. Our firm also provides Finnish crypto company formation and other services such as crypto licensing and financial accounting. Contact us now for individual counseling, and set the stage for long-lasting success.
In addition, lawyers from Regulated United Europe provide legal support for crypto projects and help with adaptation to MICA regulations.