Do you make these 5 mistakes with your tax card in Finland?

Everyone working in Finland has had to deal with his or her personal tax card (Finnish: verokortti). Usually you get in touch with it only when starting a new job or at the beginning of a calendar year. You most likely know the tax card informs your employer about your (preliminary) tax percentage. But do you also know what can go terribly wrong when it comes to your tax card in Finland?

Basics about tax card and tax return in Finland

Your tax card in Finland is relevant only in the preliminary taxation of your earned income. Actually it is only used in connection with your salary payout during the tax year. On the other hand your final tax calculation will only take place after the tax year is over. Your final tax calculation depends on your yearly tax return.
If withheld taxes from your salary were too high during a tax year, you will receive a refund the following year. The same applies vice versa: if withheld taxes were too low during the tax year you will have to pay more taxes afterwards.

The tax card in Finland shows your basic tax rate up to a certain annual income ceiling. The additional tax rate is valid for all earned income beyond the ceiling. Accordingly if your tax card‘s income ceiling is too low you will pay taxes according to the (much higher) additional tax rate. Avoid this mistake by all means as it can cause you critical cash problems.

Ideally you keep your tax card on a reasonable level and order a revised tax card in MyTax when appropriate.

You should always know whether your tax card calculation is adequate or if a considerable back tax payment is ahead.

Do you make one of these 5 mistakes with your tax card in Finland?

1. You forget to give your employer a tax card in time

If your employer has not received a tax card from you it has to withhold 60% of your income! In other words: there won’t be much left from that month’s salary. Avoid this mistake, you can easily order a tax card in MyTax.
The good news is that the rest of the year you will accordingly pay much less taxes, but only if you order a revised tax card taking into account your heavy tax spend in the first salary. Don’t forget to send it to your employer.

2. You lose your job and you do not adjust your tax card before your last salary payment.

In the sad event your employment ends and you do not yet have a new job position it is evident that your annual income will not reach the total income on your tax card. Obviously you assumed you would work the whole year when calculating the tax card. Therefore, you should definitely hand in a revised tax card to your employer in time. This is the only way to make sure your lower annual income can be considered in your last salary payout. Depending on when this last payment takes place, the tax percentage on the revised tax card can be surprisingly low and your payout much higher. With help of the revised tax card you basically manage to anticipate the tax refund you would receive only next year.  

3. Tax cards automatically generated in January are not necessarily on a suitable level

At the beginning of a calendar year Finnish tax authorities by default send out new tax cards. Tax authorities often transmit these automatically generated tax cards even directly to your employer. It can be a problem though that tax authorities use your previous year’s annual income in your new tax card:

Example: last year you started to work in July so you earned only during 6 months in that tax year. At the beginning of the new year your automatically generated tax card will show the same earning as last year. The tax card calculation will not take into account you might work up to 12 months this year.

As a result you will pay pretty low taxes during your first 6 months in the new year and think the tax rate will remain that low. However, the bad surprise will be much higher taxes during the rest of the year and a considerably lower net salary. You can only avoid this problem if you revise the tax card immediately to the suitable annual income level in as early as possible.

4. Claim deductions already when ordering your tax card

You are most likely entitled to a bunch of tax deductions, so don’t forget to include them in your tax card calculation. To learn more about tax deductions see the eBook on how to save taxes. Make sure to take eligible deductions into account when ordering a revised tax card in MyTax to cash the tax saving right away! 

5. You have salary income also from abroad

In the case you are tax eligible in Finland and also receive some income from abroad the total of your salary needs to be taxed. This will happen latest in connection with the final tax return. You should thus be fully aware that you will have to pay outstanding taxes later. In order to avoid any negative surprise you should consider adding your estimate on income from abroad when calculating the tax card.