What you need to know about inheritance tax in Finland

If you live in Finland longer you will probably face the situation where a relative passes away. While trying to cope with the loss, you will have to face completely new practical and administrative challenges. Especially when it comes to inheritance tax the questions discussed below will be valuable for you.

How is determined who inherits what?

One of the first questions usually arising concerns the law of succession, i.e. who inherits what. If there is no testament, the law of succession in general depends on the residence country of the deceased. Even within the EU there are considerable differences in how countries have defined legal succession.

Let’s take an example with a married couple and two children, where the father deceases leaving no testament.
If the father had lived in Finland, in general it is only the children who inherit. The widow can make certain claims but doesn’t automatically inherit in Finland if there are children. Even many married people, also among Finns, are not aware of that. But if the father had resided in Germany, the widow typically inherits half and the children a quarter each. 

I recommend to get familiar with the legal succession rules that apply to your family beforehand. First of all this helps you to avoid negative surprises after a relative passes away. Furthermore parties involved get the chance to consider drafting a testament in time. A testament is necessary if one wishes to choose a succession order other than legally defined.

Do I have to pay inheritance tax in Finland?

Payable inheritance tax depends on which country/countries have the right to raise taxes. This again is up to where the assets are located and whether the residence country of the deceased and Finland have a mutual tax agreement.
If a deceased in Germany had assets in Germany and also Spain and the inheritor lives in Finland, then the inheritor might have to pay taxes to all three countries. Typically a notary in Germany would take care of tax declarations regarding Germany and Spain in this example. The inheritor on the other hand would make the tax declaration to Finnish authorities.

But there are also less complicated scenarios, where the inheritor residing in Finland pays only minimal or no Finnish inheritance tax at all. Check the mutual tax agreements between Finland and countries such as the Netherlands, France, Switzerland, Denmark, and the USA. Things get way easier if said agreements state f.ex. that only one country has the exclusive right to tax what the deceased leaves.

Important: when calculating Finnish inheritance tax one can usually deduct equivalent taxes already paid in a foreign country. Therefore it can be wise to agree with Finnish tax authorities to first finalize taxation in the country of the deceased before starting the calculation of Finnish inheritance tax. In any case do contact Finnish tax authorities within three months to avoid penalties.

How much inheritance tax do I have to pay in Finland?

In Finland you start to pay inheritance tax if the taxable portion of the inheritance reaches 20 000€. There are important deductions for minors and spouses that reduce the taxable portion. The calculation of inheritance tax also depends on family ties between deceased and inheritor. There are two inheritance tax brackets in Finland. The first tax bracket includes close relatives such as wife/husband, children, parents, etc. . The second tax bracket covers everybody else including brothers and sisters.

In Finland a taxable inheritance amount of 100 000€ would typically generate a tax liability of 8 700€ in bracket 1 or 20 500€ in bracket 2. Please see the inheritance tax calculator of the Finnish tax authorities for exact info.

Examples for inheritance tax calculation in Finland 

If the inheritor has received gifts from the deceased during a period of 3 years before the deceased passed away, the gifts and eventually paid gift tax will be part of the inheritance tax calculation. See the article on Finnish gift tax here.

How to report your inheritance to Finnish tax authorities?

You can file the inheritance tax return in MyTax. Depending on the domicile country of the deceased you might have to enclose different kind of documents. As mentioned above it makes sense to contact Finnish tax authorities especially if the deceased had lived abroad.

Please note you need to file an inheritance tax return also if the inheritance is less than €20,000 in value. Contact Finnish tax authorities if you have any questions related to filing inheritance taxes.