Tax-deduction of business purchases

Written by: OP Light Entrepreneur Team

As an entrepreneur, you can deduct business expenses and purchases for taxation purposes.

You can deduct all business expenses and losses involved in generating or sustaining income. These deductions will reduce your taxable income. This will appear in your tax decision as possible refunds.

The deduction of certain expenses for taxation purposes is either wholly or partly limited. The Finnish Tax Administration makes the final decision on tax deductibility.

Some long-term assets are deductible as depreciation in OP Light Entrepreneur. Read more about handling long-term assets in our service.

What can I deduct for tax purposes?

The most common deductible purchases for professionals are:

Goods

Pens, pads, maps, envelopes and postage stamps bought for a company are tax deductible.

Small purchases

Fixed assets such as laptop computers and mobile phones

  • with an estimated economic life of 3 years at most, or
  • long-term fixed assets if their purchase price before VAT is a maximum of 1 200 euros (a total of 3 600 euros in any one calendar year)

EXAMPLE

As a carpenter, you can acquire an electric tools for your business at a maximum value of 30 000 € incl. VAT 24%.

You can deduct computers, camera equipment, or phones at once even if their price exceeds 1 200 €

The estimated economic life of computers, camera equipment, and phones is considered to be less than three years. Therefore, you can deduct the mentioned purchases in your accounting at once for business purposes even if their purchase price exceeds the balance sheet threshold (1 200 € per item or 3 600 € per year)."

Note! If you use hire purchase to buy a product or service, make a bookkeeping entry for each instalment paid. For example, if the hire purchase agreement is for 12 months and billing is monthly, record each monthly payment as an expense.

Hire purchase bills are often sent by a company other than the original seller. If a hire purchase bill is sent to you by an intermediary, do as follows:

  • Add the original vendor’s receipt itemising the products and VAT, and the intermediary’s bill with any fees and interest, to the same attachment.
  • Because the fees and interest are VAT-free, they should be recorded on a separate row, at 0 % VAT, in expenses.
    This will reconcile expenses with the amount actually paid and ensure that all the required bills and receipts are included in bookkeeping.

Pension costs

Self-employed persons’ pension insurance (YEL) contributions are deductible from personal or corporate taxation, depending on whether the person or company paid. If a personal tax deduction is made, spouses can agree on whose taxation the YEL contributions will be deducted from.

Representation row

Activities, such as customer meetings arranged to cultivate customer relationships, are 50 % tax-deductible. Venues, gifts and refreshments (reasonable quantities) required for such events are also deductible.

Representation expenses are eligible for a 50 % tax deduction, but VAT on them is not. When using the service to add representation expenses, record the expense as “representation row” and add all the participants’ names in the description field.

Internet and telephone subscriptions

You can deduct internet and phone subscription costs as business expenses, by estimating how much you use the subscription for business.

For example, if the monthly subscription fee is 30 euros (including VAT) and you estimate that it is 50% used for business purposes, you can deduct 15 euros (including VAT). If you make a partial deduction, record the proportion used for business purposes in the description field and the actual amount used by the business as the total amount. For example, "Company’s phone bill. 50 % used for business" and 30 € - 50 % = 15 € as the amount.

Software and programs

Software used, or intended for, business activities, such as a Windows Office or Photoshop licence.

Trade magazines and newspapers

You can order trade magazines for delivery to your home address, but newspapers must be delivered to the business. Professional literature such as textbooks belong to the same category.

Home office

You can use our service to make a home office deduction from the end of the 2023. We will provide further details closer to the year’s end.

Have you made purchases before establishing your business, which you would like to add as expenses?

You can record many of the purchases presented in these instructions as business expenses even if you purchased them before starting your business. For example, you may have bought a computer or telephone a year ago. You can now reallocate these to your business.

A purchase made in the year under way

  • In such a case, record the purchase as an expense using the total amount spent, and attach the original receipt
  • If the expense dates back to before you started your business but during the current year, record it under today’s date
  • In the additional information section of the expense, state that you are reallocating the purchase to business purposes and add the correct purchase date so that our bookkeeping can check it.

Purchase made in previous years

You can also add a purchase made in previous years as an expense. However, its current value will be lower than its original value. If you purchased the item in previous years, you should depreciate (lower) the value by an estimated amount. The value lowers each year, i.e. for an item purchased in previous years the possible tax deduction is smaller than the price shown on the receipt.

You can estimate based on the current market price — the the price for which an equivalent product or service is now sold new or second-hand.

  • For example, a phone bought new in 2022 cost 500 euros (including VAT)
  • The entrepreneur adds the phone as an expense in 2023. The same model currently costs around 300 euros (including VAT) from retailers.
  • The entrepreneur adds the expense and records 300 euros as the amount including VAT.
  • The expense is recorded for the current date. In the expense’s further details, the entrepreneur should state that the phone is being reallocated to business use, add the correct purchase date, and attach the original receipt

How to add a tax-deductible expense via the service?

Log into your user account and select New → Expense from the navigation view. Add the expense and fill in the fields as follows:

  • Upload an image or PDF file attachment of the expense, and add the expense date
  • Click "Add expense row"
  • Add an image of the expense in the "Description" field and add the amount of the expense (includes VAT)
  • Select the correct expense type, e.g. "Product" or "Representation row"
  • Add the country of purchase and VAT rate
  • Add a new expense row or click "Save expense" when you are ready

We have gathered additional instructions and advice in our article on how to add expenses to my own bookkeeping.

Unfortunately, the rules presented on this page do not cover every possible case, so see the Finnish Tax Administration’s pages to check for tax deductibility.

Finnish Tax Administration > Business operations

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