How does the service handle taxation?

Written by: OP Light Entrepreneur Team

Tax prepayments are made for business income. For bills paid via the service, a tax prepayment based on your tax rate is automatically set aside and paid to the Finnish Tax Administration.

What should you bear in mind about taxation?

When starting out as an OP Light Entrepreneur, do the following:

  • Calculate your tax rate based on your tax card
  • Add your earned income, OP Light Entrepreneur income, and estimate of expected income, to your tax card
  • Add your tax rate via our service (see the instructions below)
  • Bill your customers and we’ll take care of the related tax prepayments

Based on the tax rate, we’ll deduct money for the payment of tax prepayments from each bill paid by your customers. OP Light Entrepreneur automatically withholds tax and pays it to the Finnish Tax Administration.

Note! Tax prepayments are not made via the service if you pay prepayment bills from the Tax Administration e.g. for an active Business ID you already had when you registered with our service. In such cases, mark the tax rate as 0% in our service.

OP Light Entrepreneur’s tax rate

As an OP Light Entrepreneur, you only need to estimate your annual earned income and use it to calculate a new tax rate. Your earned income includes all billing via our service (VAT 0 %) and other income from paid employment.

Example of tax rate

Example: Mike does photography gigs in his spare time and estimates that he will bill 1 500 euros for this during the year. His main job involves working for another company, for which he earns 20 000 euros a year.

When ordering a tax card, Mike adds together the amount he expects to bill customers for and his salary (1 500 + 20 000 = 21 500 euros) and marks this as earned income in the tax card. This gives the correct tax rate.

Also consider the possible VAT relief in the tax percentage

Take into account the VAT relief received by your business, if you have been operating as an entrepreneur in the previous year and received VAT relief in February of the current year. The VAT relief you receive is taxable income that should be considered in your tax percentage.

If, for example, Mike has received 300 euros in VAT relief, he should include not only his billing and salary but also the relief in his calculations to ensure the tax collection is as accurate as possible.

You can calculate your new tax rate at MyTax

The final tax rate is calculated by adding together pay from the main occupation and the amounts billed for as a light entrepreneur. The total amount is added to the tax card in "Pay and fringe benefits in 2022". So, do not simply guess your business income.

Remember to keep track of your income ceiling throughout the year. If your combined earnings will exceed the income ceiling, you must calculate a new tax rate for yourself.

How do I change my tax rate via the service?

After registering for the services, add your tax rate to your user account as follows:

  • Click on the “My details” section in the upper corner of your user account
  • In the drop-down menu that opens, select “Account number and tax rate”
  • Add the tax rate to the correct field. You do not have to add the additional withholding rate.
  • Type in your service password and click “Save”

You can then send your first bill. You do not have to send your tax card to us.

OP Light Entrepreneur’s value added tax

As an OP Light Entrepreneur, you will be a private trader liable to pay VAT. Use the general VAT rate of 24%, or the lower rate applicable to your line of business, when billing customers. As an entrepreneur, you are entitled to VAT relief, if your total sales, excluding VAT, are worth under 30 000 euros in the same calendar year.

We have posted an article on VAT. Click here for more information about VAT.

Read more