The current capital gains tax is based on the Income Tax Act , which entered into force in 1993, although capital gains tax has since been reformed in various ways. At that time, however, the Income Tax Act was significantly reformed and taxation was divided into earned income and capital income according to different practices. The tax rate for capital gains tax and corporation tax was then set at 25%. The reform took a model from abroad and was intended to scale the level of taxation so that it was not too much above the international level.
Capital income taxation: how is capital income taxed?
Capital income tax is levied on capital income through a system that is in place in Finland limited progressive. This means that in the case of capital income, those who earn a lot and those who earn little pay almost the same amount of taxes. In 2019, capital income tax will be 30 percent of income less than EUR 30,000 and 34 percent of capital income exceeding EUR 30,000. The tax is paid annually in the same way as income tax. So do use s corp taxes calculator for the proper use.
Capital income tax works in such a way that all income from capital is added together and the costs of acquiring or maintaining income are deducted from the amount, as is income. The amount is then subject to capital gains tax at a flat rate of 30% up to EUR 30,000 and 34% of the excess. The amount of taxes is thus practically the same regardless of how much capital income a person accrues.
Examples of capital gains
It is possible to obtain capital income from various sources. When we talk about the net return on capital, we mean capital income minus the cost of managing capital, which in practice means the value of the time spent working on assets. The amount of capital income varies depending on what its source is. For example, in financial investments, capital income can be high, but capital income from renting an apartment is typically in the range of about 3–4% on an annual basis.
Examples of capital income are:
- Income from renting an apartment
- Mutual fund profits
- Interest income (excluding interest on bank accounts and other income subject to withholding tax)
- The majority of dividend income
Gains on the sale of assets or securities
Capital income means income or profit derived from wealth, that is, capital. There is no need to work to raise capital income, but the income comes from property. Capital income can be, for example, rental or dividend income or capital gains. Capital income received by Finns is subject to capital income tax, which has traditionally been the same among all recipients of capital income. In recent years, however, capital income tax has become limitedly progressive, resulting in two levels of taxation. On average, the tax rate on capital income at the international level in rich countries is in the order of about 30 percent.