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Salaries and taxes 5min

In employment-relationship

Taxes from normal salaries are paid as withholding taxes made by the employer. Employees need to have a tax card and therefore a tax percentage depending on expected income. If the tax percentage is too low, it needs to be corrected during the year, otherwise a residual tax or “scraps” need to be paid. If the percentage is too high, the person will receive tax refunds. Salaries are paid depending on the agreement between the employer and employee, but usually once or twice a month on a specific day. Salary is often determined by some sort of salary scale, at least in large companies. Previous experience, education, and the work tasks are determinants of pay. On the other hand, for example in sales work, the actual sales and thus bonuses may be the most influential factor. Employers will pay all of the mandatory side costs related to salaries.

Light entrepreneurs

As a light entrepreneur the situation is quite the same as in an employment- relationship. The largest difference between the two ways of working is just that the payer of pension payments changes. Light entrepreneurs need to pay it by themselves, when the employer pays it in employment-relationship. Therefore the invoicing price should be higher than the salary paid from the same job to cover the pension payments. Invoicing services take care of the withholding taxes and other side costs. It is also possible to get YEL- insurance and connect YEL- payments in FREE! Kevytyrittäjä account. After the process, light entrepreneurs do not need to worry about other than providing the correct tax card in the service.

It is important to remember that light entrepreneurs work as contractors instead of being in an employment relationship with any company.

Entrepreneurs

As an entrepreneur the person is responsible for taxes. The taxation depends on company form and more information can be found in our Entrepreneur material! Generally entrepreneurs need to handle at least pre taxes and VAT (value added tax). In any case, in order to get all the bookkeeping and taxes right, the easiest option is again to use accounting firms. Also, the amount of paid salary or personal withdrawals are their own decisions as an entrepreneur.

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