Taxation of 2016

The taxation of 2016 is going to see some changes, which the ministry of finance has justified by the deficit of government economy and the adjusting need of public sector. For the year 2016 there won’t be any major tax cuts, as these are intended to take place in 2017. The tax cuts for 2016 are mostly minor and most of the changes are tax increases in some areas. The main goal of these procedures is the balancing of government economy.

Tax cuts for low and medium incomes

According to the government program, there will be tax cuts for individuals with low and medium incomes. This will be accomplished by increasing the amount of standard tax credit for work income by 450 million euros. Additionally there will be an income level index check-up for personal income on every income level.

Tax increases

Taxation for capital income will be increased from 33% to 34%, from capital income that exceeds 30 000 euros. The capital income tax for 30 000 euros and lower will remain at 30%.

One of the more notable increases is the lowering of the minimum income level for “solidarity” taxation. In future the minimum value would be 72 300 euros, when it previously was at 90 000 euros. This change means that greater quantity on high income individuals would need to pay “solidarity” tax. This change would not be permanent and would remain in effect for years 2016 and 2017. The “solidarity” taxes higher taxation rate is paid from the sum that exceeds the minimum value of 72 300 euros.

Tax deductions

For paid mortgage interests, the deductible amount would be 55% of the expenses in 2016. This is 10% less in comparison to the 65% of 2015. Additionally the deductible amount would start to annually decrease by 10% up till year 2019. This means that at 2019 the deductible amount would only be 25%.

Deductions for capital losses is expanded on 2016, that losses occurred in year 2016 and later are deductible from all capital income. The deduction in question would only be applicable for individuals and estates. The previous ruling was that the deduction could only be made from the profits of current year and on the next five following years.

For individual persons there will be a deduction for donations that are given to universities and colleges or for the purpose of progressing science or art. The minimum amount for deduction is 850 euros, and maximum is 500 000 euros. Donations would be deductible from personal income.

Public broadcasting tax (YLE-tax)

In year 2016 the lowest income levels are exempted from public broadcasting tax. This is accomplished by increasing the minimum amount to be charged for YLE-tax, from 51 euros to 70 euros. In year 2016 the exemption would include everyone whose income is lower than 10 300 euros. Previously this was at 7 500 euros.

Real estate tax

For other than permanent dwellings the maximum tax percentage can be 1.00 % higher from the maximum permanent dwellings tax percentage value, set by the municipality. Currently the maximum can only be 0.6% higher.

The maximum power plant real estate tax is raised from 2.85 to 3.35 %. For unused property, the maximum tax rate is raised to 4.0% from the current 3.0%.

The general real estate tax range would be changed from the current 0,8-1,55% to 0,84-1,70%. The permanent dwelling taxation range will also change from the current 0,37-0,80% to 0,38-0,85%.

All the changes mentioned above would be applied first time in the 2016 property taxation, in a way that the changes of general property and permanent dwelling real estate tax are applied first time in the taxation of 2017.

Other changes

The Car tax will face reductions in years of 2016-2019 by a total of 200 million euros. The reductions are applied in stages to prevent any major market disruptions and changes in consumer behavior. But be noted that this reduction is going to be compensated with the increase of vehicle tax, with approximate of 100 million euros. These changes aim to move the taxation focus from acquiring the vehicle to the actual usage of it.

In future, the vehicle tax will be lighter on cars that have lower emission rates, and vehicles with high emission rates have a higher tax rate. For more information you can check

Tobacco tax will also face increases in years of 2016-2019. The approximate effect on the price of a tobacco cartridge would be around 0,5€/year. Other tax increase is for heating fuels. The increase would be an approximate 75 million euros and would increase the annual heating cost for oil heated and district heated houses by 75€/year and 20€/year respectively.

For more information in Finnish

Elinkeinoelämän keskusliitto


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