Ennakonpidätykseen

Ennakonpidätykseen, often translated as withholding tax or advance payment tax, is a mechanism used in Finland for collecting income tax. It is a system where tax is deducted directly from an income earner's salary or other payments by the payer before the money is handed over to the recipient. This ensures that a portion of the tax liability is paid throughout the year, rather than in a single lump sum.

The payer, such as an employer or a financial institution, is responsible for calculating and withholding the correct amount of tax based on the income earner's tax card. The tax card, issued by the Finnish Tax Administration (Verohallinto), specifies the tax percentage to be withheld. If no tax card is presented, a higher default withholding rate is applied.

Ennakonpidätykseen applies to various forms of income, including wages, salaries, pensions, and some business income. The withheld taxes are then paid by the payer to the Finnish Tax Administration. At the end of the tax year, the individual's actual tax liability is determined through a tax assessment. If too much tax has been withheld, the excess amount is refunded. Conversely, if not enough has been withheld, the individual will have to pay the remaining tax. This system helps to spread the tax burden evenly and avoid large tax debts.