ennakkoperintä

Ennakkoperintä is a Finnish term describing the system of advance or prepayment collection of taxes. It refers to the practice of collecting tax payable in the current year before the final tax determination, typically through withholding on wages, pensions, or other regular payments, and by periodic prepayments from individuals or businesses with expected tax liability. The Finnish Tax Administration (Verohallinto) administers ennakkoperintä.

In practice, employees have income tax withheld by their employer according to a tax card, which may be based on estimated annual income. Other earners and self-employed persons may make periodic prepayments, such as monthly or quarterly payments. These prepayments are credited toward the final tax determined after the annual assessment. If the prepayment estimate proves inaccurate, the amount can be adjusted during the year; underpayment may lead to additional payments or a balancing tax after assessment, while overpayment results in a refund.

Purpose and effects: ennakkoperintä aims to smooth tax receipts for the state, reduce large year-end tax payments, and improve administration of the tax system. It also affects cash flow for individuals and businesses, since part of the tax obligation is collected before the final calculation.

Legal framework and variations: the rules governing ennakkoperintä are set in Finnish tax legislation and related regulations. The system interacts with tax cards, end-of-year tax settlement, and various allowances. Certain incomes or groups may be exempt from or subject to special arrangements under ennakkoperintä.

See also: tax withholding, withholding tax, tax card.