ennakkoveroista

Ennakkovero, commonly referred to as prepayment tax, is a Finnish tax mechanism used to collect tax in advance for income that is not fully covered by tax withholding during the year. It is mainly applied to individuals with significant non-wage income or those who are self-employed, own rental property, or have other sources of income that are not subject to automatic withholding at the source. The system is administered by the Finnish Tax Administration (Verohallinto).

The process starts with an ennakkoveropäätös, a decision that determines whether a person must pay ennakkovero and, if so, the amount or rate. Payments are typically arranged as monthly or quarterly installments and are credited toward the final tax liability for the year. If most of the income is already taxed at source (for example, wages), ennakkovero may be minimal or unnecessary.

At year’s end, the actual tax is calculated in the tax assessment. If the prepaid amount exceeds the final tax, the excess is refunded; if it is insufficient, the taxpayer must pay the difference. Taxpayers can request adjustments to their ennakkovero decision during the year if expected income or deductions change, to avoid large year-end corrections.

Nonpayment or late payment of ennakkovero can incur interest and penalties. The system aims to spread the tax burden more evenly throughout the year while ensuring forecasted tax liability is covered in advance for those with substantial non-withheld income.