ennakonpidätyksiä

Ennakonpidätyksiä refers to the practice of withholding a portion of payments made to individuals or companies and remitting it directly to the relevant tax authority. This mechanism is primarily used in Finland to ensure timely collection of income taxes. When an employer pays wages or salaries, they are obligated to deduct a predetermined amount as income tax before disbursing the net pay to the employee. Similarly, when certain payments are made to individuals or companies for services rendered, a percentage may be withheld and paid to the tax authorities.

The purpose of ennakonpidätyksiä is to spread the tax burden throughout the year, preventing a large lump sum payment of income tax at a later date, such as after the annual tax assessment. The specific percentage of ennakonpidätyksiä is usually determined by the tax card issued by the Finnish Tax Administration (Verohallinto). This tax card takes into account the individual's estimated annual income and any applicable deductions or credits. If the withheld amount proves to be too high or too low at the end of the tax year, adjustments are made during the final tax assessment, resulting in either a tax refund or an additional tax liability. This system applies to various types of income, including wages, pensions, and payments for freelance work.