ennakonpidätystä

Ennakonpidätystä, often translated as withholding tax or advance payment of tax, is a Finnish tax regulation. It requires an employer to deduct a portion of an employee's wages as income tax before paying the net salary. This deducted amount is then forwarded directly to the Finnish Tax Administration (Verohallinto).

The purpose of ennakonpidätystä is to ensure that income tax is paid throughout the year as income is earned, rather than as a single lump sum. This system helps individuals manage their tax obligations and prevents large tax bills at the end of the tax year. The specific percentage of tax to be withheld is determined by the individual taxpayer's tax card, which is issued by the Finnish Tax Administration. This card takes into account various factors such as income level, deductions, and potential tax credits.

For self-employed individuals or those with income from sources other than employment, a similar system of pre-payments might apply, though the terminology and specifics can differ. It is crucial for individuals to ensure their tax card information is up-to-date to reflect their current financial situation accurately, thereby avoiding under- or over-withholding of taxes. The process is designed to simplify tax collection for both the government and the taxpayer.