Tax deductions mean all expenses which an entrepreneur can deduct from their taxable income. Such a deduction reduces the amount based on which they pay tax. In other words, tax deductions reduce the final amount of tax payable. Private traders must report their own deductible expenses in their corporate tax returns.
Private traders can report tax deductions on the following expenses related to their business activities:
- Vehicle expenses: keep a log of the kilometres driven for business purposes
- Expenses related to occasional business trips: travel and accommodation expenses + additional deduction
- Deduction for separate workspace rental or home office
- Marketing and promotional expenses (promotional expenses are 50 per cent deductible)
- Protective clothing for work
- Online connections, software, internet and telephone bills
- Bookkeeping expenses
- Insurance, including YEL pension insurance
- Separate purchases made for permanent use, that is fixed assets such as buildings, machinery and equipment. Deductions for fixed assets can be claimed either at once or as depreciation spread across several years. Full deductions can be claimed at once on the purchase price of movables such as machinery and equipment, if the asset’s useful life is a maximum of three years (in such a case, there is no maximum limit to the price that can be deducted) or for a ‘low-value asset’ (a single item that depreciates and is bought for a maximum of 1,200 euros). The maximum tax-deductible cost of ‘low-value assets’ is 3,600 euros per accounting period.
Ask for help if you need it. While you should understand taxation matters, you don’t have to face them alone. A good accountant can help an entrepreneur to manage taxation properly.
Olavi Tuomi, Leading Tax Specialist at the Finnish Tax Administration, was interviewed for the article.