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The Finnish tax measures in response to COVID-19

COVID-19 Summary of tax impacts Finland

The Finnish Tax Administration and the Finnish Government have released a variety of measures in response to COVID-19. The measures mainly consist of extensions of payment and filing periods as well as labour market related measures. All measures released have been compiled to the summary below. The page is updated regularly.

Juha Sääskilahti

Head of Tax & Legal

KPMG Suomi

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Aiheeseen liittyvää sisältöä

Deferrals and arrangements for payments

Filing deadline for corporate tax returns. The Tax Administration is granting corporate taxpayers a month of extra time for filing tax returns due to the coronavirus situation. The tax return can be filed within five months from the end of the accounting period whereas normally the tax return must be filed within four months. The extension applies to corporate entities without a separate application for the extension providing that the accounting period ended between December 2019 and February 2020.

Payment arrangements. The payment arrangements can be requested with new eased terms starting on 25 March 2020. As of 25 March, taxes that are included in a payment arrangement request are not recovered by enforcement authorities and the taxpayer’s tax debt is not published in the tax debt register or the protest list. In addition, the first instalment of the payment arrangement will fall due in three months after the arrangement has become active i.e. the Tax Administration grants a payment period of three months for taxpayers. 

Proposal regarding payment arrangements. The Ministry of Finance is preparing a legislative amendment for payment arrangements. In accordance with the current information, the interest rate for payments included in the arrangements will be reduced from 7 percent to 4 percent. The reduced rate will be applied retrospectively to taxes due after the beginning of March. The reduction is temporary and applies to taxes that are due no later than the end of August.

The deferral of pension contributions. The due date of pension contributions will be postponed up to three months. The deferral of payment will be applied to private companies as well as public companies.

Temporary VAT refunds. In accordance with the proposal, the Tax Administration would refund the VAT payments paid during the first three months of 2020. However, the measure is a payment arrangement rather than a subsidy as the taxpayer is obliged to repay the taxes within two years. The refund must be applied by the taxpayer. The processing of the refund applications is scheduled to start in June providing that the law will be approved. No refund will be granted if the VAT payments in enforcement proceedings. 

Tax prepayments. The prepayment amount is based on estimated taxable profits. If the actual income or expenses differ from the original estimate, the taxpayer can request changes to its prepayments. Due to the pandemic, the prepayment amount may be reduced without interim accounts or other written statements.

VAT returns. An additional time for the VAT returns will not be granted but the penalties related to late filing of the VAT return may not be collected. The Tax Administration enhance the handling of refunds related to value added taxes (VAT).

Measures related to labour markets

Reduced employer’s pension contribution. In accordance with the government’s decision the pension contributions will be reduced by 2.6 percent. The reduced rate will be applied to contributions paid from 1 May 2020 to 31 December 2020. The reduction will not require an application made by the taxpayer as it is granted automatically to all pension contributions. However, the measure will only apply to private companies and the reduction will not be made to employee’s part of the contribution.

Unemployment benefits for entrepreneurs. The Ministry of Employment and the Economy has decided to expand unemployment benefits temporarily for self-employed persons. Normally, full-time entrepreneurs are not eligible for unemployment benefits. In addition, the waiting period for unemployment benefits will be removed as a result the employer is entitled to the benefits since the first day of unemployment.

Accelerated cooperation negotiations for labour markets. The government has confirmed that the minimum time for cooperation negotiations will be reduced from 14 days to 5 days. Similarly, the notification of the negotiation process must be given 5 days before the negotiations at the latest. All the provisions regarding layoffs will be temporarily applied to fixed-terms contracts as well. 

Other tax-related measures

VAT exemption. The medical supplies imported from third countries are exempt from customs duties and VAT. The exemption is valid from 30 January 2020 to 31 July 2020. The exemption may be applied to goods imported by or on behalf of public operators, such as public bodies, public authorities and other bodies governed by public law. The application requires that the either of following conditions is met:

The goods are intended for distribution free of charge to persons who are or are at risk of becoming infected or who are involved in combating the epidemic.

The goods are made available free of charge to persons who are or are at risk of becoming infected with COVID-19 or who are involved in combating the epidemic.

Tax treatment of subsidies paid to companies. Municipalities and other public-sector bodies help companies and entrepreneurs in the coronavirus situation with financial aid and subsidies. Financial aid or subsidy received to cover the expenses of business operations is taxable income for the recipient, i.e. the company or entrepreneur. The amount that has been paid to the recipient as part of their business operations and recorded in their accounting must be reported on the recipient’s tax return for 2020.

The payor must also report the aid or subsidy to the Tax Administration on the annual information return on public support for business operations. Annual information returns for 2020 are filed in 31 January 2021.

These payments are not reported to the Incomes Register and no tax is withheld on them. Financial aid or subsidies are not included in the basis for VAT if they are not directly connected to the price of the product or service.

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