Ever wondered how daily allowances work for self-employed people in Finland? You’re not alone. We get asked this question a lot, and so we decided to write a new Foreign in Finland article on it! Yes, we’ve put in the research and compiled this short guide on self-employed per diems. What are they, and how can you use them to save money on taxes?
How does daily allowance work for the self-employed?
Most employees know how daily allowances (or per diems) work. Self-employed daily allowances work similarly in Finland. The amounts you can deduct are identical, what changes is how you apply.
The process for claiming daily allowances is much like that of claiming kilometre allowances. You have two options:
- Deduct the actual expenses in your accounts
- Apply for the daily allowance in your annual tax return
If you don’t have an accountant to help out, the simplest method of claiming self-employed travel expenses is to apply for all daily allowances at the end of the financial year, in your annual tax return. This way, you avoid entering individual travel expenses in your books.
Note – What are ‘additional deductions’ (lisävähennys)?
‘Additional deductions’ (lisävähennys) are a special class of tax deductions. Practically speaking, these costs can be claimed in your annual tax return. Daily allowances and kilometre allowances fall under this category.
Keeping track of expenses for bookkeeping
As the financial year comes to a close, you or your accountant will calculate the total amount of daily allowance based on the number and length of your business trips. These are then deducted from your annual tax returns.
To claim business travel expenses, you must keep track of all travel expenses throughout the year. An easy way to do this is in Holvi. You'll be prompted after each purchase to save your receipt in-app, for easy bookkeeping.
Accommodation expense receipts
§15 of the § 73 and § 75.2 of Income Tax Act (tuloverolaki) outlines that ‘the maximum allowance for accommodation payable over and above the per diem is the amount shown on a receipt or other reliable written proof provided by the accommodation establishment.’ In other words, if your accommodation bill exceeds the daily allowance, you can claim extra (within reason). Just make sure to keep your receipt.
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How much is Finland’s daily allowance for self-employed in 2021?
In 2021, the self-employed daily allowance rate is €44 full-time and €20 part-time. To apply for a daily allowance or reduce travel expenses directly in your accounts, the following conditions must be met.
1. The length of your journey (in time)
To claim a daily allowance, your business trip must be at least six hours. Depending on the length of the trip, you can receive either full-time or part-time.
6 – 10 hours
> 10 hours
2. Distance from your home or workplace
Business trip must be at least 15 km from your home or permanent workplace. The trip must be temporary and outside your permanent workplace. For example, weekly work gigs within a 20-kilometre radius of your home do not entitle you to daily allowances – sorry!
§ 13 of § 73 and § 75.2 of the Income Tax Act (tuloverolaki) includes a list of daily allowances for each country when travelling abroad.
How to calculate self-employed daily allowance in Finland
Example 1. Minna’s daily allowance for puppet show trips
Minna runs her own puppet theatre in Tampere. During the year, she makes four longer two-day trips to different locations around Finland. In addition, she makes five shorter trips to nearby communities, each of which lasts longer than 6 hours.
At the end of the financial year, Minna declares her business’ daily allowances in her company's annual tax return like this:
- 4 full-day trips x 2 days each x €44 = €352
- 5 part-day trips x €20 = €100
- A total of €452
Example 2. Jaakko’s daily allowance for music video filming
Jaakko is a part-time videographer. During the spring, he travels to Lapland to film a Finnish rap video in the snow. He leaves home on Monday at 9:00 a.m. and returns home on Wednesday at 2 p.m. A total of 53 hours = 2 days and 5 hours. So he receives two full-time allowances and one part-time allowance.
At the end of the financial year, Jaakko declares his business’ daily allowances in his company's annual tax return like this:
- 2 full-day trips x 1 day each x €44 = €88
- 1 part-day trip x €20 = €20
- A total of €108
Need help calculating daily allowance and travel expenses?
If you have any questions on how to calculate daily allowances and travel expenses for your self-employed business, we recommend reaching out to an accountant. They can guide you in the world of entrepreneurial per diems, and ultimately save you money and hassle come tax time.
If you’re looking for a service specialising in small business accounting, check out Holvi Zen – but note that this service is currently only offered to sole traders in Finnish. English is coming soon!