As part of an effort to simplify the country’s tax system, from the 1 January 2019, Finland’s employers will be required to report their employees’ wages directly to the new National Incomes Register. The register is a comprehensive database of wage, pension, and benefit information for every employee in the country - while it will require only the reporting of wages and earnings from 2019, from 2020, reporting obligations will expand to include pensions and benefits.
Once it is implemented, reports to the National Incomes Register must be submitted within 5 days of a payroll event. Wage and salary information (and pensions and benefits data by 2020) will be submitted electronically using the Income Register’s dedicated online portal, or by filling in an online form. The 5 day limit imposed on reports will effectively ensure that the register contains real-time wage and salary data.
Who will use the data?
Initially, the National Incomes Register will be accessed by Finland’s Tax Administration, the Kela Social Insurance Institution, the Unemployment Insurance Fund, and the Finnish Centre for Pensions (along with any other earnings-related pension providers). The plan is to expand access as of 2020, to the ministry of Economic Affairs and Employment, Statistics Finland, the Education Fund, and other organisations, such as life insurance providers and occupational health and safety authorities. Access will also be granted to certain public authorities under certain special circumstances.
The Register, of course, falls under the same data protection legislation in place for all EU member-states, and won’t change the rights of individuals regarding their personal information.
What do employers need to know?
Under Finland’s current regime, employers’ reporting obligations are relatively complex, and must be fulfilled across a variety of formats, according to a variety of schedules. The National Incomes Register changes this, replacing multiple reporting obligations with one single point of contact.
Payroll departments will interface with the Register directly, through a single log-in - further reducing the administrative burden and the time required for payroll process each month.
What do employees need to know?
Essentially, the National Incomes Register will consolidate all relevant earnings data, giving employees a broad, informative overview of their wages and salaries in real time - and the opportunity to verify that employers are complying with their reporting obligations. The Register will align tax rates more accurately with earned income so that retrospective tax refunds and back taxes payments will reduce dramatically.
The simplified reporting process will reduce the need for employees to manage the wider tax and benefit documentation process for issues like:
- Sickness and healthcare allowances
- Maternity, paternity and childcare allowances
- Unemployment benefits
- Student benefits
The Register’s real-time reporting mechanism also means that reporting errors can be spotted and addressed sooner - similarly reducing the need for employees to deal with tax authorities in order to resolve problems.
Businesses with an international footprint should pay close attention to their changing duties under the National Incomes Register. Certain business structures may require foreign businesses with no permanent establishment in Finland to nonetheless report to the Register on a monthly basis. If your business engages a service provider to handle its payroll solution in Finland, now is the time to ensure the appropriate preparations have been made.
For more information on Finland’s tax reporting system and the National Incomes Register, visit activpayroll’s Finland Global Insight Guide.