Finland

One of the most important changes in Finland's tax reform, effective January 1, 1993, was the division of the income for a private individual into earned income and capital income. The former is taxed according to a progressive scale with highest percentages reaching approximately 70%, while on the latter a fixed rate of 25% applies. Capital income is income derived from assets, such as capital gains, interest, and dividends under certain circumstances. All other income is taxed as earned income, including fringe benefits and other non-cash benefits received from employment. Under the new Value-Added Tax Act, intended to comply with the EU VAT system, most of the services that were tax-exempt are now taxed. The main VAT percentages vary between 22% and 12%. Finland is negotiating new tax treaties with several countries. The new treaties will in principle follow the OECD model treaty.