Finland will reduce income taxes for workers by EUR 230 million and defer taxation on employee stock options until share transfers, while indexing earned income tax bases by 3.2% across all income levels to take effect on 1 January 2027.

RF Report

Finland’s Ministry of Finance has initiated a public consultation on sweeping amendments to income taxation and the Income Tax Act, designed to strengthen purchasing power and encourage employment. The package targets a EUR 230 million reduction in levies for lower and middle-income workers and introduces flexibility for employee share schemes.

Adjustments across income brackets and employment benefits

The government intends to index earned income tax bases by 3.2% across all income levels, adjusting both tax scale brackets and both the earned income deduction and basic deduction accordingly.

For self-employed individuals, the deduction would climb to 5.5%, up from the current rate, while the collective benefit tax rate would fall by 0.5% to 26%.  Separately, financial support and benefits provided under the Child Welfare Act would gain tax-exempt status, and receipts from beverage packaging deposits would be classified as non-taxable income.

Taxable earned income (EUR) Tax at lower limit (EUR) Tax rate for portion exceeding lower limit (%)
Up to 22,700 0 12.64%
22,700 – 33,600 2,869.28 19.00%
33,600 – 41,400 4,940.28 30.25%
41,400 – 53,800 7,299.78 33.25%
Over 53,800 11,422.78 37.50%

Deferring tax on employee share options

Under the revised treatment of employee stock options in unlisted limited companies, workers would defer income tax liability until shares acquired through such options are transferred. Critically, no interest accrues on the deferred tax during the waiting period. The proposals also remove existing constraints on employee share issues, allowing workers to receive shares in a parent company rather than only in their direct employer.

Targeted deductions and tax relief

  • Work income deduction: To encourage employment, the government proposes to increase the maximum work income deduction to EUR 3,660 (up from EUR 3,430) and raise the income threshold where the deduction begins to phase out to EUR 38,000.
  • Basic deduction: The maximum basic deduction would be increased from EUR 4,265 to EUR 4,400 to account for inflation and support the lowest income levels.
  • Entrepreneurial deduction: The deduction for self-employed individuals and partners in certain business entities would rise from 5.0% to 5.5%.
  • Collective benefit tax: The tax rate for collective benefits would be lowered by 0.5 percentage points to 26%.

Implementation and next steps

The government plans for these laws to take effect on 1 January 2027, and they will be applied for the first time to the 2027 tax assessment.

The public consultation on this draft remains open for comments until 12 August 2026.