Taxation of benefits
Some of the benefits Kela provides are taxed while others are exempt from tax.
The benefits are taxed according to the tax laws. There are specific tax cards for benefits (vero.fi).
Even if the benefits are lower than wages, the tax percentage may not necessarily be lower.
Taxable benefits
The tax rate is usually the same as the rate you pay on your salary. However, if you pay less than 25% tax on your salary, the child home care allowance is taxed at 25%. If you think that your tax percentage is too high, you can request a new tax card.
If your tax percentage is not known to Kela, your special care allowance is taxed at 60%.
Daily allowances for parents are usually taxed at the same rate as your salary. However, if the withholding rate on your salary is less than 25%, the daily allowances for parents are taxed at 25%. Minimum-rate daily allowances are taxed at 20%. If you think that the percentage of tax you pay on daily allowances for parents is too high, you can request a new tax card.
The tax withholding rate on the partial parental allowance and partial special pregnancy allowance is the same as the percentage of tax you pay on your salary. The tax percentage is not raised to 25% even if you pay less than 25% tax on your salary.
If your tax percentage is not known to Kela, your daily allowances are taxed according to a separate table (vero.fi, in Finnish).
Guarantee pensions are taxed according to the tax card for the guarantee pension. Once you have been awarded a guarantee pension, go to MyTax and request a tax card for the guarantee pension (vero.fi).
In the absence of a tax card, no tax is withheld from the guarantee pension. If you are paid a guarantee pension retroactively for a period preceding the current year, it is taxed at 40%.
National pensions are taxed according to a tax card issued for pension income. Request a tax card for pension income in MyTax (vero.fi).
In the absence of a tax card, taxes are withheld from old-age pensions or disability pensions under the national pension scheme at certain predetermined percentages. For national pensions paid out at the full rate, the withholding percentage is 0%, and for national pensions paid out at a reduced rate, 40%. If you are paid a pension retroactively for a period preceding the current year, the withholding rate is 40%.
If you live abroad and receive a national pension and, according to the Finnish Tax Administration, have limited tax liability, the withholding tax rate on your national pension is 0%.
Housing allowance for pensioners, care allowance, front-veterans’ supplement and disability supplement for veterans are free from tax.
When you receive a pension decision from Finland or from some other country, you should ask the Finnish Tax Administration to send your pension tax card to the payer of your pension. In this way, your taxation will be up-to-date. The information in your future tax cards will be communicated to Kela and the authorised pension providers automatically. This means that if you need a new tax card for example because of other income you may have, you do not have to provide that tax card to Kela.
If you do not have a separate tax card for benefits, your partial care allowance or flexible care allowance will be taxed at the additional rate shown in your tax card for wages. If your tax percentage is not known to Kela, the allowance will be taxed at 60%.
The private day care allowance is taxable income for the provider of early childhood education. The family who is granted the allowance does not have to pay taxes on it.
Kela pays the private day care allowance directly to the provider of early childhood education and withholds taxes on the allowance before payment (except for day care providers who have been entered in the tax withholding register).
Learn more about how the private day care allowance is taxed (Partner Organisations section, in Finnish).
Rehabilitation allowance is usually taxed at the same rate as your salary. However, if you pay less than 25% tax on your salary, the rehabilitation allowance will be taxed at 25%. If you receive rehabilitation allowance at the minimum rate, it is also taxed at 25%. If you think that your tax percentage is too high, you can request a new tax card.
If your tax percentage is not known to Kela, your rehabilitation allowance is taxed according to a separate table (vero.fi, in Finnish).
The partial rehabilitation allowance is taxed in the same way as the regular rehabilitation allowance.
Rehabilitation allowances paid to pensioners are always taxed at 40%.
The sickness allowance is usually taxed at the same rate as your salary. However, if you pay less than 25% tax on your salary, your sickness allowance will be taxed at 25%. Minimum-rate sickness allowances are taxed at 20%. If you think that the percentage of tax you pay on the sickness allowance is too high, you can request a new tax card.
If your tax percentage is not known to Kela, your sickness allowance is taxed according to a separate table (vero.fi, in Finnish).
The partial sickness allowance is usually taxed at the same percentage as your salary. The tax percentage is not raised to 25% even if you pay less than 25% tax on your salary.
The percentage rate at which the special care allowance is taxed is usually the same as the rate at which you pay tax on your salary. However, if you pay less than 25% tax on your salary, the special care allowance is taxed at 25%. Minimum-rate special care allowances are taxed at 20 percent. If you think that your tax percentage is too high, you can request a new tax card.
If your tax percentage is not known to Kela, your special care allowance is taxed according to a separate table (vero.fi, in Finnish).
Survivors’ pensions are taxed according to a tax card issued for pension income. Request a tax card for pension income in MyTax (vero.fi).
Spouses’ pensions consist of an initial pension and a continuing pension. In the absence of a tax card, spouses’ pensions are taxed as follows:
- spouses’ initial pensions, 30%
- spouses’ continuing pensions awarded at the full rate, 0%
- spouses’ continuing pensions awarded at a reduced rate, 30%
- spouses’ pension paid out as a lump sum, 40%.
Without a tax card, reduced-rate orphans’ pensions are taxed at 20% and full-rate orphans’ pensions at 0%.
If you are paid spouses’ or orphans’ pension retroactively for a period preceding the current year, your pension is taxed at 40%.
If you receive a survivors’ pension and live abroad, and have limited tax liability according to the Finnish Tax Administration, your pension is taxed at 0%.
Once you have been granted a pension, visit MyTax to apply for a tax card for pension income (vero.fi).
The study grant, the provider supplement to the study grant, and the supplementary allowance for the purchase of study materials are all taxable income.
If you are paid a study grant and you have other taxable income, visit MyTax to request a tax card for wages (vero.fi). The study grant, the provider supplement and the supplementary allowance are relevant to the rate of tax you pay on your salary.
If you have no other income, you do not pay tax on the study grant. This means that the entire study grant amount will be paid into your account. However, if you would still like to pay tax on your study grant, you can tell Kela your preferred tax percentage.
If you pay back study grant, Kela will report your repayments to the incomes register. The Finnish Tax Administration receives information about your repayments from the incomes register and factors it in your taxation. You do not have to take any other action.
General social security benefit (yleistuki) is an unemployment benefit paid by Kela. The benefit is taxable income. This means that taxes are deducted from it. If you do not request a separate tax card for your general social security benefit, it will be taxed at 20%. The same tax rate also applies to commuting and relocation allowance (liikkuvuusavustus). If you want to change the tax rate, request a tax card for benefits from the Tax Administration.
You may need a separate tax card for general social security benefit or commuting and relocation allowance if
- you get occasional income or you do paid part-time work while unemployed
- you get other benefits in addition to your general social security benefit or commuting and relocation allowance.
Transition security allowance (muutosturvaraha) is taxed at the additional tax rate shown in your tax card for wages and salaries. If you have not reported your tax rate to Kela and you do not have a separate tax card for benefits, your transition security allowance is taxed at 60%.
Benefits that are free from tax
- adoption grant
- assistance with student loan interest
- care allowance for pensioners
- child benefit
- child increase for pensioners
- child maintenance allowance
- conscript’s allowance
- disability allowances
- expenses compensations during participation in employment promoting services
- front-veteran’s supplement and additional front-veteran’s supplement
- general housing allowance
- housing allowance for pensioners
- housing supplement for students
- maintenance allowance
- maternity grant
- reimbursements for medical care expenses
- school transport subsidy
- social assistance
- student loan compensation.
Tax card
It is usually not necessary to send the tax card to Kela. In most cases, Kela gets the information on so-called basic tax cards directly from the Finnish Tax Administration.
If you have limited tax liability, submit a tax-at-source card or a non-resident’s tax card (vero.fi) to Kela. Finnish citizens who have lived abroad for 3 years become nonresident for tax purposes and have a limited liability to pay tax in Finland. Foreign citizens are considered to have limited tax liability as soon as they leave Finland. Contact the Finnish Tax Administration if you do not know what kind of tax card you should use.
When to get a new tax card
If you think that you may be paying too little or too much tax on your benefits, use this calculator (vero.fi) to check your tax percentage.
You can also visit MyTax (vero.fi) to request a new tax card for benefits.
You can ask the Finnish Tax Administration to send the tax card directly to Kela.
You can also call us and ask us to apply a higher tax percentage than that set by the Finnish Tax Administration. You do not need a new tax card for that. Call Kela’s customer service number to make the request.
Can you get a refund if you pay too much tax?
Kela can pay back excess taxes to customers who submit a new tax card that is backdated to take effect retroactively. The tax percentage on the new tax card must be lower than that which was used before. Customers must also contact Kela to request that the tax withholding is corrected.
For pensions, Kela will make the appropriate correction and refund excess tax automatically once a new tax card valid for a retroactive period of time arrives at Kela. In that case, customers do not have to contact Kela to request a correction.
Excess tax can only be refunded during the year in which it was paid. It is not possible to refund the customer for excess tax if the refund would not go into payment until after the New Year.