The Finnish government has submitted legislative proposals to parliament that would implement significant VAT and tax changes from January 2026, including a reduction in the 14% VAT rate to 13.5% and elimination of the home office deduction for employees.
VAT Rate Reduction
The reduced VAT rate would decrease from 14% to 13.5%, affecting food products, restaurant and catering services, sports and fitness services, cultural and sporting event admissions, books, medicines, passenger transport services, and accommodation services. The government estimates that if the tax reduction is fully passed through to prices, consumer prices for affected goods and services would fall by 0.44%.
Employee Tax Deductions
The home office deduction for employees would be eliminated under the proposals. In 2023, nearly 400,000 individuals claimed this deduction totaling €343 million. Employees would still receive the automatic €750 income acquisition deduction. Additionally, trade union membership fees would no longer be tax-deductible, though unemployment fund contributions would remain deductible. Over 2 million people claimed deductions for trade union and unemployment fund fees totaling €580 million in 2023.
Gift and Inheritance Tax Changes
Tax-free gift thresholds would increase from €4,999 to €7,499 per three-year period between individuals. The inheritance tax exemption would rise from €20,000 to €30,000 per heir, with the threshold determined by the date of death. Interest on late inheritance tax payments would be reduced from the reference rate plus 3.5 percentage points to plus 2 percentage points.
Employment Benefits
Company bicycle benefits would become taxable for agreements made on or after 24 April 2025. Existing agreements concluded by 23 April 2025 would remain tax-exempt until the contract expires, but for no more than five years from benefit commencement.
The Finnish Tax Administration confirmed that if parliament approves the proposals, the changes would take effect from 1 January 2026, representing the government's broader fiscal policy adjustments for the coming year.
