(Oct. 23, 2015) The Finnish Tax Administration (Verohallinto) issued an opinion on October 15, 2015, on the provision by individual drivers of personal transportation services to customers by means of a mobile phone application, such as the services offered by Uber. The Tax Administration stressed that it is not authorized to determine whether such services conform to Finnish law, which requires taxi service providers to obtain a specific authorization for their business, and that its opinion “is based on the assumption that such services are considered non-professional personal transportation services … .” (Laura Ambagtsheer-Pakarinen, Tax Administration Opines on Tax Treatment of Uber Drivers, INTERNATIONAL BUREAU OF FISCAL DOCUMENTATION: NEWS (Oct. 21, 2015) (by subscription).)
According to the opinion:
- when provided by an individual, the personal transportation service is taxed as earned income under the country’s Income Tax Law (Tuloverolaki, 30.12.1992/1535 (as amended), FINLEX), and because the service cannot be considered business income, given its “sporadic nature and small scale,” the taxpayer driver who provides the service “may neither deduct the expenses from income from other income sources nor set off the losses against profits of future years” (Ambagtsheer-Pakarinen, supra);
- the driver may deduct the costs incurred in acquiring and maintaining income, but his or her living costs are non-deductible. The driver may only deduct those costs related to providing the service, which in practice are part of the vehicle’s annual maintenance cost given that the driver uses his own vehicle, a personal asset, to provide the service. The costs, as determined on the basis of the annual guidance issued by the National Tax Board, are €0.25 (about US$0.28)/km for drivers who use their own car and €0.13/km for drivers who use a company car (id.);
- in general, passengers are subject to withholding tax on the remuneration paid the driver for the service, in conformity with the Precollection Act (Ennakkoperintälaki, 20.12.1996/1118 (as amended), FINLEX), unless the remuneration per year does not exceed €1,500 (about US$1,703) and is not related to the passenger’s business or professional activities (Ambagtsheer-Pakarinen, supra);
- the driver typically need not be registered in the Precollection Register (ennakkoperintärekisteri) because of the small-scale nature of the service, but profit-generating activity is subject to tax assessment in advance and taxes are to be paid in installments (id.);
- employers may reimburse employee travel expenses based on business trips conducted using the service, as long as the employee submits a claim for the travel expenses “including the receipts and details as stipulated in the relevant legislation” (id.); and
- a reduced value-added tax rate of 10% applies to personal transportation, and if a driver supplies services with a value of €8,500 (about US$9,650) or more (€10,000 from Jan. 1, 2016) per fiscal year, he must register for purposes of VAT (id.).
Uber began operating in Helsinki on November 19, 2014, offering two products, Uber Black, which “uses licensed drivers in fancier cars” and costs slightly more than traditional taxi rides, and Uber Pop, a matching service for persons offering rides and those needing them, which was initially to run for a six-month trial period. (Uber Starts in Helsinki, Denies It’s a Taxi Service, YLE UUTISET (Nov. 20, 2014).)