Business owners get preferential tax benefits

Business owners get preferential tax benefits

A third of such dividends are exempted from taxes, while one quarter is subject to the capital gains tax.

Heikki Niskakangas, a professor emeritus of corporate law at Aalto University, said on Wednesday that the law can create situations where a business owner is subject to a tax rate of 26 percent on income that would be taxed at a rate of more than 50 percent in the case of a wage earner.

The program encourages business owners to take out their income as dividends rather than wages.

The corporate responsibility watchdog takes it one step further: the business owner sets up a holding company that acquires shares in their business to inflate the business's value, based on revenue potential, or 'hopes and predictions', as described by Niskakangas.

This allows business owners to mark up the value so that they are able to withdraw the maximum of 150,000 Euros in dividends.

Three companies are using the arrangement, according to Finnwatch. WTD Media is owned by Natalia Salmela, SP Lifestyle, which is owned by Sara and Mikko Parikka, and Auri Kananen, which is owned by Auri Kananen.

Salmela has defended the arrangement on social media. She asked on Instagram if she'd like a follow-up.

Niskakangas reminds Helsingin Sanomat that unlisted companies in such sectors rarely need to establish a holding company because they have the necessary wealth to take advantage of the facility to the maximum extent.

Despite the existence of a professional, Kananen said the corporate structure was created with the help of a professional to shield against possible legal actions in the US. The tax benefits of the arrangement came as a 'bit of a surprise', she said in an interview with YLE on September 5th.

You won't lose all your money but they'll be safe there, she said to the public broadcasting company.

The preferential tax treatment of dividends has been described as anentrepreneur incentive that consolidates the solvency of businesses and encourages business owners to accumulate wealth in the business before reaping the rewards of their work at a reduced tax rate, said Juha-Pekka Raeste, a political and economic journalist at Helsingin Sanomat.

The tax break affects business owners who are wealthy, successful, or resort to various methods to increase the value of their business. The ministry of finance said in its tax survey for this year that the benefits are enjoyed almost exclusively by entrepreneurs in the highest income decile.

Unlisted companies paid 2.5 billion euros in dividends that were taxed at the reduced rate in 2021.