Business owners get preferential tax exemption

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Business owners get preferential tax exemption

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

In a statement to Helsingin Sanomat last Wednesday, Heikki Niskakangas, a professor of corporate law at Aalto University, said the option could 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 move encourages business owners to take out their earnings as dividends rather than wages.

The agreement adopted by the corporation responsible watchdog takes it one step further, however: the business owner establishes a holding company to acquire shares in their business to inflate the value of the business based on revenue potential or 'hopes and predictions', as described by Niskakangas.

The ability to mark up the value of the business allows business owners to withdraw the maximum of 150,000 euros in dividends.

According to Finnwatch, the arrangement was used by three companies. Auri Kananen, the CEO of WTD Media, owns WTD Media, SP Lifestyle, which is owned by Sara and Mikko Parikka, and Aurika Cleaning, which is owned by Auri Kananen.

Salmela has defended the arrangement on social media. She asked on Instagram, if there's a question to be asked.

Helsingin Sanomat reminderd Niskakangas 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.

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

She said she'll be safe there, you won't lose all your money but they'll be safe there.

Experts in the industry have said the preferential tax treatment of dividends is anentrepreneur's incentive that strengthens the resolve of businesses and encourages business owners toaccumulate wealth in the business before reaping the rewards of their work at a reduced tax rate, J.P. Raeste, a political and economic journalist at Helsingin Sanomat, wrote in an analysis on Monday.

The tax exemption affects most entrepreneurs who are wealthy, successful, or who use 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 out 2.5 billion euro in dividends taxed at a reduced rate in 2021.