Dividends exempt from taxes

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Dividends exempt from taxes

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

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

This encourages business owners to take out their earnest earnings as dividends rather than their wages.

The company's arrangement takes it one step further, however: the business owner establishes a holding company that buys shares in their business to inflate the company's value based on revenue potential - or 'hopes and predictions', as described by Niskakangas.

The transaction allows business owners to mark up the value so that they can withdraw the maximum of 150,000 euro in dividends.

The arrangement has been used by three companies, according to Finnwatch. Natalia Salmela, the controlling partner of WTD Media, has a controlling interest in 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 how to get a new hairstyle for me.

Helsingin Sanomat reminds Niskakangas that unlisted companies in such industries rarely need to set up a holding company because they have the necessary wealth to take advantage of the arrangement to the maximum extent.

Besides, 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 surprise, she said in an interview with YLE on September 5th.

resigned, you won't lose all your money but they'll be safe there, she said in a statement to the public broadcasting company.

Industry lobbyists and policy makers have described the preferential tax treatment of dividends as an entrepreneurial incentive that strengthens 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 entrepreneurs who are extremely wealthy, successful, or who choose various ways to boost the value of their business. In its tax survey for this year, the ministry of finance said that the benefits are enjoyed almost exclusively by entrepreneurs in the highest income decile.

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