Global Daily Tax News, Finnish Parliament Approves 2026 Budget Legislation, (Dec 24, 2025)

Finland's parliament signed off on the 2026 Budget on December 19, 2025.

The Government earlier announced tax measures for inclusion in the Budget. Among numerous other things, the Budget includes personal income tax cuts and a reduction to the corporate tax rate to 18 percent from 2027. In addition, tax expenditures for businesses will be cut by a total of EUR20m by 2027, with a decision on specific measures to be taken at a later date.

The Government earlier confirmed tax cuts for low- and middle-income earners, worth EUR520m in 2026 and EUR125m in 2027, as well as an increase worth EUR100m to the earned income deduction. Further, the top marginal tax rate will be lowered from approximately 59 percent to 52 percent.

Income tax brackets will be revised upwards by 3.8 percent to counteract inflation, except for the top personal income tax band.

The Government has decided to amend the earlier announced plans to raise tax on pensions received by high-income taxpayers. Tax will be raised by a lesser degree, by reducing the highest-earning pensioner's earned income tax relief. This change will apply to pension income exceeding EUR65,000.

In the area of deductions, the following changes were proposed:

• The child allowance will be increased to EUR105 per child, up from EUR50;

• The tax deduction for membership fees for labor market organizations will be eliminated;

• The home office deduction will be withdrawn for employees; and

• The tax exemption for employee bicycles will be withdrawn.

The tax subsidy for zero-emission employer-subsidized cars will be continued in line with the earlier decision for 2026-2029, and the carbon dioxide component of the tax on transport fuels will be lowered.

The Government also confirmed earlier proposals to lower tax for key personnel coming to work in Finland, by reducing the withholding tax from 32 percent to 25 percent, and an extension to the tax incentives eligibility period to 24 months for returning Finnish citizens.

Further, the Budget increases environmental and health-related taxes, including excise duties on alcohol and tobacco products and the waste tax.

The VAT rate on food, accommodation, medicines, cultural services, and transportation will be lowered from 14 percent to 13.5 percent, and VAT will be raised on public service broadcasting services.

The lower limits of inheritance and gift tax will be raised and the late-payment interest rate on inheritance tax will be lowered.

Finally, the electricity tax subsidy for mining will be abolished from January 1, 2026, the forest management tax credit will be increased, and the strategic stockpile fee will be raised from April 1, 2026.

The changes will generally be effective from January 1, 2026.