What will change in financial management in 2026? Government tax reforms from an entrepreneur's perspective

The year 2026 will see a number of major tax changes that will directly affect the taxation and financial management of both individuals and businesses. Many of the reforms are aimed at broadening the tax base - i.e. tax cuts will be financed by reducing deductibles. Here's a brief overview of what the Finnish government has decided on the tax system and what entrepreneurs should know.

Key tax changes in government proposals

1. Taxes on work will be lightened, but deductions will be cut

• Government proposes cuts in labour taxation of around EUR 1 billion in 2026, especially for low and middle income earners.
• The earned income tax credit is increased and the child tax credit is increased.
• The highest marginal tax rate is calculated around 52 per cent.
• At the same time, the elimination of several deductions offsets the tax reductions:
  • The tax deductibility of membership fees for social partners will be abolished.
  • The workroom allowance will be abolished.
  • The tax exemption for commuter bicycles will be abolished for contracts concluded on or after 24 April 2025.

2. VAT reduction

• The government intends to reduce the current reduced VAT rate of 14 % 13,5 to % from 1.1.2026.
• This includes food, restaurant services, accommodation, public transport, medicines and cultural services.
• Next year, no change is planned for the standard ALV stock (25.5 %).

3. Withholding tax for key employees

• The withholding tax rate will be reduced from the current 32 % 25 to %.
• The law applies more widely, including for returnees, which means that the tax advantage is also extended to Finnish citizens who return to the country.

4. Corporate income, losses and corporation tax (development projects)

• Although a reduction in the corporate tax rate from 20 % → 18 % is planned, it will come into effect not until 2027, not 2026.
• The government proposes to extend the loss carry-over period from the current 10 years 25 years from 2026 onwards.
• In addition, changes to the legislation on share exchanges in M&A transactions are being considered from a tax treatment perspective.

5. Extension of the donation deduction

• The proposal includes an extension of the right to deduct donations so that deductions could be made for donations to organisations such as youth, cultural, sports and athletic organisations.

How will these changes affect the entrepreneur?

• Pricing and VAT invoices: If you offer services or products subject to a reduced VAT rate of 14 %, you must update your invoices and pricing to at least 13.5 %.
• Cost effects of work-related benefitsA: If you have employees or yourself, expenses that were previously deductible (e.g. office deduction, bicycle allowance), their elimination may increase your tax burden.
• Remuneration arrangements for key staffA: If you are using or wish to apply for a key-man withholding tax scheme, the new criteria will widen the potential user base.
• Loss carryover possibility: Extended loss carry-forward can provide more flexibility for the business - losses do not ”expire” as quickly.
• Tax planning and deductions: Deductible expenses are eliminated - it is important to check which expenses are still deductible and how to plan your tax planning in the new situation.
• Timely preparation of accounting and reporting: The changes are large-scale, so your company's systems, processes and finance staff need to prepare early - not wait until the last minute.