How do I deduct YEL contributions in taxation – eight tips for the entrepreneur

As an entrepreneur, you take care of your pension and social security by paying YEL insurance. However, you can deduct YEL contributions in your taxation. Nella Toivonen and Kirsi Tuunala, senior tax experts at the Finnish Tax Administration, explain where and how to claim the deduction.

1. How easy is it to deduct YEL contributions?

– YEL contributions are deducted on your tax return. The easiest way to submit both the company tax return and complete the entrepreneur's pre-completed tax return is to use the Finnish Tax Administration's MyTax online service.

2. How are YEL contributions deducted in practice?

– If the YEL contributions are paid by the company, the contributions are deducted on the company's tax return as business expenses. If you have paid the contributions yourself, you can deduct them on your own or your spouse's pre-completed tax return. A self-employed person can deduct YEL contributions either on the business tax return, the personal tax return or the spouse's tax return.

3. How does the company form affect the deduction of YEL contributions?

– For example, a limited company is a legally independent legal entity, i.e. a separate entity from its owners, which is always responsible for its own commitments and liabilities. By contrast, a sole trader, i.e. a self-employed person, is not a legal entity separate from his or her business and can therefore deduct YEL contributions either as a business expense or, alternatively, on his or her own or his or her spouse's pre-completed tax return.

4. When should a self-employed person deduct YEL contributions on his or her own personal tax return and when on the spouse's personal tax return?

– It is better to deduct the contributions on the tax return of the spouse whose earned income is higher.

5. And when can YEL contributions be deducted in the company's taxation?

– If you want to deduct YEL contributions as business expenses in your company's taxation, the company must also pay the YEL contributions. When YEL contributions are deducted as business expenses, they lower the profit of the business. The Finnish Tax Administration deducts 5% of the entrepreneur's business profit for the tax year. This reduces the amount of the entrepreneurial deduction. However, the entrepreneurial deduction does not apply to the taxation of a limited liability company or the shareholders of a limited liability company.

6. How does the entrepreneur's other income structure affect the deduction of YEL contributions?

– Entrepreneurs' situations vary widely, and the viable deduction depends not only on the company form, but also on a wide range of income and deductions, for example. It is advisable to allocate contributions to the income with the highest tax rate. Entrepreneurs can use the tax percentage calculator to estimate the impact of different situations on their overall income.

7. Does the deduction of YEL contributions also apply to light entrepreneurs?

– Yes, if the light entrepreneur has YEL insurance. In 2024, YEL insurance is mandatory if, for example, the light entrepreneur receives an income of at least EUR 9,010.28 per year from a billing service company and works as a light entrepreneur for more than four consecutive months. The Finnish Tax Administration has a customer guide on light entrepreneurship and YEL contributions.

8. What if a self-employed person forgets to deduct YEL contributions? Can it be done retroactively?

– If a self-employed person forgets to deduct YEL contributions, the deduction can be claimed within the time limits for appeals. The general appeal period is three years from the beginning of the year following the end of the tax year. This means that in the case of a claim for the tax year 2022, the appeal must be received by the Finnish Tax Administration by 31 December 2025.

For spouses, on the other hand, the deduction is granted as claimed before the end of the tax year for which the claim was filed. This allocation request cannot be changed after the end of tax assessment. The end date of tax assessment varies for different taxpayers. You can see the end date on your own pre-completed tax return.

The purpose of Varma's marketing communications is to promote earnings-related pension insurance and to market Varma's services. We also publish other content that may be relevant or of interest to an insurance policyholder or a person starting a business. This content is general information, and Varma is not responsible for its exhaustiveness. We cannot guarantee the applicability of the content to all situations and are therefore not liable for any damages caused by the use of the information in the published content. Any use of the information in the published content shall be at the user's own risk.

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