Tax at source on interest
Taxation at source on interest applies to domestic interest accrued bySource: https://vm.fi/en/taxation-at-source-on-interest (date 12.2.2024) The Taxation at source on interest is withheld upon payment of the interest. So it never comes to the customer's account.Only income from interest accrued by natural persons and estates of the deceased is subject to taxation at source on interest. The tax at source on interest is 30% of the interest accrued. The tax at source on interest is collected by those responsible for paying the interest, including banks, financial service offices, or the issuer of the bond. The state is the recipient of tax revenues derived from tax at source on interest. Deposits and bonds subject to taxation at source on interest are exempt from income tax.
- deposits held in accounts created for the receipt of public deposits located in banks or corresponding co-operative savings and loan associations or financial service offices
- bonds that are open to public subscription.
Example 1
The interest rate on a person's current account is 0.25% p.a., i.e. per year. How much is added to a person's account if interest is calculated based on the lowest balance of the year? The person's lowest balance during the year in question was 537€.
i = 0.25% =0.0025, t = 1 a (= a year) and k = 537€. In this case, the deposit rate in euro would be:
As this is subject to a withholding tax of 30% on the state, i.e.
so a person's account is deposited
Method 2: A person receives 70% of the deposit rate because 30% goes as a tax at source on interest to the state. In this case, the interest rate can be solved as
In this case, the interest in euros would be
Most banks calculate the interest rate on a monthly basis according to the lowest balance. The interest is only paid once a year. The principle in the calculations is the same but the annual rate must be divided by 12 to make it a monthly rate.
Example 2.
The person invested 1500 euros in a three-year fixed-term account, which was not allowed to be deposited into or withdrawn from during the investment period. The annual interest rate for the account is 2.8 \%. How much money is in the account at the end of the investment period if the interest is paid to that account?
1. year:
Interest in euros is from which 30\% is paid for the state as an tax at source on interest, so . Tästä maksetaan lähdeveroa 30 % , so
.
is added to the account. The same result would be obtained with Sama tulos olisi saatu laskemalla After first interest payment, the accound would have
2. year:
Interest is now calculated according to the new balance, i.e. the account is added
It is worth noting here that counting all at once will get you 29.98€. The difference is due to the fact that the exact values are rounded down in the example:
After the second year of investment, the account has
The third-year interest rate is calculated according to the balance at the end of the second year, so when the deposit ends, the account will have 1603.03 euros.