The purpose of being on the prepayment register is to inform payors that the payor does not have to arrange for tax withholding. The beneficiary of the income who is being prepayment-registered will pay whatever advance payments are required. When you are on the prepayment register, it has an impact on the way your taxes are collected from you during the ongoing year when you receive income. However, if money is paid in the form of wages, the payor must always withhold tax on it even though the beneficiary is on the register.
Who can be registered?
The prepayment register is one of the registers of the Tax Administration. If you are a self-employed individual, a company or a corporate entity and you operate a trade, business, farm or other activity that generates income, the Tax Administration can enter you in the register. You may ask for registration in advance before you have started the business.
There is no mandatory rule that would require a business to have a prepayment Registration. In fact, in some circumstances, the person who works can find it useful that the payor withholds taxes – so it may be desirable to not have a registration at all.
The Tax Administration can also reject registration applications from taxpayers who have not filed their taxes or have not kept their books. As operators who have had previous problems with taxation or accounting cannot be accepted into the advance payment register, being part of the register also tells partners about the reliability of the company or entrepreneur.
Prepayment register or tax at source
If the foreign company is not entered in the Prepayment Register or has not presented a tax-at-source card for zero-rate withholding, the payer may have to withhold tax at source on the amount.
If the foreign company has a permanent establishment in Finland, the company must withhold tax at source on any trade income they pay to another foreign company, if the work is done in Finland. The same applies to Finnish companies that pay trade income to a foreign company for work done in Finland.