Taxation of Light Entrepreneurs – Everything You Need to Know (Without Legalese)

Table of Contents

1. How does taxation work for light entrepreneurs? (Quick overview)
2. Tax card and withholding tax – Who handles it and how?
3. How much of the invoice actually ends up in your pocket? (Example calculation)
4. Tax deductions: The light entrepreneur’s secret weapon
5. Own business ID and VAT – When does it make sense?
6. Customer’s household deduction – A sales argument or not?

Ready to jump on the light entrepreneurship train, but taxation feels as clear as IKEA instructions without pictures? Don’t worry, you’re not alone. For many, taxes are the big monster hiding under the bed whispering scary words like “withholding rate” and “income-generating expenses.”

In this article, we’ll unmask that monster and show you that taxation for light entrepreneurs is actually surprisingly simple. We’ll focus specifically on light entrepreneurship without your own business ID, which is the most common and easiest way to start.

If you already have a business ID, you are technically a sole trader, and your taxation works a bit differently. That’s a topic for another guide. Here, we’ll focus on how it works when you let an invoicing service handle the bureaucracy for you. Let’s throw those tax myths in the trash and find out how to keep as much of your hard-earned money as possible in your own pocket!

1. How does taxation work for light entrepreneurs? (Quick overview)

Let’s start with the most important point: when you work as a light entrepreneur without a business ID, the tax office does not see you as an entrepreneur. Instead, you are treated as an employee.

This is the core of the whole system and makes your life a lot easier.

In practice this means: All money you invoice through the invoicing service is paid to you as salary. Just as if you were in a traditional job.

The invoicing service acts as a middleman or “paperwork employer.” It handles all the boring but mandatory obligations that would normally fall on an employer:

• It adds VAT to your invoice and pays it to the tax office.
• It withholds taxes from your salary based on your tax card (withholding tax).
• It takes care of social security contributions and other statutory payments.

So your only tasks are: do the work well and send the invoice. The invoicing service is like your personal financial manager who ensures everything goes by the book. You can focus on what you’re good at – whether that’s coding, photography, or writing.

2. Tax card and withholding tax – Who handles it and how?

“But do I have to report my income to the tax office myself?” is one of the most common questions. The answer is delightfully simple: usually not.

Since your income is considered salary, the invoicing service takes care of reporting for you.

Here’s how the process works:

1. You provide your tax card to the invoicing service. When you register, the service usually receives your tax card directly from the tax office.
2. The service applies withholding tax. When your customer pays the invoice, the service calculates your salary and deducts the tax percentage from your tax card. This is called withholding.
3. The data is sent automatically to the income register. The invoicing service reports the salary paid and withholding directly to the national income register.
4. The data appears on your tax return. The tax office pulls this data and it appears automatically in your pre-filled tax return the following spring.

Your main task is just to deliver your tax card and check that the pre-filled tax return is correct. Easy as pie – but without the allergy symptoms.

Tip: If you earn income from light entrepreneurship alongside your main job, you should recalculate your income estimate when you start. If your main job’s tax card percentage is too low, you may end up paying back taxes. It’s always better to pay slightly too much in advance and get a refund later than the other way around.

So remember: trust, but verify. Even though the systems are automated, mistakes can happen. Review your tax return carefully.

3. How much of the invoice actually ends up in your pocket? (Example calculation)

This is the million-euro question. Out of the invoiced amount, how much really lands in your bank account? Let’s go through it with an example.

Imagine you’re a graphic designer creating a logo for a client. You agree on a price of 1000 euros.

1. Invoice amount + VAT
   The invoicing service adds VAT (normally 25.5%). The invoice sent to the client looks like this:
   1000 € + 255 € (VAT 25.5%) = 1255 €
   The client pays this to the service.

2. VAT is paid to the tax office
   The invoicing service sends the 255 € VAT straight to the tax office. This money is never yours. What remains: 1000 €

3. Service fee
   The invoicing service takes its fee, typically around 3%.
   1000 € * 3% = 30 €
   Remaining: 970 €

4. Social contributions (often included in the fee)
   The service may deduct the statutory health insurance contribution if you’re not YEL-insured. In 2025 this is 1.87%. For simplicity, let’s say 2%. That leaves about 970 € as your gross salary.

5. Withholding tax
   From this gross salary, tax is withheld according to your tax card. Let’s assume 20%.
   970 € * 20% = 194 €

6. Net salary (money to your account)
   Finally, here’s what you get:
   970 € - 194 € = 776 €

Result: From a 1000 € invoice, you receive 776 € net.

Of course, this is just an example. The actual amount depends on your personal tax percentage and the invoicing service’s fees. Most services have calculators on their websites where you can check your exact case.

4. Tax deductions: The light entrepreneur’s secret weapon

Now for the fun part – how to get some money back (or at least pay less tax). Since your income as a light entrepreneur is salary, you can make deductions in your personal tax return just like any employee.

These are called income-generating expenses – costs directly related to your work. Think of them as investments that help you earn.

At this point, you become a world champion in receipt collecting. Every work-related receipt is a potential tax euro back in your pocket. Keep them safe – digital copies are fine.

What can you deduct?

Here are the most common deductions light entrepreneurs can use:

1. Tools and equipment

All purchases necessary for your work.

• Small purchases: Items under 1200 € can usually be deducted fully in the year of purchase.
• Larger purchases: Over 1200 € are usually deducted over several years (depreciation).

2. Home office deduction

If you work from home, you can use the tax office’s standard deduction rates.

• 960 €/year: If you use your home office mainly for work (over 50%).
• 480 €/year: If you use it part-time or as a side job.
• 240 €/year: If used occasionally for side income.

3. Computer and internet

If used for both work and personal use, you can usually deduct 50% for work.

4. Professional literature and training

Books, subscriptions, courses, and training directly related to your profession are deductible.

5. Travel expenses

Trips to clients or for work:

• Own car: Deduct mileage allowance (keep a log).
• Public transport: Save tickets and receipts.

6. Travel expenses via invoicing service

Some services let you add mileage, daily allowances, or meal allowances directly to the invoice.

Important: you must enter these deductions yourself in your personal tax return in OmaVero. The invoicing service doesn’t do it for you.

5. Own business ID and VAT – When does it make sense?

One major difference between a light entrepreneur without a business ID and a sole trader with one is VAT.

As a light entrepreneur without a business ID, you are not VAT-liable. The invoicing service is. It adds VAT to invoices and pays it to the tax office. That’s convenient, but there’s a downside: you cannot deduct VAT on your purchases.

What does VAT deduction mean?

If you have your own business ID and are VAT-liable, you can subtract the VAT on business-related purchases from the VAT you collect from clients.

Example:

• Sole trader: Buys a laptop for 1255 € (incl. 255 € VAT). They can deduct the VAT, so the real cost is 1000 €.
• Light entrepreneur without ID: Buys the same laptop for 1255 €. They can deduct it as an expense, but cannot reclaim the 255 € VAT.

Having your own business ID makes sense if:

• Your annual turnover exceeds 20,000 € (VAT threshold in 2025).
• You have many large purchases with significant VAT.

For beginners, though, light entrepreneurship without a business ID is often the safest, easiest way to test your business idea. You can always register later once your business grows.

6. Customer’s household deduction – A sales argument or not?

The household deduction is a tax benefit individuals can get for certain work done in their home or summer house (e.g. cleaning, renovations, childcare, IT installations).

This is very important for you as a light entrepreneur because it can be a big selling point.

Can customers get the household deduction if they hire a light entrepreneur?
Yes, they can!

The condition is that the payment recipient is in the prepayment register. Since you work through an invoicing service, what matters is whether the service is registered.

In practice, all major invoicing services in Finland are in the register. That means your customer can use the household deduction normally.

This is a fantastic sales advantage! Be sure to mention it to customers, especially if your services qualify. Even if the invoice comes from the service, they still get the full deduction. It’s like offering a discount – one that the tax office pays. Who would say no?

Summary: Taxes are not a monster

Light entrepreneur taxation may sound complicated at first, but broken into steps, it’s logical and manageable.

Here are the key takeaways:

1. Your income is salary. The invoicing service handles withholding and reporting.
2. Keep your tax card updated. Make sure your income limits and tax rate are correct.
3. Use deductions. Collect receipts for all work-related expenses and report them in OmaVero.
4. Customers get the household deduction. A strong selling point – use it!

Taxation isn’t a barrier to entrepreneurship, just a rulebook. Once you know the rules, you can focus on what matters: doing what you love and earning a living from it. Good luck on your journey!