Easier dismissal, YEL changes, new mega-agency begins operations

Threshold for dismissal lowered

Dismissal on personal grounds has become easier. The legislation concerned entered into force at the beginning of 2026.

Following amendments to the Employment Contracts Act, the grounds for dismissal related to the employee as a person are now met more easily than before. The reason no longer needs to be both proper and weighty; a proper reason alone is sufficient.

The requirement that the employee’s conduct must have had a material impact on the employment relationship has also been removed, and the negligence no longer needs to be as serious as previously.

In addition, the obligation to offer alternative work will in future apply only in situations where the employee’s ability to work has changed during the employment relationship.

Minor negligence does not, however, justify dismissal. Before dismissal, the employer must as a rule issue the employee with a warning. Underperformance remains grounds for dismissal.

The aim of lowering the dismissal threshold is to reduce employment risk, particularly in small companies. The Act lists, by way of example, situations in which dismissal may be possible.

The practical impact of the change will only become apparent over time through case law, as dismissal grounds are assessed through an overall evaluation that takes into account the seriousness of the employee’s conduct and other factors set out in the Act.

How YEL contribution rate changed

The YEL contribution rate for business owners will be 24.4% in 2026. The Finnish Centre for Pensions says YEL contributions will on average remain at the same level as in 2025. This is because of the end to age-linked contributions. However, in practice a large group is facing an increase in their YEL percentage, from 24.1% to 24.4%, an increase of 0.3 percentage points.

One age group wins from the end to age-linked pension contributions: 53–62-year-olds, whose YEL contributions have been 25.6% for years. Now, the harmonization of contribution percentages reduces their YEL bills if their YEL income remains the same. For business owners aged under 53 and 63 or over, the end to age-linked YEL contributions increases their contributions by 0.3 percentage points.

Upper age limit for YEL raised

The increase by one year in the upper age limit for insurance for those continuing as entrepreneurs or employees beyond retirement age entered into force at the beginning of 2026. In 2026, persons born in 1958 or later must still be insured as normal. Until now, the obligation to take out employee (TyEL) and entrepreneur (YEL) insurance has ended at the end of the calendar month in which a person turns 68. Going forward, the limit is 69.

If an entrepreneur continues business activity alongside a full old-age pension, however, they are not required to pay YEL insurance contributions despite the age limits mentioned.

Other YEL changes

An entrepreneur’s YEL income is adjusted automatically each year using the wage coefficient. In 2026, the wage coefficient increases YEL income by 2.3 per cent.

The minimum YEL income threshold for entrepreneurs’ unemployment security rose at the turn of the year. In 2026, the minimum YEL income threshold for entrepreneurs’ unemployment security is €15,481 per year.

Reduced VAT rate lowered

As of the beginning of 2026, the reduced VAT rate of 14% applied to certain goods and services was lowered to 13.5%.

The change applies to foodstuffs, restaurant and catering services, animal feed, passenger transport, accommodation services, guest marina services, medicines, as well as menstrual products, incontinence products and babies’ nappies.

The change also affects culture and sport, including books, sports and exercise services, admission to cultural events and venues, sporting events, use of sports facilities, performances by performing artists, athletes or other public performers, imported works of art, works of art sold by the creator or an occasional seller, and copyright-related compensation received by organizations representing copyright holders.

When the reduced VAT rate is lowered, the applicable tax rate for the sale of goods and services is determined by when the goods are delivered or the service is provided.

For goods, the time of delivery, i.e., when the goods are handed over to the buyer, generally determines the VAT rate.

For services, the decisive factor is usually the time at which the service is performed, i.e., when the service is available to the buyer.

An advance payment means a payment received by the seller before the goods have been delivered or the service performed. When the VAT rate changes, the decisive factor in advance payment is when the funds are available to the seller. If the advance payment was received before the legislative change enters into force, the law in force at the time of receipt applies.

New authority begins operations

The new Finnish Supervisory Agency (LVV) began operations at the start of 2026. Its remit includes tasks related to social and healthcare services, environmental administration, occupational safety and health, rescue services and preparedness, as well as education and early childhood education.

All duties carried out by Valvira, most of the duties of the Regional State Administrative Agencies, and the majority of the environmental and natural resources responsibilities of the Centres for Economic Development, Transport and the Environment (ELY Centres) were transferred to the new authority. The operations of Valvira, the Regional State Administrative Agencies and the ELY Centres ended on 31 Dec. 2025.

The new authority has offices in 18 localities. It employs approximately 2,000 people.

Ten regional vibrancy centres were established to replace the existing ELY Centres. New vibrancy centres began operations on 1 Jan. 2026. Most of the duties of the ELY Centres have been transferred to the vibrancy centres. The vibrancy centres are responsible, among other things, for matters relating to business and industry, rural areas, transport, the environment and natural resources.

As part of the reform, the environmental permit and supervisory duties of the ELY Centres have been transferred to the newly established Finnish Supervisory Agency, while public passenger transport duties were transferred to the Finnish Transport and Communications Agency (Traficom).

The vibrancy centres have a head office or branch office in every region employing nearly 2,000 people.

New loans added to credit register

Since 1 Dec. 2025, lenders have begun reporting loans granted to sole traders, farmers and forestry owners to the positive credit register. Previously, only consumer credit and comparable loans had been reported to the positive credit register, which was introduced in April 2024.

The information can be used immediately in consumer lending once it has been reported to the register. For example, if a sole trader applied for a car loan, mortgage or credit card after 1 Dec., the lender will also have seen loans related to the applicant’s business activity on the credit register extract, provided they have been reported.

From April 2026 onwards, lenders may also use information on new loans in business lending, provided they have applied for and been granted a data permit. Business lending includes situations where a sole trader makes purchases for business purposes or where a farmer acquires equipment for their operations.

If sole traders or farmers or forestry owners have no loans granted for business, agricultural or forestry activity, the change taking effect in early December does not affect their previous situation.

Mandatory electronic filing

All businesses except sole traders, i.e. private traders, are now required to submit notifications and applications to the Trade Register electronically. The change entered into force on 1 Jan. 2026.

Mandatory electronic filing applies, among other things, to company registrations, change and cessation notifications, applications and financial statements.

The Patent and Registration Office (PRH) says mandatory electronic filing is based on amendments to the Trade Register Act and the Business Information Act.

New employment voucher introduced

At the beginning of the year, Finland introduced a new employment voucher for young people.

The youth employment voucher is a subsidy granted by employment authorities to support companies in hiring unemployed young people under the age of 30.

The subsidy received by the company covers half of the young person’s wages for a period of six months, up to a maximum of €1,500 per month.

An employment authority may grant an employment voucher, i.e., discretionary recruitment support, to a company that employs a young person aged 18–29 for at least six months.

A condition for granting the state aid is that the unemployed young person is aged 18–29 and has been unemployed for at least six months. An exception applies to young people who have completed only basic education, for whom a minimum of three months of unemployment is required.

At the beginning of 2026, the Uusimaa vibrancy centre will grant funding to employment authorities to support the employment of young people. Thereafter, the employment authorities that receive funding will enter into agreements with recruiting companies on the use of the subsidy.

Changes in taxation

Taxation of earned income is being reduced in 2026, with the highest marginal tax rates for wage earners reduced from around 59% to approximately 52%. In addition, incentives for work among families with children will be strengthened by increasing the child-related increment of the earned income deduction by €55, raising it to €105 per jointly raised child and €210 per child in single-parent households.

Taxation of key employees under the withholding tax scheme is being eased and expanded. The withholding tax rate for key employees coming to work in Finland will be lowered from 32% to 25%, and the scope of the legislation will be extended to Finnish citizens returning to Finland. For Finnish citizens, the maximum period of application will be 60 months.

The tax exemption for employer-provided bicycles will be abolished. The change applies from 2026 onwards to bicycle benefits agreed between employer and employee on or after 24 Apr. 2025. Bicycle benefits agreed before that date will remain subject to the current rules until the end of the contractual period, but for no longer than five years from the introduction of the benefit.

The home office deduction from earned income will be abolished. Costs related to a dwelling or holiday home used by the taxpayer or their family are not deductible expenses incurred in earning or maintaining earned income. For income other than earned income taxed under the Income Tax Act, taxpayers may deduct for such premises the amount of the home office deduction determined by the Finnish Tax Administration. The government originally also planned to abolish the flat-rate home office deduction for sole traders, but later reversed this decision.

Employer-paid legal advice costs for employees has been made tax-exempt. The amendment to the Income Tax Act applies not only to criminal cases, but also to civil disputes and the imposition of administrative sanctions.

Labour market organization membership fees will no longer be deductible against taxation. Membership fees of organizations whose rules allow objectives related to labour market activities will no longer be deductible. The removal of the deduction applies to both employee and employer organizations. Based on current information, the abolition also applies to the membership fee of Suomen Yrittäjät.

The tax treatment of bonuses in the financial sector has changed. Customer bonuses, rebates, discounts or other monetary benefits based on a customer relationship will be taxable capital income if they accrue or are determined on the basis of the amount or value of loans, deposits or investments specified in the legislation. However, such benefits will be tax-exempt insofar as they are used for, or relate to, service charges or loan interest determined on the same basis as the benefit accrued.

The tax treatment of shares acquired through share exchanges will change. In share exchanges between related parties, the shares changing ownership will be valued, for the purposes of calculating the acquiring company’s net assets, at their mathematical value prior to the exchange. As of 1 Jan. 2026, this amendment will apply to share exchanges carried out on or after 1 Jan. 2017. For acquisition cost purposes, the shares will be valued at their combined mathematical value prior to the exchange. The amendment relating to acquisition cost will apply to share exchanges carried out on or after 1 Jan. 2026.

Inheritance and gift taxation will be eased. The minimum taxable inheritance threshold is being raised from €20,000 to €30,000, and the minimum taxable gift threshold from €5,000 to €7,500. Interest charged on the payment period for inheritance tax will be reduced to the reference rate plus two percentage points. In addition, the inheritance tax relief for generational transfers will be extended to allow application in cases involving minor heirs.

The forest deduction will be increased. The maximum forest deduction is rising in 2026 from the current 60% to 75% of capital income from forestry for the tax year. The forest deduction base, i.e., the maximum deductible amount, will also increase from 60% to 75% of the combined acquisition costs of forest properties. The changes will enter into force from the 2026 tax year, meaning that the higher forest deduction can be claimed in the 2026 tax return filed in spring 2027.

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