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Sole trader net assets and the capital income share in 2026: 20 %, 10 % or 0 %

Karma Accounts · Published 4 October 2026

As a sole trader (toiminimi) you are not taxed on your profit as one lump. The Tax Administration (Verohallinto) splits it into capital income (pääomatulo), taxed at 30 %, and earned income (ansiotulo), taxed at your progressive rate with any wages you have. The split depends mostly on one figure: the net assets (nettovarallisuus) of your business at the end of the previous year.

How the split is calculated

1. Start from the result: business income minus expenses.
2. Deduct any confirmed losses from earlier years and the 5 % entrepreneur's deduction (yrittäjävähennys). What is left is the distributable business income (jaettava yritystulo).
3. Capital income is a 20 % annual return on the net assets at the end of the previous tax year, but never more than the distributable income.
4. The rest is earned income.

For tax year 2026 the base is the net assets at the end of tax year 2025: 31 December 2025 if your accounting period is the calendar year. In the year you start, the net assets at the end of that same year are used.

Capital income is taxed at 30 % up to 30 000 euros and at 34 % above that. The limit counts all your taxable capital income for the year, not only the business share.

What counts as net assets

Net assets are the business assets minus the business debts, valued under the Act on the valuation of assets for tax purposes (laki varojen arvostamisesta verotuksessa). Private assets and debts stay out, even if they are in your books.

• Counted: machinery and equipment at undepreciated acquisition cost, inventory at acquisition cost, trade receivables (also with single-entry books) and cash in hand.
• Mixed use: a car or other asset counts only if more than 50 % of its use is business; otherwise none of it counts.
• Not counted: the balance of an ordinary bank account. Bank interest is taxed under the act on tax at source, so the deposit stays out of net assets too.

If private withdrawals paid with business borrowing have made your equity negative, the debt taken for private use is not a business debt here, and part of the interest may be non-deductible.

The 15 000 euros in the bank does nothing for the capital share. A service business whose main asset is a laptop can have net assets near zero, so almost all its profit is earned income anyway. If debts exceed assets there are no net assets, and a sole trader with no employees is taxed on all the business income as earned income.

The wage-based addition

If the business pays wages, 30 % of the wages paid during the 12 months before the end of the tax year is added to the net assets before the 20 % is calculated. Only wages actually paid and subject to withholding count, not accruals. You cannot pay yourself a wage, and wages to your spouse, or to a family member under 14 at the start of the tax year, are left out.

With 40 000 euros of net assets and 20 000 euros of wages, the base is 46 000 euros and the capital income share 9 200 euros. Net assets come from the previous year, wages from the year being taxed.

Worked example

Net assets of 40 000 euros at the end of 2025, no employees, and 50 000 euros of distributable business income in 2026:

Under the default, the 8 000 euros is taxed at 30 %, or 2 400 euros, and the 42 000 euros joins your other earned income. With only 6 000 euros of distributable income, all of it would be capital income.

When 10 % or 0 % makes sense

Instead of 20 %, you can ask for 10 %, or for all the distributable income to be earned income, but not both. The Tax Administration says the better option depends on the earned income of you and your spouse and the deductions made from it.

The arithmetic: each euro moved from capital to earned income stops being taxed at 30 % and is taxed at your marginal rate on earned income.

• If that marginal rate is below 30 %, as it can be in a year when your total earned income is small, 10 % or 0 % lowers the tax.
• If it is above 30 %, the default 20 % gives the lower tax.
• 10 % is the middle option: it moves half of the default capital share.
• Capital income above 30 000 euros, counting all sources, is taxed at 34 %, which changes the comparison.

The answer has to be worked out with the year's real figures. With a growing profit, also compare toiminimi and Oy.

How to make the request

• Where: in MyTax (OmaVero) on Form 5, under "Other details and claims"; on the current Form 5 it is section 17 (Vaatimus jaettavasta yritystulosta). The rest of the return is in the parts of Form 5 people get wrong.
• Deadline: before the taxation for that year ends. End dates vary between May and October and are shown in MyTax and your tax decision, so if your 2025 assessment is still open, a request for 2025 can still be made.
• Spouses: if you run the business together, the capital share is divided by ownership of the net assets and the earned share by work done, and the request is joint.

What we do

At year-end we calculate the net assets from the books, leaving out what the tax rules leave out, and fill in Form 5, including the request for 10 % or 0 % when you choose one. It is part of the monthly fee for sole trader accounting: 69 € a month plus VAT 25.5 %.

Sources

• Vero: Business tax return 5, instructions for filing
• Vero: Capital income and its tax rates
• Vero: Dividing business income into earned and capital income (in Finnish)
• Vero: How net assets are calculated (in Finnish)
• Vero detailed guidance: net assets of a business operator or self-employed professional (in Finnish)
• Finlex: Income Tax Act 1535/1992, sections 38, 41 and 124 (in Finnish)
• Finlex: Act on the valuation of assets for tax purposes 1142/2005, section 15 (in Finnish)

Please note: this is general information about Finnish rules, not advice for your own situation, and the rules change. Ask us before you act on it.

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