Taxation of rental income and capital gains from investment properties in Finland

In Finland, rental income from investment properties is considered taxable capital income.¹ This means that the income is taxed separately from earned income, such as salary income, and is subject to the capital income tax rate. Capital income taxation is progressive, meaning that the tax rate increases when income exceeds a certain threshold.¹ This guide has been prepared based on the guidelines of the Tax Administration and deals with the taxation of rental income received by private individuals, deductions applicable to it, and the tax treatment of capital gains arising from the sale of investment properties. The aim is to provide a clear and practical overview of the tax obligations and opportunities of real estate investors.

The tax payable on capital income is determined according to the tax rate set annually. In 2024, the tax rate on capital income will be 30% up to €30,000. If taxable capital income exceeds €30,000 per year, the excess amount is taxed at 34%.¹ These tax rates apply to all capital income, including rental income and capital gains from the sale of property.³ It should be noted that capital income taxation was separated from earned income taxation in 1993, when the tax rate was initially 25%.⁵

It is important for real estate investors to understand the principles of taxation of rental income and capital gains. Accurate and timely reporting of information to the tax authorities and taking advantage of all allowable deductions are key factors in ensuring correct taxation and optimizing the tax burden.² Careful familiarization with the rules helps to avoid mistakes and possible tax penalties.

2. Determining taxable rental income

2.1 What is rental income?

In taxation, rental income refers to compensation received for transferring the right to use an object, typically a residential apartment or property, to another party.⁷ In addition to the monthly rent, all other payments received from the tenant, such as separate payments for water, sauna, parking space, or laundry, are also taxable rental income.⁷ Reminder fees charged by the landlord for late rent, late payment interest, and contractual penalties based on the lease agreement are also considered taxable rental income.⁷

2.2 Income other than cash

Rental income can also be received in the form of non-monetary compensation. This may occur, for example, if the tenant performs work for the landlord or makes repairs to the landlord's property in lieu of rent. In this case, the amount of taxable income is the fair market value of the consideration received (e.g., labor or materials and labor costs for repairs) in the year in which the consideration is received.⁷

A special situation arises if the tenant, with the landlord's permission and at their own expense, makes fundamental improvements to the rented property that permanently increase its value. If these repairs are based on the lease agreement, the expenses paid by the tenant are considered taxable income for the landlord in the year in which the tenant pays the expenses.⁷ This may lead to a situation where the landlord receives taxable income without receiving a corresponding cash payment in the same year. This highlights the need to take tax consequences into account when drawing up the lease agreement, especially if renovations to be carried out by the tenant are agreed upon. If, on the other hand, the repairs carried out by the tenant are not based on the lease agreement, taxable income is generated for the landlord only when the lease agreement expires, and the amount of income is the increase in the value of the property at the time of expiry.⁷

2.3 Tax year for income (Payment basis)

The payment principle is applied to the taxation of rental income earned by natural persons. This means that the income is considered to be the income for the tax year in which the landlord has received it – i.e., when it has been paid into the landlord's account, withdrawn in cash, or otherwise received.⁷ The date to which the rent relates is therefore not decisive for the tax year; rather, the date of payment is decisive.⁷ For example, if the rent for January of the following year is paid in December of the current year, it is considered income for the tax year that includes December.⁸

2.4 Rental security deposit

A rental deposit received from a tenant is not taxable income for the landlord when it is received.⁸ The deposit only becomes taxable income when and to the extent that it is used to cover rent arrears, repair damage caused by the tenant to the apartment, or cover other expenses under the lease that the tenant has not paid.⁸ If the security deposit is returned to the tenant at the end of the tenancy, it does not constitute taxable income for the landlord at any stage.⁹

3. Deductions from rental income

3.1 General principles

The key point in the taxation of rental income is that all expenses incurred in acquiring or maintaining rental income may be deducted from taxable gross rental income.⁸ These are referred to as income acquisition expenses. As a rule, expenses are deducted in the tax year in which they were paid (payment basis).⁸ Exceptions to this are items that can be deducted as depreciation, such as the acquisition costs of buildings and more expensive furnishings, as well as the costs of renovating apartment shares, which are deducted over several years.¹⁰

Expenses are deductible only for the period during which the apartment or property has been rented out.¹⁰ Expenses incurred during the period of personal use cannot be deducted. Rental activity is generally considered to begin when the apartment is actively offered for rent, for example by publishing a rental advertisement or giving an assignment to a rental agent.¹⁰ When the apartment is vacant, for example due to a change of tenant or renovation, expenses (such as maintenance charges) are generally deductible as long as the apartment is still in rental use and has not been taken into personal use or put up for sale.¹²

3.2 Prerequisite: Current rent

Full deduction of income-generating expenses requires that the rental activity be carried out for the purpose of generating income. A key indicator of this is that the apartment is rented at market rent.⁸ Market rent generally means at least the value of the benefit in kind of company housing or the market rent charged for a similar apartment in the locality.

If an apartment is rented at a price significantly below the market rate (below market price), for example to one's own child or other relative, the Tax Administration may consider that the activity is not primarily carried out for the purpose of generating income.⁸ In this case, expenses related to the rental activity, including interest on income-generating debt, may be deducted up to the amount of rental income received.⁸ This means that below-market rentals cannot result in a tax-deductible loss, even if the actual expenses exceed the income received. In such cases, some of the expenses may remain permanently non-deductible for tax purposes, which in practice constitutes an economic cost of providing assistance in this way. The right to deduct interest on income-generating debt may also be denied entirely if, for example, the rental is to a family member without rent or at a significantly low rent, in which case the loan can be equated with consumer credit^.

3.3 Maintenance charges and other payments made to the housing company (Housing shares)

The owner of a housing share typically pays a monthly maintenance charge to the housing company, which may consist of a maintenance charge and a capital charge (financing charge). In addition, shareholders may pay off their share of the company's loans in a lump sum (loan repayment). The deductibility of these items from rental income depends critically on how the housing company treats the payment in its own accounting.⁸

• Maintenance charge: The housing company always records maintenance charges as income in its accounts (revenue recognition). Therefore, a landlord-shareholder may deduct the maintenance charge paid in full from their rental income in the year in which it was paid.²
• Capital contribution (financial contribution) and loan repayments: The accounting treatment of these items varies from one housing company to another. The treatment directly affects the shareholder's right to tax deductions:
  • Recognition as income: If the housing company records the capital contribution or loan installment in its accounts as income (recognizes it as income), the shareholder may deduct the entire amount paid from their rental income in the payment year.⁸ This also applies to large loan repayments made in a single installment, even if they exceed the rental income for the year in question (the excess amount constitutes a loss, see section 4).⁸ Recognition as income is generally advantageous for the lessor in the short term, as it immediately reduces the tax payable and thus improves cash flow.
  • Funding: If a housing company records a capital contribution or loan installment in its balance sheet as capital funding (funding), the shareholder may not deduct the payment from their rental income in the payment year.⁸ Instead, the amount paid is added to the acquisition cost of the share. This increase reduces the taxable capital gain from the sale of the apartment or increases the deductible capital loss.⁸ Fund financing thus transfers the tax benefit to the future, to the time of sale.

Obligation to provide clarification: Since the accounting methods for capital contributions and loan shares vary, landlords must determine the correct treatment for their own housing companies. This information can usually be found in the property manager's certificate or obtained directly from the property manager. If requested by the tax authorities, the landlord must be able to prove the income from the payment they have deducted, for example with a certificate or email from the property manager.¹²

The housing company's decision on the accounting method can have a significant impact on the attractiveness of the investment from the perspective of different investors. Investors who emphasize current cash flow favor investments where fees are recognized as income. Investors aiming for long-term value growth who want to minimize future capital gains tax may find funding more acceptable, even though it reduces immediate returns.

Table 1: Tax treatment of company charges and loan repayments

(Based on: ⁸)

3.4 Interest and expenses on income-generating debt

• Interest deductibility: Interest on debt incurred for the purchase of an investment property (or other rental income-generating asset) is fully deductible from capital income.¹³ Such debt is considered income-generating debt for tax purposes. The deduction is made from all of the taxpayer's capital income (not just the rental income from the property in question) and is made in the year in which the interest was paid.⁸
• Difference between mortgage interest rates: It is very important to distinguish between income-generating debt and a mortgage taken out to purchase your own permanent home. Mortgage interest has not been tax-deductible since January 1, 2023.¹³ Therefore, it is essential to ensure that the bank has correctly reported the purpose of the loan to the Tax Administration (income-generating debt). If the purpose of the loan has been incorrectly entered on the pre-filled tax return (e.g., mortgage or other debt), the information must be corrected in order to receive the full interest deduction.¹³ Interest on loans taken out to purchase a vacation home cannot be deducted, as it is considered consumer credit.¹³
• Other loan-related expenses: Other expenses directly related to income-generating debt are also deductible as income-generating expenses from capital income. Such expenses include, for example, loan arrangement fees, delivery fees, and credit reserve commissions.⁸ Compensation paid to the bank for an interest rate cap agreement or interest rate compensation due to early repayment of the loan may also be deductible.⁸ However, insurance premiums related to loan repayment protection are not considered deductible.⁹
• Debt capital repayments: Loan capital repayments are never tax deductible.¹⁶

3.5 Renovation costs: Annual repairs vs. major renovations

Expenses incurred from renovating a rented apartment or property are tax deductible, but how and when they are deducted depends on the nature and timing of the renovation. For tax purposes, renovations are divided into annual repairs and major renovations.⁷

Definitions:

• Annual repair: Measures taken to restore an apartment or building to its original condition. In other words, this refers to repairs that maintain the condition of the property. Examples include painting or wallpapering walls, replacing kitchen cabinets or appliances with ones of a similar standard, or replacing flooring with a new material of a similar standard.⁷
• Renovation: Measures that raise the quality, value, or comfort of a home or building above its original level. Extensions and alterations are also considered basic renovations. Examples include installing balcony glazing on a previously unglazed balcony, changing the layout of rooms, adding mechanical ventilation, or replacing water-circulating radiator heating with underfloor heating.⁷ More extensive renovations, such as a complete kitchen or bathroom renovation, often include elements of both annual repairs and basic renovations. In such cases, the costs must be divided between these two categories, if necessary based on a reasonable estimate.⁸

Reduction methods:

• Annual repair costs: Deducted in full from rental income in the tax year in which they were paid.⁷
• Basic renovation costs (apartment share): The costs of renovating a condominium cannot be deducted all at once. The landlord can choose between two options:
  1. Straight-line depreciation: Expenses are deducted from rental income in equal annual installments (straight-line depreciation) over a period of 10 years, starting from the year in which the expenses were paid. If the probable economic life of the renovation is less than 10 years, the depreciation is made during the economic life^.7 For example, €4,000 in renovation expenses can be deducted at €400 per year for 10 years.
  2. Addition to acquisition cost: The expenses are added to the acquisition cost of the share. In this case, they do not reduce the annual taxable rental income, but are deducted when calculating the capital gain upon the sale of the apartment.⁸
• Basic renovation costs (real estate): Basic renovation costs incurred for real estate (e.g., a single-family home) are always added to the acquisition cost of the building. They are deducted through annual building depreciation (see section 3.6).⁸

Timing of renovation: The timing of renovation has a significant impact on the deductibility of expenses each year:

• Immediately after purchase, before the first tenant: If the apartment is renovated immediately after purchase, before the first tenant moves in, renovation costs (both annual repairs and major renovations) cannot be deducted from annual rental income. They are added in full to the purchase price of the apartment or property and only affect the calculation of the capital gain.⁹ This is important to note, as it can have a significant impact on cash flow and taxation in the early stages of the investment. Investors who expect to receive immediate tax relief on post-purchase renovations may be in for a surprise.
• During the rental period or between tenants: When the apartment has already been used for rental purposes, the costs of renovations carried out while it is vacant, for example when changing tenants or during renovations, are deductible in accordance with the annual repair/renovation rules described above. The prerequisite is that the apartment is still in rental use and has not been taken into personal use or put up for sale.⁷ According to the Tax Administration's guidelines, it is sufficient that the tenant has moved into the apartment or taken the business premises into use in order for subsequent annual repair costs to be deducted as annual expenses and basic improvement costs as straight-line depreciation.⁷

• Own work: Landlords cannot deduct the value of their own work as renovation costs. However, the material costs of renovations carried out by the landlord and travel expenses to the renovation site are deductible (within the framework of the annual repair/basic renovation rules). Remuneration paid to external professionals (e.g., plumbers or electricians) is a deductible expense.

3.6 Depreciation of buildings (real estate)

When renting out real estate (e.g., a detached house, semi-detached house, or other building with land), the landlord can deduct depreciation from the purchase price of the building from the rental income each year. Depreciation reflects the wear and tear and decline in value of the building over time.

• Depreciability: Depreciation can only be applied to the acquisition cost of the building, not the land (plot), as land is considered a non-depreciable asset.⁸ Depreciation cannot be applied to the acquisition cost of housing shares either.⁹
• Removal percentages: The maximum annual depreciation is calculated as a percentage of the remaining acquisition cost (undepreciated acquisition cost) for the taxation of the building. The percentage depends on the type of building. ⁸:
  • Residential, office, and other similar buildings: 4%
  • Shops, warehouses, factories, workshops, utility buildings, power stations, and other similar buildings: 7%

• Depreciation base (acquisition cost): The acquisition cost of a building consists of its share of the original purchase price or construction costs of the property, direct expenses related to the purchase (such as transfer tax on the building), and basic renovation expenses incurred for the building.¹⁰ The undepreciated acquisition cost is reduced by the amount of depreciation made each year.⁹
• Claiming deductions: Deductions are not automatic; landlords must claim them themselves in their tax returns. This is done in OmaVero or on form 7K.⁶, which is intended for reporting rental income from real estate.
• Partial-year depreciation: If the building has been in your own use for part of the year or if rental operations begin or end during the year, depreciation can only be calculated for the period corresponding to the rental use. In this case, the depreciation is calculated by proportioning the full-year depreciation by the number of rental days in relation to the total number of days in the year.¹⁰ In the year in which the building is sold, no depreciation can be deducted.¹⁰
• Impact on capital gains: Annual depreciation reduces the acquisition cost of the building for capital gains tax purposes. When the property is sold, the original acquisition cost is not deducted from the sale price when calculating the capital gain, but rather the lower, depreciated acquisition cost.⁹ Depreciation therefore brings forward the tax benefit to the present, but correspondingly increases the capital gains tax payable in the future (assuming that the sale price exceeds the undepreciated acquisition cost).

3.7 Acquisition costs of furniture and household appliances

The purchase costs of furniture and household appliances acquired for a rental apartment are deductible from rental income, but the method of deduction depends on the purchase price and useful life.

• Small purchases (annual expense): If the purchase price of a single piece of furniture or household appliance is no more than €1,200, or its economic life is no more than three years, the purchase cost can be deducted in full in the year in which it was paid.⁸ The limit rose from €1,000 to €1,200 in 2021.¹²
• More expensive purchases (Depreciation): If the purchase price exceeds €1,200 and the useful life is more than three years, the acquisition cost cannot be deducted in one go. It is deducted as annual depreciation. Depreciation is calculated on an item-by-item basis, and the maximum amount is 25% of the remaining acquisition cost (residual value) of the item.⁸ When the undepreciated acquisition cost of an item falls to €1,200 or less, the remaining amount can be depreciated in a single installment in that year.¹²
  • Example: A refrigerator-freezer costing €2,000 is purchased for a rental apartment. In the year of purchase, 25% * €2,000 = €500 can be deducted as depreciation. The remaining expense is €1,500. The following year, 25% * €1,500 = €375 can be deducted as depreciation. The remaining expenditure is €1,125. In the third year, the entire remaining expenditure of €1,125 can be deducted at once, as it is less than €1,200.¹²
• Standard deduction for furnished accommodation: If the apartment is rented furnished, the landlord may choose to apply a standard deduction for furnishings instead of deducting the actual costs and depreciation. This deduction covers all costs related to furnishings and household appliances. The standard deduction is ⁸:
  • €40/month if renting a furnished studio apartment or room.
  • €60/month if renting a furnished two-room apartment or larger. The chosen deduction method (actual expenses/depreciation vs. standard deduction) should, in principle, be applied consistently in the same property in future years. A formulaic deduction is administratively simple, as it does not require the tracking of individual receipts and depreciation. However, deducting actual costs may be more economical if significant investments are made in furniture and appliances or if they need to be replaced frequently.

3.8 Other deductible expenses

In addition to the above, many other expenses related to rental activities can be deducted from rental income, such as:

• Property tax: Property tax on rental properties is deductible.¹⁰ No property tax is payable on housing shares.
• Insurance premiums: Insurance premiums paid by the landlord and related to the rental activity (e.g., property or landlord liability insurance).¹⁰
• Tenant acquisition costs: Costs incurred in finding a tenant, such as real estate agent fees, newspaper or online advertisement fees, and credit check fees.⁸
• Travel expenses: Necessary travel expenses related to rental activities. These include, for example, trips to show the apartment, inspect its condition, carry out maintenance or supervision, sign the lease agreement, or attend the housing company's general meeting.¹⁰ The use of your own car can be deducted up to the maximum mileage allowance confirmed annually by the Tax Administration (e.g., €0.30/km in the 2024 tax return; check the current amount at Vero.fi) or the actual expenses.¹⁰ Other actual travel expenses, such as train or bus tickets and, if necessary, reasonable accommodation expenses, may also be deductible. However, standard daily allowances for increased living expenses cannot be deducted.⁹
• Expert fees: For example, the cost of purchasing literature or training related to real estate investment.
• Membership fees: For example, the membership fee for the Finnish Landlords Association.
• Telephone and IT expenses: If the rental business is extensive and requires, for example, a separate telephone connection or the purchase and maintenance of a computer, the expenses incurred may be partially or fully deductible.
• Home office deduction: If managing rental activities (e.g., accounting, communicating with tenants, marketing) takes a significant amount of time and requires a workspace at home, you may be eligible for a home office deduction based on standard or actual expenses.

4. Losses from rental operations and deficit compensation

4.1 Occurrence of loss

Rental activities may result in a tax loss if the deductible expenses paid during the tax year (including interest on income-generating debt, depreciation, and deductible charges) exceed the taxable rental income received during the same year.¹⁸ Such a situation may arise, for example, in a year of renovation, in the early stages of rental operations due to high interest expenses, or if a large, taxable company loan share is paid off at once. However, it should be noted that no loss is confirmed for underpriced rentals.⁸

4.2 Reduction from other capital income

Losses from rental activities are primarily deducted from other capital income for the same tax year.¹⁹ If, for example, the taxpayer has dividend income or capital gains from other assets, losses from rental activities reduce this income and thus the tax on total capital income.

4.3 Deficit compensation

If there is no other capital income or it is insufficient to cover the entire loss from rental activities, a capital income deficit arises. This deficit can be partially offset in the taxation of earned income (such as salary or pension income). This is called a deficit credit.¹³

• Amount of credit: The deficit credit is 30% of the amount of the capital income deficit.¹⁴ This corresponds to the lower tax rate on capital income.
• Maximum amount: The maximum amount of the deficit allowance is €1,400 per year per taxpayer. If the taxpayer has a spouse, their combined maximum amount is €2,800 per year.¹³
• Child allowance: The maximum amount of the allowance is increased if the taxpayer or spouses together have minor children. The increase is €400 for one child and a total of €800 for two or more children.¹³ The maximum compensation for one child is therefore €1,800 and for two or more children €2,200 (for spouses, €3,200 and €3,600, respectively).

4.4 Confirmation and transfer of capital income losses

If there is still a capital income deficit after the deficit credit has been fully utilized (or if there is insufficient earned income tax to make the credit), the Tax Administration will confirm the remaining amount as a capital income loss.¹⁹ This confirmed loss can no longer be used in the taxation of earned income, but it is automatically transferred to be deducted from capital income in future years.¹⁹ The loss is deducted from capital income as it arises over the next 10 tax years.¹⁹

These mechanisms – deducting losses from other capital income, deficit compensation in earned income taxation, and carrying losses forward to subsequent years – form a system that mitigates the risks associated with real estate investment from a taxation perspective. They help to balance the impact of large expenses or temporarily low rental income on the investor's overall finances and support the continuity of operations even in more challenging economic times.

5. Sale of investment property: Taxation of capital gains

When an investment property is sold, the sale usually results in either a capital gain or a capital loss.

5.1 Capital gains/losses

A capital gain arises if the sale price of the apartment (less any costs associated with the sale) exceeds its tax-deductible acquisition cost.³ A capital loss arises if the sale price (less selling expenses) is less than the deductible acquisition cost.³

5.2 Tax liability

Capital gains from the sale of an investment property are always taxable capital income.³ They are subject to the capital income tax rate (30%/34%).³

5.3 Tax exemption for your own permanent residence

The provision in the Income Tax Act concerning tax exemption on capital gains from the sale of one's own permanent residence does not apply to investment properties. Tax exemption requires that the seller has owned the home for at least two years and has used it continuously for at least two years as their own or their family's permanent residence during the period of ownership.³ Renting out the home, even temporarily, interrupts this required continuous residence, in which case the capital gains become taxable.

5.4 Calculating Winnings – Two Methods

The amount of capital gains or losses can be calculated in two alternative ways. Taxpayers can choose the calculation method that is most favorable to them. ³:

• Method 1: Reducing actual expensesIn this method, the actual purchase price of the apartment and the expenses incurred in generating the profit are deducted from the sale price.³
  • Acquisition cost: Includes the original purchase price, transfer tax related to the purchase, and other direct acquisition costs. It also includes any renovation costs that have not been deducted annually as straight-line depreciation (housing shares) or that have been added to the acquisition cost of the building (real estate). In addition, capital contributions and loan repayments funded in the housing company's accounts are added to the acquisition cost.³ In the case of real estate, depreciation made over the years is deducted from the acquisition cost of the building.⁹
  • Expenses incurred in acquiring the profit: These typically include sales-related expenses such as real estate agent's commission, advertising costs, and document fees.³
• Method 2: Acquisition cost assumptionAlternatively, the so-called acquisition cost assumption can be deducted from the sales price. The amount of the assumption depends on the length of ownership of the asset 3:
  • Ownership period less than 10 years: The presumed acquisition cost is 20% of the sale price.
  • Ownership period of at least 10 years: The presumed acquisition cost is 40% of the sale price. When using the presumed acquisition cost, the actual acquisition cost and any expenses incurred in generating the profit (selling expenses) may no longer be deducted from the sale price.³

Choice of calculation method: Taxpayers should always calculate the capital gain using both methods and choose the method that results in a lower taxable gain (or a higher deductible loss).²⁰ The acquisition cost assumption is often the more favorable option when the home has been owned for a long time (especially more than 10 years) and its value has increased significantly in relation to the original acquisition and improvement costs. It is also practical if accurate information or receipts for all items related to the acquisition cost are no longer available.²⁴ Deducting actual expenses is typically more advantageous if the increase in value has been minor or if significant renovations have been made to the home, which have been added to the acquisition cost.

Table 2: Comparison of Methods for Calculating Capital Gains

(Based on: ³)

5.5 Loss on disposal

If the sale of an investment property results in a loss (i.e., the sale price minus selling expenses is less than the tax-deductible acquisition cost), this capital loss is tax deductible.³

• Reduction: Capital losses are primarily deducted from other capital gains received during the same tax year. If there are no capital gains or they are insufficient to cover the entire loss, the remaining loss is deducted from other capital income (such as rental income or dividend income) for that tax year.³ If there is still insufficient capital income, the remaining capital loss is carried forward to be deducted from capital gains and other capital income arising during the following five years.³
• No deficit compensation: Losses on disposals cannot be used to obtain deficit compensation in earned income taxation.³
• Small losses: A capital loss is not deductible at all if the total acquisition costs of all assets (not just apartments) disposed of during the tax year have been no more than EUR 1,000 AND the total disposal prices have been no more than EUR 1,000.³

6. Accounting and reporting to the tax authorities

6.1 Accounting and receipts

Even if a private individual engaged in rental activities is not required to keep accounts in the manner specified in the Accounting Act (unless the activities are very extensive and professional), they must keep records of their rental activities that provide sufficient information for taxation purposes.⁶ All income and expenses must be recorded, and related documents, such as receipts, invoices, rental agreements, and bank statements, must be carefully retained. Supporting documents must be kept for at least six years after the end of the tax year.⁶ Supporting documents do not need to be attached to the tax return, but they must be presented to the Tax Administration upon request.⁶ It is good practice to organize supporting documents by property and by year, for example in folders.

6.2 Notification to the tax authorities

• Rental income and expenses: Rental income and deductible expenses related to it must be reported to the Tax Administration annually^.2 It is recommended that you report your estimated rental income and expenses for the coming year to the Tax Administration during the year. This can be done either by applying for a change in the withholding tax percentage on your tax card or by applying for advance tax.² By doing so, the tax will be paid evenly throughout the year and large residual taxes ("mätkyt") will be avoided at the end of the tax year.² If the information is not reported during the year, it must be reported no later than the following spring on a pre-filled tax return.² Loss-making rental activities or situations where expenses equal income must also be reported.² The report is primarily submitted electronically via the OmaVero service or, if necessary, on paper forms (form 7H for housing shares, 7K for real estate, 7L for other property).²
• Changes: If there are significant changes in rental income, expenses (e.g., maintenance charges, interest), or the scope of rental activities (e.g., termination of a lease) during the year, these must be reported to the Tax Administration without delay. This is important so that the withholding tax percentage on your tax card or the specified advance tax can be updated to reflect the actual situation.² If you pay advance tax, you should not leave any payments unpaid, but should apply to the Tax Administration for a change or removal.²
• Capital gains/losses: Any gains or losses arising from the sale of an investment property must be reported to the Tax Administration. You can pay tax on capital gains in advance by applying for advance tax in OmaVero or on form 9 (Calculation of capital gains or losses) immediately after the transaction.³ It is advisable to submit the application by the end of the year of disposal to avoid penalties for late payment.³ In any case, the transaction details must be checked and, if necessary, corrected or added to the pre-filled tax return that arrives the following spring.³ Tax-exempt sales (does not apply to investment properties) and loss-making transactions must also be reported.³

6.3 OmaVero

OmaVero is the Tax Administration's electronic service, which is the primary channel for handling almost all tax matters. It can be used to apply for changes to tax cards, apply for or change advance tax, report rental income and expenses, and report capital gains and losses.²

Active and timely reporting of information to the Tax Administration is not only a legal obligation, but also helps real estate investors to better manage their finances. By anticipating the amount of tax due and paying it evenly throughout the year, you can avoid unpleasant surprises at the end of the tax year and ensure financial predictability.

Final words

Taxation related to the ownership and sale of investment properties is a significant issue, with both rental income and any capital gains being taxed as capital income. The definition of rental income, extensive deduction rights, and capital gains calculation principles discussed in this article emphasize the importance of diligence and up-to-date information in the taxation of real estate investors. Systematic documentation of tax-deductible expenses and timely reporting to the Tax Administration are key measures that not only ensure compliance with legal obligations but also enable tax optimization within the framework of the law. Although the tax regulations for investment properties may seem detailed, understanding them gives real estate investors a better ability to predict the return on their investments and manage their finances more effectively.

As tax legislation is constantly changing, it is important to follow the latest guidelines issued by the Tax Administration and, if necessary, seek expert assistance to ensure that investment activities are taxed appropriately and successfully in the long term.