Salary vs dividends from Finnish Ltd 2026 — which is more tax-efficient?

An owner of a Finnish limited company (Oy) can take income either as salary or dividends. The two routes are taxed differently, and the optimal split depends on the company's net assets, the owner's personal tax situation, and the YEL work income. This is one of the most common questions Finnish Oy owners ask.

This guide covers corporate tax, the dividend tax thresholds, and a practical example of the optimal split.

Corporate tax 20%

A Finnish limited company pays corporate income tax of 20% on its profit. Corporate tax is calculated on taxable profit — revenue minus all deductible costs, including salaries.

This is central to the calculation: salary paid to the owner reduces the company's taxable profit. If the company's profit is €100,000 before any owner withdrawals, and the owner takes €50,000 as salary, the company pays corporate tax only on €50,000 — i.e. €10,000.

Dividends, by contrast, cannot be deducted from the corporate tax base — they are paid from after-tax profit. This means dividends are taxed first at the company level (20%) and then again at the owner's personal level.

The 8% net asset threshold for dividends

Dividends from a non-listed Finnish company are split into two tax categories based on whether the amount falls within or above 8% of the company's net assets:

• Dividends within the 8% threshold — only 25% is taxable as capital income, the remaining 75% is tax-free. The effective rate is therefore 25% × 30% = 7.5%. This favourable treatment applies to a maximum of €150,000/year per shareholder.
• Dividends above the 8% threshold (or above €150,000) — 75% is taxable as earned income, 25% is tax-free. The earned-income portion is added on top of other earned income, pushing the effective rate to 40–55%.

Net assets are calculated as total assets on the balance sheet minus liabilities. Example:

In practice the 8% threshold is often low relative to the owner's living costs, so most Oy owners must take a significant portion of their income as salary.

The optimal split in practice

Consider an example: company profit is €100,000 before owner withdrawals, and company net assets are €100,000.

The optimal monthly salary is typically €3,500–4,500/month. At this level:

• Salary is sufficient to cover living costs while building the company's net assets over time
• The most favourable dividends under the 8% rule (€8,000) can be withdrawn at an effective rate of ~7.5%
• Retained profit grows net assets, improving future dividend potential

Note that the optimal salary level also depends on the YEL work income: salary and YEL work income can differ, and both affect pension accrual and social security entitlements.

YEL and the owner's social security

An Oy owner who works in their own company is required to take out YEL insurance — TyEL pension insurance does not apply to a company owner holding more than 30% of shares or voting rights.

YEL work income directly determines:

• Pension accrual — the higher the work income, the larger the eventual pension
• Kela sickness allowance and parental allowance
• Entrepreneur unemployment fund benefits (also requires membership of an AYT fund)

A YEL work income set too low significantly weakens social security coverage. Set too high, it inflates contributions unnecessarily. The balance is typically between €20,000–40,000/year depending on salary level and life situation.