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Taxation of maternity, paternity and parental allowances
Maternity, special maternity, paternity and parental allowances are taxable income. They are taxed in accordance with the tax laws. Even though the allowance is lower than the salary, the withholding rate is not necessarily lower. The reason for this is that it is not possible to make the same tax deductions from the allowance as from the salary.
Amount of preliminary tax withholding
Usually, tax is withheld from maternity, paternity and parental allowances at the same rate as from your salary. If the withholding rate on your salary is lower than 25%, tax is withheld on the maternity, paternity and parental allowances at 25%, minimum, unless you apply for a revised tax card from the Tax Administration.
If you are paid maternity, paternity or parental allowance at the minimum rate, the withholding rate is 20%.
If you are in paid employment and get maternity or parental allowance at the same time, the allowance is paid at the minimum rate, and the withholding rate is 40%.
In the case of the partial parental allowance, the salary withholding rate is used.
If the allowance is paid out in a single payment or retroactively for a period other than the current tax year, tax is withheld in accordance with the decision issued yearly by the Tax Administration concerning the procedures and rates of tax withholding. For example, if paternity allowance is paid out in January but for a period before 1 January of the current year, the tax withholding rate is determined on a day-by-day basis according to the amount of the allowance. Tax is withheld according to the withholding table also if your withholding details are not available to Kela.
The Tax Administration provides Kela with the tax prepayment details for basic tax cards.
If you have a tax-at-source card you must yourself send the tax card to Kela. Tax-at-source cards are used by persons who live abroad or who move to Finland from another country.
Unless you provide Kela with a new revised tax card at the turn of the year, the withholding rate for the previous year is used in January.
You may wish to ask the tax administration for a revised tax card
If the withholding rate for the allowance seems too low or too high, you can check the withholding rate using the calculator at www.vero.fi/verolaskuri. With a revised tax card, the withholding rate can be less than 25%. You can apply for a revised tax card for social security benefits at MyTax. The Tax Administration will, on request, send the revised tax card directly to Kela.