Decision of the Supreme Administrative Court

On 12 May 2023, the Supreme Administrative Court issued its decision KHO 2023:42 on invoicing service companies and self-employed light entrepreneurs. The decision changes the previous tax policy.

What are taxable wages?

According to the Supreme Administrative Court’s decision, the taxable wages of a light entrepreneur who uses invoicing services include compensation paid for work, from which the fee charged by the invoicing service company and the employer’s health insurance contribution have been deducted. 

Because the fee paid to the invoicing service company and the employer’s health insurance contribution have been deducted from the amount of the light entrepreneur’s taxable wages, the light entrepreneur can no longer deduct them in their own taxation.

What are the grounds for wages subject to withholding and the employer’s health insurance contribution?

An invoicing service company must pay the employer’s health insurance contribution if the light entrepreneur is obligated to take out YEL insurance. The invoicing service company pays the employer’s health insurance contribution based on wages subject to withholding.

Based on the Supreme Administrative Court’s decision, the employer’s health insurance contribution is calculated from the amount of wages from which the invoicing service company’s fee and the employer’s health insurance contribution have first been deducted. No value added tax is calculated on the amount of wages.