Tax credit for domestic help, Finland


Health and social work
Target Groups: 


This case example describes the role of the ‘tax credit for domestic help’ scheme in reducing the incidence of undeclared work in Finland’s household services industry. The initiative enables the purchasers of such services to deduct a proportion of the cost through the tax system, thereby providing an incentive to employ workers in the formal sphere. In 2009, the maximum deductible amount has been increased to €3,000 and the coverage has been extended to other services such as the installation and maintenance of information technology (IT) in the home.



Finland’s household services industry is an area of low productivity, where the market barriers are relatively low and competition in terms of price is extremely high. Among the difficulties experienced by the industry are problems with labour supply, the low price of services, the level of undeclared work and the underdevelopment of the market. However, an initiative known as the ‘tax credit for domestic help’ offers the opportunity to deduct a proportion of the costs of these services through the tax system, to help discourage undeclared work and simultaneously encourage formal employment in this industry. The actors involved in implementing this initiative include the tax authorities, private companies and the households themselves.


The tax credit for domestic help is a tax deduction scheme whereby the householder pays remuneration to a formal private sector company for services such as cleaning or home repairs, or for care of an elderly person or a child in the home. The deduction scheme helps to reduce the level of undeclared work in the industry. Under this scheme, it is more advantageous for the purchaser to require a receipt for the work done than to have it undertaken as undeclared work. The domestic help credit scheme can also increase the demand for small-scale work needed in a household.

Specific measures

In Finland, the possibility to partly deduct the cost of household work through the tax system has been introduced across the country since the beginning of 2001. The system was originally piloted over a three-year period in a number of regions from 1997, such as the Etelä-Suomen or Oulun ja Lapin county. Another model was also tested during this time, involving direct subsidies to companies that provide services to households.

At present, it is possible to deduct 30% of the wage itself (or just 10% in 2003), including the social security contribution, or 60% of the work compensation. Work compensation refers to payment to an entrepreneur or enterprise for work; therefore, the payment is not a wage as such. The maximum amount of deduction was €2,300 in 2008 (or €900 in 2003); in 2009, this threshold has been increased to €3,000. The deduction is granted on an individual basis and can therefore be given to both spouses. This maximum amount may include work involving maintenance and reconstruction of a dwelling or holiday home up to a threshold of €1,150 in 2008. The own risk for the deducted costs is €100.

Since the beginning of 2009, it is also possible to deduct the cost of work involving the installation, maintenance and support of information technology (IT) and telecommunications in the home. This includes hardware, software, data security and network connections.

Evaluation and outcome

In Finland, a total of 155,802 households – or 6.6% of all households – availed of the tax credit for domestic help in 2004. The total tax deductions amounted to €111.3 million overall. In 2002 alone, 92,000 people availed of the scheme, with the total tax deduction amounting to €42.7 million. Over 90% of the participating households purchased the deductible service from a company. Some 73% of the households purchased repair services, while 25% purchased cleaning services. Only 4% purchased human care services or childcare services, and about 3% purchased gardening services. The recently introduced possibility of buying services for parents and grandparents was used by just 2% of the households applying the tax deduction.

During 2004, the total volume of household services that were purchased under the tax deduction scheme amounted to €457 million. Of this figure, over 90% corresponds to repairs. In terms of employment, the estimated effect of the deduction scheme amounted to about 10,000 work years, or around 12,100 jobs, in 2004; moreover, the estimated net effect, that is, cases where the deduction had a decisive effect on the purchase of the service, amounted to over 3,500 work years, or around 4,600 jobs. Approximately 84% of the total net work years, or 70% of jobs, corresponded to household repairs; a further 14% of net work years, or 26% of jobs, related to cleaning services. The jobs that have been created as a result of the tax deduction system are market-regulated and do not have an overriding effect on other jobs.

In 2006, the tax credit scheme had some 243,000 users, with the total deduction granted amounting to €165 million. In 2007, about 8%–9% of households used this system. It is estimated that, in 2010, the proportion of users will increase to 10% of all households.

Obstacles and problems

It is believed that if households were able to benefit from the tax credit scheme immediately, that is, at the time of the purchase, then the demand for household services would increase considerably.

Awareness of the advantages of the deduction system was initially poor but has increased in recent years. Households would also like to benefit from a tax deduction when purchasing IT and digital services, along with catering services, party services and moving services, as well as beauty, hairdresser and meal delivery services in connection with human care. As mentioned, since 2009, the scheme has started to cover services involving the installation, maintenance and support of IT and telecommunications technology in the home.

Lessons learnt

In order to enhance the impact of the tax deduction system on the household services sector, the development efforts should focus on increasing the use of the deductions and the demand for household services. At the same time, it should centre on improving the availability of professional workers and on solving the specific challenges facing the companies providing household services.

Other measures could include the Tax Administration’s valuation of the cleaning services bought by companies for their staff as fringe benefits, the promotion of so-called ‘service vouchers’ and the reduction of value-added tax (VAT) for household services.

Impact indicators

With the assistance of the tax credit scheme, the majority of previously undeclared work has shifted into the legal sphere. According to the entrepreneurs’ own estimate, the proportion of undeclared work has decreased from about 60% to 25% of household services. The level of undeclared work has diminished particularly in the area of renovation work, where a high proportion of such workers were employed both on an informal and legal basis prior to the introduction of the domestic help credit scheme.

Another significant benefit of the scheme is that it has activated a new type of demand for household services worth hundreds of millions of euro, having initiated a whole new service market, at least in terms of cleaning services.


The system is transferable; a number of other countries, including Denmark, have already introduced a similar initiative.


Judging by its effects, the domestic help credit scheme has proved to be an effective and evolving system.


Main organisation responsible:

Finnish Tax Administration, Website:


Niilola, K., Valtakari, M. and Kuosa, I., Kysyntälähtöinen työllistäminen ja kotitalousvähennys, Työpoliittinen tutkimus 266, 2005, available online at:

Niilola K. and Valtakari, M., Kotitalousvähennys, Työpoliittinen tutkimus 310, 2006, available online at:

Tuovinen, M., Yksityiset kotityöpalvelut ja kotitalousvähennys,

Valtiovarainministeriö, Kansantalousosasto, June 2007, available online at:

Articles on the subject

Further articles on this topic are available online at:

Piet H. Renooy, Regioplan, and Paivi Kantanen, Finnish Ministry of Employment and the Economy


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