THE SELF-EMPLOYED PERSONS’ PENSION (YEL)
An artist can take out pension insurance in accordance with the Self-employed Persons’ Pension Act if he or she carries out artistic work with an intent to profit.
Contributing to a self-employed person’s pension does not require the artist to establish a company or commence activities as a private trader. A person who pursues independent operations with intent to profit can be considered an entrepreneur for purposes of the Self-employed Persons’ Pension Act. An independent artist might be such a person.
The authorities can determine that an artist is an entrepreneur even if that person has not him- or herself made any pension contributions or been otherwise considered an entrepreneur. The tax authorities notify the Finnish Centre for Pensions about the artist’s entrepreneurial operations if his or her tax return indicates that the entrepreneurial income exceeds the specified limits.
The entrepreneur is responsible for obtaining pension insurance. Self-employed persons’ pension insurance is mandatory if the confirmed income is above a certain threshold (EUR 7,645.25 per year as of 2017) and the person does not fall within the scope of another pension act in connection with the same work activities. Supplementary personal pension-insurance policies do not substitute for the statutory insurance. An artist can fall within the scope of the Self-employed Persons’ Pension Act retrospectively for reason of the above-mentioned notification submitted to the Finnish Centre for Pensions by the tax authorities. The artist will then be required to pay any pension contributions that are due, with penalty interest.
The essential part of YEL insurance is the determination of the person’s confirmed income under the YEL scheme. The confirmed income under this scheme determines the YEL pension contribution and later also the amount of the pension. It is also the basis for determination of many social-security benefits, such as parental and sickness allowances and earnings-related unemployment benefits.
The confirmed income under the Self-employed Persons’ Pension Act reported for the determination of the self-employed persons’ pension contribution cannot be changed retrospectively. This is why special attention should be paid to the amount of the confirmed income already when one is applying for the self-employed persons’ pension.
In 2017, the YEL pension contribution for those under 53 or between 63 and 67 years of age is 24.1% of the confirmed income, and for those 53–62 years of age it is 25.6% of the confirmed income. A person starting out as an entrepreneur will receive a discount from the pension contributions for the duration of the first four years. The new entrepreneur’s discount rate in 2016 is 22%. For an entrepreneur starting operations in 2017, the YEL pension contribution is 18.8% of the confirmed income for those under 53 or age 63–67 and is 19.97% of the confirmed income for those between 53 and 62 years.
The pension contributions are tax-deductible. The contributions can be deducted also on the spouse’s tax return.
In addition to arranging pension cover for him- or herself, the artist may be responsible for obtaining pension cover for other people. This is the case in, for example, productions wherein the artist hires people who will be in an employment relationship with him or her to take care of work related to the project. The artist will then have a pension-insurance obligation with regard to the persons working under this employment relationship, and the artist is, accordingly, in an employer’s position.
Determination of a visual artist’s confirmed income for YEL pension insurance
The Finnish Centre for Pensions provides instructions on the determination of an entrepreneur’s confirmed income under the YEL scheme in a confirmed-income guide that it publishes each year. In addition to general instructions, the guide contains sector-specific instructions for determining the confirmed income for various sectors.
For visual artists, the Finnish Centre for Pensions has published two sets of table-form instructions for the purpose of determining a visual artist’s confirmed income. In addition to general instructions for all visual artists, there is a separate instruction publication for sculptors.
The tables included in the instructions provided by the Finnish Centre for Pensions can be used as tools in negotiating on the self-employed persons’ pension with pension-insurance institutions and on the confirmed income for YEL purposes.
In accordance with the instructions provided by the Finnish Centre for Pensions, the confirmed income on which the visual artist’s self-employed persons’ pension is based is determined in line with the artist’s annual sales of works, as presented below.
Annual sales, euros per year Confirmed income for the entrepreneur, euros per year
Here, ‘annual sales’ refers to sales from which the expenses incurred in the artistic operations have been deducted. If the artist falls within the scope of VAT liability, the figure means the sales in the relevant year without VAT less the expenses incurred in the artistic operations without VAT.
The deductible expenses of visual artists vary significantly. This is why, when determining the confirmed income for a self-employed person’s pension insurance, one should pay special attention to taking the allowable expenses into account. For example, a sculptor creating a large work of art may include paid services such as foundry and stone-processing expenses in his or her work-space and materials costs.
Determining the confirmed income is very important because this is taken as the basis for many benefits affecting an entrepreneur’s income, such as parental and sickness allowances. For an independent artist, the actual amount of income is not very significant in this respect, since benefits are determined on the basis of the YEL declared income, not actual income.
From the beginning of 2009, in addition to the confirmed income for YEL, the grant income falling within MYEL scope affects the amount of an artist’s social benefits.
Since the beginning of 2009, all grants that exceed the lower limit (EUR 3,822.63 in 2017) and have been awarded for work lasting at least four months fall within the scope of the Farmers’ Pension Insurance Act (i.e., MYEL) and are not included in the calculation of the confirmed income for YEL. Also, state grants for five years or longer awarded before 2009 and still under payment are linked to a separate state pension scheme and are not taken into account when one is determining the confirmed income for YEL.