Foreign Employee at a Shipyard
Welcome to Finnish Tax Administration’s web pages for foreigners at shipyards!
A foreign employee, who is a resident in Finland (stays more than 6 months in Finland), is applied by the same regulations and orders on the same criteria as those of permanent residents in Finland. In some cases of the foreign employees the tax treaty may set limits to Finland’s taxation right.
General information about a foreign employee’s taxation in Finland
If a foreign employee stays in Finland max 6 months and his employer is a Finnish company (or the employer has a permanent establishment), employee’s final tax at source will be 35 %. The employer withholds tax from the employee’s pay. The employer has to withhold the tax even if the employee doesn’t provide a tax-at-source card to the employer. The employer may exempt the tax-at-source deduction from the wages and fringe benefits before collecting the tax. This deduction is applicable only if the local tax office has recorded it in the employee’s tax-at-source card. The deduction is € 510 per month, or alternatively, € 17 per day, if the accrued wages are from a shorter time than a month.
If a foreign employee stays in Finland max 6 months and his employer is a foreign company (the employer is non-Finnish and it does not have a permanent establishment) Finland will usually not tax the employee’s income (Exception: leased employees). Read more about “Taxation of the leased employees”.
If a foreign employee stays in Finland for longer than 6 months, he pays taxes from his salary to Finland. The foreign employee’s salary is taxed in Finland according to the same rates as those of permanent residents in Finland. The employee must apply for a tax card or self-initiated advance tax from the local tax office!
If the employer is not Finnish or the employer does not have a permanent establishment in Finland and if the employer is not entered in the employer register, he is not obligated to withhold tax for the Finnish tax administration, then the tax card is not needed. Then it is important that the employee asks for the local tax office to compute a self-initiated advance tax (ennakkovero) for him. The employee will then make the prepayments himself. If the employee neglects his prepayments and has no withholding, he will end up having to pay interest on his tax.
The tax treaty may limit Finland’s taxation right in some cases, where a foreign employee’s stay in Finland is less than 183 days in a calendar year (for example: Germany, Hungary) or in 12 successive months (for example: Russia, Estonia, Latvia, Lithuania, Poland) and the employer is a non-Finnish company and it does not have a permanent establishment in Finland.
Applying for a self-initiated advance tax
A foreign employee, who is a resident in Finland (stays more than 6 months in Finland), and who is obligated to pay taxes in Finland from his income and
- his employer is not Finnish and
- his employer does not have a permanent establishment in Finland and
- his employer is not entered in the employer register,
has to pay his taxes himself, because in this kind of cases no withholding tax is provided to Finland. The employee has to ask for the local tax office to compute a self-initiated advance tax (ennakkovero) for him. The self-initiated advance tax is applied for by filling in an application for prepayment and for change in withholding tax percentage (5010) and returning it to the local tax office. If you are working as a leased employee, see applying of the self-initiated advance tax here.
Applying for a tax card
A foreign employee coming to Finland and who has
- a Finnish employer or
- a foreign employer who has a permanent establishment in Finland or
- a foreign employer who does not have a permanent establishment in Finland, but is entered in the employer register
needs a tax card for withholding the tax. A tax card is applied for by filling in an application and returning it to the local tax office.
-
Application for tax card for foreigners and persons who have been living abroad
Foreign employee, who is going to stay in Finland for longer than six months, applies for his first tax card using this form.
-
Application for prepayment and for change in withholding tax percentage
Foreign employee, who is going to stay in Finland for longer than six months, applies for his tax cards using this form (exception: for the first Finnish tax card, use the form above).
-
Заявление, бланк №5036 (pdf)
Foreign employee, who is going to stay in Finland for longer than six months, applies for his tax cards using this form (exception: for the first Finnish tax card, use the form above).
-
Application for tax-at-source card – final withholding tax
A foreign employee, who is going to stay in Finland for six months at the most, applies for his tax card with this form.
In Finland, resident individuals are taxed according to progressive tax rates for national tax purposes and flat rates for municipal tax (including church tax and social security). Withholding tax percentage can be estimated with the help of a tax percentage calculator. In Finland the tax year is a calendar year, which means that the taxable annual income is determined by the wages and the fringe benefits earned and paid during a calendar year.
An employee needs a Finnish personal ID number when applying for a tax card. Even a short-term employment contract can qualify a person for applying for the Finnish personal ID. Applicants can in most cases conveniently submit their application documents at the local tax office when applying for the tax card (the employee’s withholding allowance certificate). In this way, applicants can save a trip to the Local Register office, i.e. they do not have to go to the Local Register office separately. Please note: If an employee’s estimated stay in Finland will last more than one year he has to submit the ID number application documents at the Local Register office instead of local tax office.
Contact addresses of Local Tax Offices:
Satakunta Tax Office
Rauman toimipiste
Valtakatu 6
26100 RAUMA
Varsinais-Suomi Tax Office
Aninkaistenkatu 1 D
PL 921
20101 TURKU
Other Local Tax Offices’ contact addresses municipality.
Tax Return
If a person has applied for a Finnish personal ID number in the previous calendar year he usually receives a pre-populated, pre-completed tax return in April. The person should check the correctness of the pre-populated information. If there are any errors and omissions, the necessary corrections should be made and the form should be signed and sent to tax office. The deadline to send back the form is printed in Section 1 of the form.
If a resident person does not receive a pre-populated tax return, it is the legal obligation of the taxpayer to fill in an empty tax return form and send it to the tax office before the deadline. The most common reasons for foreign employees not to receive a pre-populated tax return are the point of time of registration or an insufficient address. In these cases the taxpayer may contact the local tax office or fill in an empty tax return form and send it to the tax office. More information on a pre-populated tax return:
Foreign leased employees
Wages of leased employees, who stay in Finland for less than six months, are subject to Finnish income tax if they come from Iceland, Norway, Sweden, Denmark, Latvia, Lithuania, Estonia, Belarus, Georgia, Moldova, Poland, Kazakstan, Isle of Man, Cayman Islands, Bermuda, Guernsey, Jersey or a country that does not have a tax treaty with Finland. The wages are taxed the same way as if the employer was Finnish. (See above: “If an employee stays in Finland max 6 months”).
Employees (leased and all others, too) who stay in Finland for over 6 months are subject to Finnish income tax regardless of what country they come from (See above: “If an employee stays in Finland for longer than 6 months”).
The income is considered to be earned from Finland if the work of the leased employee is done here, even if the employer is foreign. The condition of taxing the wages is the tax treaty that does not prevent Finland’s taxation right.
If a foreign employer doesn’t have a permanent establishment in Finland, it does not necessarily have to withhold tax. Therefore, the employee has to ask for the local tax office to compute a self-initiated advance tax for him. This must be done by the end of the month following the calendar month when the working has started, at the latest. If the employee has not asked for advance taxes, the tax office can impose a penalty tax on him. Before asking advance taxes the employee has to have Finnish personal identity number.
Read more about foreign leased employees’ taxation:
Social security payments
When a foreign employee comes to work in Finland for more than 4 months, he has to pay health care payment (1,30% v.2013) and per diem payment (0,74% v.2013) to Finland, payments are included in the tax percent. Besides tax, the employer will also withhold employees share of pension insurance and unemployment insurance payments. The social security payments mentioned above are withheld unless the employee has the certificate E101/A1 or E102, which prove that the person is not insured in Finland.
Tax-free compensation for travel expenses
Compensations for travel expenses paid to residents in Finland are tax-free, under certain conditions, up to the maximum amount defined every year in an official decision. The compensations for travel expenses include kilometre allowance, daily allowance, meal money and accommodation expenses. A foreign employee, working in Finland, is entitled e.g. to tax-free daily allowance of Finland (38 euros in 2013), if the requirements for paying tax-free compensation expenses are otherwise met.
A Non-resident in Finland is entitled to, for example, daily allowance (equivalent to Finland’s daily allowance 34 euros in 2011), compensation for accommodation expenses (a voucher from an accommodation business is needed) and compensation for travelling tickets, and they will not be considered as salary.
Advance ruling
Every taxpayer has the right to request for a preliminary, advance ruling to find out what the tax consequences of a planned business or family transaction would be. The tax authorities must usually abide by the outcome of a ruling, not against it. A written, free-formed request for a ruling is required. The bodies within the Tax Administration that process ruling requests are (1) The Tax Administration and (2) the Central Tax Board.
Rulings are prepared against a fee. The fees vary from € 120 to € 3 470 depending on claimant and type of tax. Preliminary rulings on prepayment of taxes or employers social security contribution, which are processed by the regional tax office, cost € 120. Advance rulings on the most common issues of a taxpayer’s income taxation, cost € 350.
Tax treatys
When a foreign employee leaves Finland, he should pay attention to:
- Notice of change of address and the new address abroad are given to the Register Office, but it is good to give the same information also to the tax authorities
- It is possible to give the tax return from the present year before leaving from Finland
- If a person has to pay self-initiated advance taxes, he should fill in the application for cancelling the rest of them, so that the unnecessary taxes will not be collected
- A notice of the new bank account number for paying the possible tax refund abroad (a bank account number can also be added to the tax return)
NOTE: The information on this page is for general guidance only. More detailed information can be found on the Finnish Tax Administration’s Finnish and Swedish pages (www.tax.fi) or from a tax office.