Instructions for filling out the Annual Information Return of employers (Employer Payroll Report) or other payers 2017

The instructions below are designed for the electronically submitted filings (VSPSERIE and VSPVYHT) and Form 7801e. Additionally, guidance is included regarding the electronically submitted filing VSPSKUST.

Contents

Introduction

Changes on the previous reporting year

Payor-specific information

Acceptable personal identity number or Business ID formats
Total deductions made from social security contribution (631)
Total wages paid out by substitute payer (such as KELA), for which the actual employer has paid social security (650)
Total wages and compensation that are subject to tax at source and employer‘s social security contribution (614)

Information on wage-earners/recipients/beneficiaries

  • Recipient’s personal identity no / Business ID (11)
  • Types of Payment (10)
  • Country code in connection with 5/5Y/7Q Types of Payment (5)
  • Month of payment of compensation or Cross-trade time (12)

Wages

  • Wages for principal (P) and side occupations (1)
  • Dividends/profit surplus based on work effort (wages) PT
  • Wages paid to self-employed individuals, YEL/MYEL pension insurance (PY, 1Y)
  • Dividends/profit surplus (wages) based on work effort (beneficiary carries insurance, YEL or MYEL) YT
  • Wages/fees paid to sportsmen or athletes (P)
  • Wages paid by a substitute payor and pay security (=palkkaturva) (6, 61)
  • Seafarer’s income (2, 2Y)
  • Deducted before taxes withheld (17)
  • Taxable fringe benefits, i.e. benefits in kind (20-49)
  • Employee stock options and grants (35)
  • Payments of wages not included in the base of health insurance contributions (36)
  • Tax-exempt reimbursement for expenses (50-56)
  • Taxable reimbursement of costs/expenses (57)
  • Premiums for voluntary additional pension insurance (80-82)

Compensation for work, payable to independent contractors

  • Nonwage compensation for work (H)
  • Dividends or profit surplus based on work effort (non-wage) (HT)
  • Compensation for use including royalties (G, G1)
  • Wages paid to sportsmen or athletes (H2)
  • Other taxable income, deemed as earned income (H4)
  • Reimbursement, paid by a non-profit organisation (H5)

International tax situations

  • Finnish worker posted to another country – wages as basis for insurance premiums, subject to 6-month rule (5, 5Y)
  • Worker arriving in Finland
  • Instructions to foreign employers with no permanent establishment (PE) in Finland

Introduction

This memorandum discusses the annual Employer Payroll Report (EPR), the deadline of which is the end of January following the year of payment of wages. Household employers are not required to submit any EPR unless the amount of wages paid out to the same employee is at least €200 during the calendar year.

The report can be submitted electronically to the Finnish Tax Administration. The e-services called Tyvi and Ilmoitin are available. In addition, web forms, and printable paper forms can be accepted. Employers filing for five (5) or more people earning income must use e-file to submit their EPRs electronically. This requirement does not concern individuals or estates of deceased persons as employers.

Employers must become familiar with the statutes on mandatory insurance contributions. We assume that employers know these rules already and thus the instructions below do not give any guidelines as to whether an insurance contribution for pension or unemployment relief purposes should be payable or not. Instead, the instructions below describe the requirements of how to report these payments after they have been made. Similarly, not all alternative accounting and reporting routines are covered in the examples shown below.

Note: The translation into English is an abbreviated version. For example, for precise information on how to report the wage payments that follow a bankruptcy (involving substitute payers and "pay security" – palkkaturva), see the original Finnish-language instructions.

Deadlines for submittal

If the filer uses paper-printed forms to submit the Annual Information Return of employers (Employer Payroll Report) or other payers, and on payments made to nonresident taxpayers, the deadline is end of January. If the filer submits it electronically, the deadline is 5 February 2018.

Making corrections; using the new identifier of the filing

For more information on how to make corrections to annual information returns after you submitted them, see ”Making corrections” (vero.fi > Lomakkeet > Vuosi-ilmoituslomakkeet).

The process for entering corrections involves the submittal of a new return: the latest submittal will always replace the previous one. There can only be one return with the same identifier. If there is a mistake in the information return, you must invalidate it and send us a replacement.

The identifier for this annual information return is:

  • File identifier
  • Type of Payment
  • Year of payment
  • Payor's ID
  • Beneficiary's personal identity code or business ID
  • Month of payment/cross-trade time

Changes on the previous reporting year

Company car benefit, age group (23)

Updated vehicle age groups A, B and C.

Reimbursement paid by a nonprofit organisation (H5)

Updated guidance for this Type of Payment.

Payor-specific information

This information is designed for reporting the facts that have an impact on the health insurance contribution (formerly 'social security'), including deductions from it and payments made. Do NOT report the total of paid wages in this section.

If the report is filed on paper, it is mandatory to give the payer's name, Business ID or personal identity code, the year of payment and the details of a person to contact.

The location where this information is found on the Employer Payroll Report paper form (7801e) is the fields 631, 650 and 613; similarly, on the Annual Information form for beneficiaries with a limited tax liability i.e. nonresidents (7809e): field 614.  For electronic filers, the payor-specific information is found in the VSPSVYHT filing code structure.

The payor-specific information (data elements 631, 650, 613 or 614) is filed only once per calendar year. For electronic filers, if data elements 631, 650, 613 or 614 are without reportable information for the year, the payer does not have to specify the year of payment or the contact person etc. If you or your organisation is a registered employer paying wages regularly but you have not paid them during the reporting year you must fill in data element 613 accordingly, and give your Business ID or personal identity code.

The payer-specific information should contain precise information on the following:

  • Year of payment
  • Payor's Business ID or personal identity number
  • Person to contact
  • 631: Total deductions made from health insurance contribution (7801e)
  • 650: Wages paid by substitute payor (usually Kela – 7801e)
  • 613: No wages were paid during the calendar year (7801e)
  • 614: Total wages and compensation, which are subject to tax at source and employer‘s health insurance contribution (also includes the tax values of fringe benefits – 7809e).

Example: Over the calendar year, the employer has had three people on the payroll. This employer does not have any exceptional reportable information regarding health insurance contributions, which would entail the filing of separate payor-specific information. In this way, the employer should only file three recipient-specific itemizations to show the paid wages and the withheld taxes.  If the employer files the report on the paper form, the payor-specific lines must show Payor's name, Business ID/personal identity code, the Year of payment and the person to contact.

Information concerning non-employer payors (making 'other 'payments)

Payor name, address, personal identity number or Business ID must be reported. If the payment is made from a sub-accounting unit, its entire code number must be reported. Annual information returns must be filed using the same identity numbers as are used by the filer when submitting self-assessed tax returns on employer contributions (formerly 'Periodic tax returns'). If money has been withheld on payments made to limited-liability companies, to cooperative enterprises or to other corporate bodies, the payor must report its head-office Business ID (not a sub-accounting unit identity code).

To make sure of sufficient contact details, give the name and telephone number of a person to contact.

Acceptable personal identity number or Business ID formats

Payors' full and complete personal identity numbers or Business IDs must be showing.  See the following examples:

  • Personal identity number 101010-101A
  • Business ID 0123456-2
  • Sub-accounting unit ID 0123456-2-001.

Total deductions made from health insurance contribution (631)

If you must adjust the contribution due to a daily allowance or other similar reason, you must enter the adjustment in data element 631.

Adjusting earlier contributions

Report your self-initiated deductions from the contribution payments in data element 631 if they depend on:

  • Payments of daily allowances within the meaning of Public Healthcare Acts
  • Payments of daily allowances due to motor accident insurance contracts etc.
  • Pension benefits, rehabilitation allowance and disability pension that have been paid, as required by the laws that govern employment pensions.

Further reasons for self-initiated deductions from contribution payments include wage payments for paid vacations, if the employee is on parental leave and coverage from Kela has been received to finance these payments.

Report the deductions during the year when they were made.

Note: any adjustment you make must also be reported on tax returns on employer contributions (formerly 'Periodic tax return'), see separate instructions: Filing and paying self-assessed taxes

Excessive health insurance contribution

When you have reported a too high contribution on the tax return by mistake, you can correct the situation by subtracting the excess from the reported contributions of the same calendar year.  No entry in data element 631 must be made in this case.

However, if the mistake is detected and the correction made after the turn of the year, you must make an entry in data element 631.

Total wages paid out by substitute payer (such as KELA), for which the actual employer has paid health insurance (650)

Employers must use data element 650 to report any wages that a substitute payer has paid out and on which the substitute payer has withheld tax (examples of substitute payers are Kela, ELY-Centres and bankruptcy estates) and paid it forward to the Tax Administration. Concerns situations of bankruptcy, liquidation or financial difficulties.  No itemizations are necessary, however, the actual employer remains responsible for social security contributions.  For this reason, data element 650 is used for reporting the total amount of these wages. The substitute payer gives the itemization report.

Example: Household employers use data element 650 to report Kela-paid private medical-care support and to report a similar municipality-paid support.

Employers must also use data element 650 to report the tip income, paid by clients, of doormen at restaurants, for which the employer pays social security contributions but does not withhold tax. Tip income is not included in the itemization. If there is a pre-determined amount of tip income agreed, the employer company is expected to withhold tax in the usual way and pay all employer’s contributions. Such an income is included and reported in the itemization in the same way as wages. The employer must report these wages in the recipient-specific itemizations.

Use data element 650 also to report any transfers of sportsmen's wages to a special fund when social security contributions have been paid on them.

Total wages and compensation that are subject to tax at source and employer‘s social security contribution (614)

If a nonresident wage earner carries Finnish social insurance, the employer must pay Finnish social security contributions on any wages paid. Use data element 614 to report the sum total of all wages paid to nonresidents (fringe benefits included). If the wages are not liable for employer’s health contribution, enter a zero at 614.

Use the VSRAERIE specification or Form 7809e to report recipient-specific information for each nonresident employee on the payroll.

The original Finnish version of this memorandum includes a more extensive discussion of the coverage of the Finnish social security system. For more information, see instruction (in Finnish; Swedish): ”Sairausvakuutusmaksut – veroilmoitus työnantajasuorituksista ja vuosi-ilmoitus 2017 ”.

Information on wage-earners/recipients/beneficiaries

Each worker on the payroll should be itemized separately.

Recipient’s personal identity no / Business ID (11)

Enter the personal identity code or Business ID in line 11. If the recipient is not a physical person, they can be a limited joint-stock company, a partnership or other legal person – in these situations, enter their Business ID.

You must enter the identity codes in full.  Examples of acceptable formats:

  • Personal identity no – 101010-101A or 100209A202B
    The character in the middle of the code is the minus sign for individuals born in the 20th century (1900's) and an uppercase 'A' for those born in the 21st century (2000's).
  • Business ID – 0123456-2.

Types of Payment (10)

Enter the Type of Payment in line 10. Examples of Payment Types are ‘wages’, ‘pension paid by employer’ and ‘seafarer’s income’.

Report all the payments of the same type only once for the calendar year (fill out one section of this form). Do not send us a report every time you make a payment. Exceptions from this rule are the nonwage compensation amounts sometimes paid to a general or limited partnership and to a corporate entity (such as a limited-liability company, a cooperative enterprise, and an association). They should be itemized month-by-month; see Royalties and compensation for use for more information.

If the same beneficiary received several types of payments, write the information for each type of payment separately, using several sections of the form, even though the beneficiary remains the same.

It is important to report the correct Type of Payment. They have an impact on the recipients’ taxes. If details concerning Types of Payment are missing, the tax office will send a written inquiry to ask for explanation.

Types of Payment:

P   Wages from principal employment
1    Wages from secondary (sideline) employment
PT  Dividends/profit surplus based on work effort (wages)
P3  Daycare provider’s wages
PU Wages, sourced from a special fund, paid to athlete/sportsman
PY  Wages from principal occupation (beneficiary carries insurance, YEL or MYEL laws)
YT  Dividends/profit surplus (wages) based on work effort (beneficiary carries insurance, YEL or MYEL)
1Y  Wages from sideline occupation (beneficiary carries insurance, YEL or MYEL laws)
SA Contribution to health insurance fund
5    Wages (as basis for insurance premiums) subject to six-months rule
5Y  Wages subject to six-months rule, if paid to self-employed individual
6    Wages paid as a substitute payor and pay security (§ 9.2, Prepayment Act)
61  Wages paid as a substitute payor, subject to six-months rule
2    Seafarer’s income
2Y  Seafarer’s income, if paid to self-employed individual
H    Nonwage compensation for work
H1  Fund units in an employees’ mutual fund
HT  Dividends or profit surplus based on work effort (non-wage)
H2  Athlete´s/sportsman’s nonwage fees
H3  Household employee´s fees and expenses
H4  Other taxable income deemed as earned income
H5  Reimbursement paid by a non-profit organisation
H6  Reimbursement of costs, paid to conciliator
B    Pension paid by employer
G    Compensation for use; deemed as earned income
G1  Compensation for use; deemed as capital income (compensation for use, royalties, or interest on unpaid wages)
7K  Wages paid by employer (with a PE in Finland) to employee not covered by Finnish social insurance.
7L  Wages paid by employer (no PE in Finland) to employee not covered by Finnish social insurance.
7M Wages paid by employer (no PE in Finland) to employee who is covered by Finnish social insurance.
7N Wages paid by foreign employer (no PE in Finland) having responsibility to pay and discharge employee’s taxes (employment contract ”Net-of-tax”)
7Q Wages paid by employer (no PE in Finland) to employee, who has not stayed longer than 183 days in Finland during Tax-Treaty-defined sojourn period.

Country code in connection with 5/5Y/7Q Types of Payment (5)

5 and 5Y Types of Payment require that filers enter appropriate country codes in data element / line 5. Filers should enter relevant country code. This is the country where the worker performs work, labour or personal services. Enter the country code of the country where he or she worked the longest if several countries are involved.  The 7Q Type of Payment also requires that filers enter appropriate country code in data element / line 5. Filers should make reference to the country with which Finland has a Tax Treaty, and enter relevant country code. Reference to country should always be made when 7Q Type of Payment is applicable.

For more information, see Tax treaties in force. For a list of country codes, see the final part of that page.

Month of payment of compensation or Cross-trade time (12)

Whenever the recipient of compensation is a limited joint-stock company, a cooperative enterprise, a general or limited partnership or other legal person, amounts paid out and amounts withheld should be reported with a full month-for-month specification. Thus, separate forms are filled out for each payment and each month, and month number (1 to 12) should be written in line 12 ” Month of payment of compensation”.

Shipping organization paying out seafarer’s wages is expected to enter the quantity of full cross-trade months in line 12. The seafarer-recipient will then receive a tax deduction.

Wages

The concept of wages means all types of salaries and wages, fees, remuneration, benefits and compensation based on an employment contract, and fees for attending meetings, for giving lectures, for being a member of a board of directors etc., or a managing director. Furthermore, for the purposes of taxation, ‘wages’ also means money retrieved from a partnership in which the individual is a partner, and personal compensation for acting as a shop steward, trustee, auditor, or in other personal, confidential post.

A few types of wages are not called wages. Other names are used, such as 'seniority compensation', 'rental money', 'Christmas money' etc. (§13, Prepayment Act). It is important to note that benefits given to the taxpayer in other forms than cash such as accommodation and meals are taxed as wages. They are called in-kind benefits or fringe benefits. Furthermore, if the employer pays reimbursement for business travel, which is higher than the confirmed tax-exempt travel allowance level, the excessive amount will be wages. Moreover, if the employer pays any of the worker’s living costs, it will be wages.

Wages for principal (P) and side occupations (1)

Even though the tax treatment is the same, separate Types of Payment should be used in reporting wages for principal/main and secondary/side/sideline occupations. The computation of the following tax year’s personal withholding rates requires, that the Tax Administration database include this information. Filers should show the separation between these Payment Types even if the worker is not being paid in cash, and only receives a taxable benefit in kind.

Filers must show all wages paid out, even if no taxes were withheld because of small amount of wages paid, or because an instruction in the wage earner’s tax card prescribes no withholding. Please note that ‘PY’ and ‘1Y’ should be utilized when amounts are paid to self-employed individuals carrying YEL or MYEL insurance.

Freelancer tax withholding card

Some workers have tax cards made out for freelancers. Then the amounts paid may be wages (main or side occupation), nonwage compensation or royalties. When filling out the Employer Payroll Report form, use the Type of Payment that accurately reflects the nature of the work of this worker.

How to fill out the form

Line 10 (110): Principal-occupation wages, ‘P’ and sideline-occupation wages, ‘1’.

Line 14 (114): Enter the gross amount of wages/other payments.

  • Gross wages means the total amount before withholding (Line 15) or deduction of certain costs (Line 17).
  • Furthermore, if the employer pays reimbursement for business travel over and above the confirmed tax-exempt allowance level, the excess amount will be gross wages. Reference is made to the Tax Administration's Official Decision Tax-exempt allowances in 2017 for business travel. Entire employer-paid amounts will be fully taxed as wages if no relevance exists with the kilometre and travel time requirements, specified in the text of the Official Decision.

Gross amount to be entered in line 14 should not include:

  • Cash equivalents of taxable fringe benefit values (Lines 20, 30 and 40)
  • Employee stock options, employee stock grants (Line 35)
  • Reimbursement of costs/expenses (Lines 50–57).

Line 15 (115) Enter amount of tax withholding

Line 16 (116) Enter amount of pension insurance and unemployment fund withholding

Line 17 (117) Enter any deducted amount, if deducted prior to tax withholding.

Dividends or profit surplus based on work effort (wages) PT

When a distribution of dividends or profit surplus has been made by a company or by a cooperative society, the payment itself and the taxes withheld on it must be reported on an annual information return. To determine the correct time to report it, the year of payment is the year when the dividend/surplus was first available for payment or the year when it was actually paid. It is important to specify the individual (name and personal identity number) who actually worked for the company or cooperative society.

The company or cooperative society must file the EPR, Form 7801e to report its paid distributions based on work efforts. This also concerns situations where a holding company is the technical recipient of the dividends or surplus. If there is a holding company in between, payment to the holding company must be reported on Form 7801e, and the holding company’s further dividend payment to the shareholder must be reported on Form 7812e.

Receipts of dividends are taxed as wages or as trade income if the reason for payment was the recipient's or an associated individual's work effort. The receipts are taxed as income in the hands of the individual whose work effort is in question, and the entire amount is regarded as taxable. These tax rules apply to distributions made by non-listed companies.

Pursuant to § 13 a, Prepayment Act, receipts of dividend can be taxable either as wages or as trade income = nonwage compensation. Use the PT Type of Payment to report dividend that falls into the category of wages within the meaning of § 13, Prepayment Act. Withholding and social security contribution should be carried out at payment. Nevertheless, no pension insurance premium and unemployment insurance premium are necessary. If these premiums have been collected, enter the amounts in line 16 (116).

If a distribution was paid out, but the payor withheld no tax because the recipient is someone else, not the individual who worked and whose taxable earned income should consequently include the receipts of dividends, leave line 15 (115) blank.

The same tax rules as apply to dividends also apply to distributions of profit surplus.

Note: If the recipients are entrepreneurs carrying insurance under YEL or MYEL laws, use Type of Payment YT to report any dividends/profit surplus paid on the basis of work effort.

How to fill out the form

Line 10 (110): Type of payment is PT, if dividends or distribution of profit surplus will be taxable as wages.

Line 14 (114): Enter the gross amount paid.

Line 15 (115): Enter the amount of taxes withheld.

Wages paid to self-employed individuals, YEL/MYEL pension insurance (PY, 1Y)

Payment Types in connection with wage payment to self-employed individuals are different. This is necessary because of reasons related to the healthcare contribution payment computation by the Tax Administration. The annual basis income (in Finnish: yrittäjän työtulo; in Swedish: företagarens arbetsinkomst) is the legally stipulated calculation rule for MYEL and YEL governed healthcare contribution payments (§ 5, Act on Sickness Insurance).

Example: Typically the partners of a (limited) partnership, and majority shareholders of limited companies carry pension insurance under the (law called) YEL, who are holders of more than 30 percent of the shares alone, or holders of more than 50 percent of the shares with their family members – from 2011 onwards.

Typically, the farmer and the farmer’s child who lives and works at the farm, carry pension insurance under the MYEL. In the case of a deceased farmer, a beneficiary of the estate may carry pension insurance under the MYEL. In these cases, wages are paid from the company in respect of which the person concerned carries pension insurance under the YEL or MYEL laws.

Example: A self-employed YEL-insured individual may sometimes receive income taxable as wages. Nevertheless, no employer/employee relationship will develop. The applicable legal provision is § 13, Prepayment Act. An example of such income is the fee for a personally delivered lecture. Payors of such fees should note that if the recipient has stated that he has pension insurance under YEL, payors should use PY or 1Y Payment Types.
It may happen that the recipient has not carried pension insurance under the YEL or MYEL laws for more than a few months, not for the entire year. Payors should use PY or 1Y Payment Types only for the months concerned. If wages have been paid for other months, use P (Wages from principal employment) 1 (Wages from secondary employment).

Example: An individual is the full-time managing director of a limited company, and has held 20% of company stock as of 1 January 2017. The remaining shares have been held by a stock-exchange listed investment company. Through a contract of purchase on 1 April 2017, the managing director bought all the shares. Thus, after this date, he has been the sole owner. Conclusion: He has carried pension insurance under the YEL starting 1 April 2017 because of the operations of his business enterprise.

→ Wages paid 1 January 2016–31 March 2017 must be reported as P Payment Type.
→ Wages paid 1 April 2016–31 December 2017 must be reported as PY.

Thus, the basis for health insurance premiums is to be equalled with the YEL wage income only for the period when he carried pension insurance under the YEL.

How to fill out the form

Line 10 (110): Enter PY whenever wages for principal or main employment were paid to a self-employed person or businessman (to person carrying pension insurance under the YEL or MYEL laws), and similarly, enter 1Y when wages for side employment were paid

Line 14 (114): Enter gross cash wages/other payments (in euros).

  • Gross amount should include taxes that may have been withheld (Line 15) and any costs that have been deducted (Line 17).

However, line 14 should not include:

  • Cash equivalents of taxable fringe benefit values (Lines 20, 30 and 40)
  • Employee stock options, employee stock grants (Line 35)
  • Reimbursements of costs/expenses (Lines 50–57).

Line 15 (115): Enter the amount of tax withholding.

Line 17 (117): Enter any deducted amount, if deducted prior to tax withholding.

Dividends or profit surplus (wages) based on work effort; recipient carries YEL or MYEL insurance (YT)

Use YT Payment Type for reporting these dividends and distributions. For more information, see the instructions regarding PT Payment Types above.

How to fill out the form

Line 10 (110): Enter YT whenever dividends or distributions of profit surplus, based on work effort, were paid to a shareholder (to an individual carrying pension insurance under the YEL or MYEL laws).

Line 14 (114): Enter gross amount paid.

Line 15 (115): Enter tax withheld.

Wages/fees paid to sportsmen or athletes (P)

 When wages are paid directly to the sportsmen/athletes concerned, P or 1 Types of payment are used.

To transfer a part of the wages to a sportsmen's special fund requires that the sum total is reported in line 650 – Total wages paid out by substitute payer, for which the actual employer has paid health insurance. Thus, if a payment is made to a sportsman/athlete who is younger than 16 years of age, the payment should not be reported here. Similarly, nonwage compensation to a sportsman/athlete should not be reported here.

See the reporting instructions under Wages, sourced from a special fund, paid to athlete/sportsman if money has been saved in the special fund and then paid out.

How to fill out the form

Line 10 (110): Enter the amount using either 'P' or '1' Type of payment whenever wages are paid to an athlete/sportsman.

Line 14 (114): Enter the gross amount paid. The gross amount should include taxes that may have been withheld (Line 15) and any costs that have been deducted (Line 17).
However, line 14 should not include:

  • Cash equivalents of taxable fringe benefit values (Lines 20, 30 and 40)
  • Employee stock options, employee stock grants (Line 35)
  • Reimbursements of costs/expenses (Lines 50–57).

Line 15 (115): Enter the amount of tax withheld.

Line 16 (116) Enter amount of pension insurance and unemployment fund withholding, including any amounts that relate to the sum to be transferred to the special fund.

Line 17 (117): Enter any deducted amount, if deducted prior to tax withholding.

Payer-specific information, line 650: Enter the wages to be transferred to the special fund, for which the employer has paid health insurance.

Wages paid by a substitute payor and pay security (=palkkaturva) (6, 61)

The most usual substitute payors are enforcement authorities, towns, cities, rural communes, Kela, ELY Centres and bankruptcy estates. Such a payor has the information-reporting requirement. They should file EPRs for any wages paid out, using their own Business ID.

No itemization of the EPR will, under the circumstances, be filed by the actual employer. However, the actual employer has the obligation to pay health insurance contributions for the wages paid by the substitute payer. Thus, the actual employer is expected to report them.

EPR to be filed by the actual employer

Because it is the actual employer’s duty to pay contributions for the wages paid by the substitute payor, the actual employer is expected to enter the relevant gross amount in line 650, to report the total wage amount serving as the basis for the health insurance contribution paid.

For precise information on the wage payments that follow a bankruptcy, see the original guidance in either of the national languages, Finnish or Swedish.

Seafarer’s income (2, 2Y)

How to fill out the form

Line 10 (110): Seafarer’s income falls under 2 Payment Type. Separate Type is necessary because deductions from seafarer’s income are different from deductions from usual wage income. If seafarer’s income has been paid to an individual carrying pension insurance under the YEL or MYEL laws, use 2Y as Payment Type.

Line 14 (114): Enter gross cash wages (in euros). Gross amount should include taxes that may have been withheld (Line 15).

Line 14 should not include:

  • Cash equivalents of taxable fringe benefits (Lines 20, 30 and 40)
  • Employee stock options, employee stock grants (Line 35)
  • Reimbursements of costs/expenses (Lines 50–57).

Line 15 (115): Enter amount of tax withholding.

Line 16 (116): Enter pension and unemployment contributions, withheld from the seafarer’s wages.

Line 12 (112): Shipping company paying out seafarer’s income should enter the number of full months regarded as cross-trade months, for the purposes of tax deduction.

Deducted before taxes withheld (17)

As an employer, you can subtract direct worker-paid costs, related to the performance of work, labour and personal services (§ 15.2, Prepayment Act). An example of such costs is a forestry worker’s self-paid costs for using their own chain saw.  Another example: any worker-paid travel expenses if you do not pay tax-exempt reimbursement for them (in addition to paying wages to your worker).

Line 17 (117): Enter any deducted amount, if deducted prior to tax withholding. Please note that this amount should be included in the amount written in line 14.

Example: A musician playing the accordion gets a "gig" for €200. Any travel expenses he may have do not affect the gross pay of €200, in other words, he receives no reimbursement for travel expenses. The employer has the option, if the musician has informed them of the travel expenses, to reduce the base of tax withholding by subtracting an amount corresponding to a permitted tax-exempt reimbursement from the gross pay. Assuming that travel expenses amount to €20.91 – for 51 kilometres at €0.41 per kilometre – plus €19.00, added as a partial per diem allowance, the base can be reduced to €160.09. This amount also serves as the base for the employer's health insurance contribution payment.

Enter €200.00 in line 14; enter €39.91 in line 17.

Leave lines 50 to 56 blank.

The musician must claim these deductions by reporting them on the income tax return. The amounts to be deducted in his final assessment will probably be somewhat lower than what was deducted from his withholding when he got paid for the gig.

Taxable fringe benefits, i.e. benefits in kind (20–49)

Enter the amount of taxable fringe benefit equalling the amount used when withholding the taxes. Enter any compensation collected in return, if you, as the employer, collect any money from workers in exchange for giving them fringe benefits. Nevertheless, the information-reporting requirement for all fringe benefits remains in force even if the worker has paid back an amount that fully covers the taxable value, or even exceeds the taxable value of the particular fringe benefit in question. If the worker makes such a payment, no amount should be added to the wages. For more information on taxable values, go to www.tax.fi to download the current Official Decision of the Finnish Tax Administration.

To withhold tax from worker’s pay is feasible only when there is a cash payment taking place. If worker is receiving a fringe benefit but no cash wages, no taxes can be withheld

Company cars (20–25)

Line 20 (120): Enter the difference between taxable value and the amount collected from worker. If you, as the employer, collect an amount that at least equals the taxable value in exchange for the company car, leave line 20 blank. However, if the worker only has a company car and no cash wages, line 20 should not be left blank. However, under no circumstances should the amount entered in line 20 be included in line 14 "Amount of cash wages/remuneration”.

Line 21 (121): Enter any compensation collected in return, if you, as the employer, collect some money from workers in exchange for the company car. Enter the amount in line 21 even if the worker has paid back an amount that fully covers the company car’s taxable value, or even exceeds it.

Example: Worker’s annual gross cash wages equal €40,000. The taxable value of his company car is €4,000 per year. The employer collects €3,000 cash from worker every year. Conclusion: Enter €3,000 in line 21, and €1,000 in line 20 (which reflects the amount to be added to taxable gross wages). Enter €40,000 in line 14.

If you have used the kilometre-based valuation rule of the company car benefit (instead of the invariable monthly valuation rule), report the private kilometres in line 22 (122). The number of kilometres should be substantiated by a driver’s log, kept by the worker.

Line 23 (123): Specify the car’s age group as follows:

  • A = 2017, 2016, and 2015
  • B = 2014, 2013, 2012
  • C = 2011 or earlier
  • U = Company car used in a foreign country

Select either line 24 or line 25 as follows:

Line 24 (124): Tick the box if you provide the unlimited company car benefit, where all fuel costs are employer-paid.

Line 25 (125): Tick the box if you provide the limited company car benefit, involving the worker’s obligation to buy fuel and pay for some other car costs, even for business-related kilometres. The worker should pay for fuel and other car costs to an outside supplier, not make payments back to the employer.

Note: If a company car benefit is altered during the year, the employer specifies, in the annual information report, the age group corresponding to the most recent car benefit as well as whether the benefit is unlimited or limited. Kilometres and euros are summed for the whole year. In such cases only one annual information report is filed.

Benefit arising from low-interest home loan (30)

If employer has given a low-interest loan to worker, it gives rise to a taxable benefit.
The interest is deemed low if it is smaller than the current base interest rate confirmed by the official decision of the Ministry of Finance.

  • Line 30 (130): Enter the amount reflecting the taxable benefit. Do not add it in lines 40 and 14. This benefit is separately reported for the purposes of the worker’s tax assessment. As a financing cost for the home, the amount will be equated with a tax-deductible payment of home-loan interest.
  • For loans other than home loans: If employer has given a low-interest loan to worker, it gives rise to a taxable benefit. Enter the value in line 40 ”Other taxable fringe benefits”.

Other taxable fringe benefits (40–46)

Enter employer-provided in-kind benefits, paid in non-cash terms, in lines 40–46. Typically, accommodation, telephones and meals are given to workers, and examples of less frequently occurring benefits are the use of a garage, a motorboat, a life insurance contract, a pension insurance contract, a gift card, a seafarer’s fringe benefit, and the benefit arising from an issue of company shares to personnel.

  • Line 40 (140): Enter the difference between taxable value and the amount, if any, collected from worker. The Decision of the Finnish Tax Administration on fringe-benefit valuation lists the usual fringe benefits. Consequently, use fair market value of the benefit if it is not included in the Decision, because it is less frequently occurring. Enter the relevant value in line 40 even if no cash wages were paid to worker or even if the cash pay were too small for the purpose of withholding any tax from it.
  • Line 41 (141): Enter any compensation collected by employer in line 41, regarding other fringe benefits than company cars or employer-subsidized commuter tickets.
  • Lines 42–45 (142–145): Tick appropriate boxes.
  • Line 46 (146): If the compensation collected by the employer equals the taxable value of the meals benefit, tick box 46. Do not enter the collected compensation in line 41.

Example: Tick box 46, if worker has the right to buy lunch coupons at prices based on taxable meal value (which is lower than the coupon’s nominal face value), or if the taxable meal value is collected from worker’s net pay each time a cafeteria lunch is served.

Benefit arising from employer-subsidized commuter tickets (40, 48–49)

It is exempted from tax for an employer to give a fringe benefit in the form of a commuter ticket for the employee’s personal use, if its maximum value is €300 and certain requirements are met. Furthermore, employer-provided commuter tickets for €750 to €3,400 are also tax-exempt income under § 64.2, Income Tax Act. If a commuter ticket is given, the EPR should always contain this information, even if no taxable benefit or deductible amount exists.

If the worker buys the ticket, and employer pays reimbursement for full or partial cost, the paid amount will be fully taxable as wages. In this case, simply enter the price paid in line 14.

How to fill out the form

  • Line 40 (140): Enter the portion regarded as taxable wages in this line.
  • Line 48 (148): Enter the wage-equivalent amount that will be deductible in the worker’s tax assessment. In other words, enter the portion regarded as taxable wages (Line 40) plus any worker-paid portion of the price paid for the ticket.
  • Line 49 (149): Enter the tax-exempt portion of the benefit.

Example: Employer has given an €800-ticket to worker. No worker-paid portion is required to cover the cost. Under the provisions of Income Tax Act, the taxable portion is the part above €300, and the part below €750, or €300. Consequently, worker received €800 of which €350 is tax-exempt and €450 is taxable.

  • Line 40: Enter taxable fringe benefit, €450.
  • Line 48: Enter amount of wage equivalent benefit, €450.
  • Line 49: Enter amount of tax-exempt benefit, €350.

Example: Employer has given a €5,000-ticket to worker. No worker-paid portion is required to cover the cost. Consequently, worker received €5,000, of which €2,950 is tax-exempt and €2,050 is taxable.

  • Line 40: Enter taxable fringe benefit, €2,050.
  • Line 48: Enter amount of wage equivalent benefit, €2,050.
  • Line 49: Enter amount of tax-exempt benefit, €2,950.

Example: Employer has given a €1,000-ticket to worker. To cover part of the cost, employer collected a worker-paid portion of €200. Consequently, taxable fringe benefit value equals €250. Worker received €550 benefit tax-exempt.

  • Line 40: Enter taxable fringe benefit, €250.
  • Line 48: Enter amount taxable as wages, €250 and the amount collected from worker, €200, total €450 as the amount of wage equivalent benefit.
  • Line 49: Enter amount of tax-exempt benefit, €550.

Example: Employer has given a €1,000-ticket to worker. To cover part of the cost, employer collected a worker-paid portion of €500. As shown above, rules of calculation set down the taxable fringe benefit value of €450. However, in this case, there is no taxable benefit, because worker paid back €500, which is more than €300. Consequently, amount of tax-exempt benefit equals €500.

  • Line 48: Enter amount collected from worker, €500.
  • Line 49: Enter amount of tax-exempt benefit, €500.

Example: Employer gives a €300-ticket. It does not give rise to a taxable benefit.

  • Line 49: Enter amount of tax-exempt benefit, €300.

Employee stock options and grants (35)

Pursuant to § 66.3, Income Tax Act, the benefit arising from Employee Stock Options (ESOs) is taxable and reportable by employer. You must enter it in line 35. No health insurance contributions are payable on the value. Similarly, they are not included in the base that determines the health insurance premium payment. They must not be included in lines 14 (114) ”Amount of cash wages/remuneration” and  36 (136), because no insurance premium needs to be paid.  

The Tax Administration has released an updated guidance article on ESOs, where the examples (no 41 to 45) are relevant for annual information reporting. Find them in section 8.2 of the guidance (in Finnish and Swedish).

As of 2017, it is required to enter the value of a benefit arising from ESOs earned during work in a foreign country. This means that the part of the benefit must be reported that has been included in the withholding exemption offered by the six-month rule.  The wage earner, in turn, must report the exempted part on their income tax return.  For more information, see section 8.2 of the guidance, example no 45 (in Finnish and Swedish).  

Employee stock optionsThe benefit arises from the employee's rights to purchase common stock below market price, including purchases based on linked agreements such as convertible loans, option rights etc. The benefit value is the fair market value of the underlying stock/share at the date when the ESO is exercised. If the employee had paid something for the ESO, the amount paid must be subtracted. The tax year for this income is the year of exercising the ESO.

Stock grants

The benefit arises similarly, as the employee gets common stock for free or below market price. The income is not subject health insurance contributions or premiums (for exact details, see separate guidance (in Finnish and Swedish), section 5.1.3).

Line 35 (135): Enter the portion regarded as wages, separately from any other fringe benefits, arising from employer-provided stock options and stock grants. If any portion was paid in cash, it should not be reported on line 35.  Cash payments must be included in line 14 (114) ”Amount of cash wages/remuneration”, and also included in line 36 (136), because no health insurance premium needs to be paid.  Do not enter the cash in line 35.  

Synthetic options are bonuses, which relate to company stock performance, payable to management and employees in cash. If paid out, they should also be included in line 14 (114) ”Amount of cash wages/remuneration” and in line 36 (136), because no health insurance premium needs to be paid.

Payments of wages not included in the base of health insurance contributions (36)

Usually, annual gross income is the basis of health insurance contributions, and consequently, line 14 usually serves as the base. Nevertheless, some amounts may be included in line 14 that are not included in it. Pursuant to Chapter 11, § 2.4 of Sickness Insurance Act, no health insurance contribution is required in connection with payments of some income types. Similarly, no health insurance contribution is required. To make it possible for the Tax Administration to determine the individual's correct health insurance contribution level, the employer should report any amounts falling into this category in line 36. However, line 36 is not intended for reporting the interest-rate benefit within the meaning of § 2.4, provision 2, of Sickness Insurance Act, nor is it intended for reporting the benefits arising from stock options and grants within the meaning of § 2.4, provisions 4 and 5. Report these payments in the lines that are designed for them.

Amounts to be reported in line 36 (136), Types of payment P, PY, PT, YT, 1, 1Y, P3, 2, 2Y, 5 and 5Y, 6, 7M and 7N:

  • Collective taxable fringe benefit, furnished to all personnel or staff.
  • This is a collective benefit offered to workers in some noncash form. No cash equivalent has been discussed in the official Decision on taxable fringe benefits.
  • Benefit arising from a stock issue offered to personnel, if the majority of personnel is entitled to it.
  • Benefit arising from a synthetic option, benefit arising from comparable instrument.
  • Wages for waiting time, pursuant to Chapter 2, § 14.1, Employment Act.
  • Compensation for damages, including damages for unusual termination of employment (severance).
  • this entry would only be for taxable compensation. For this reason, if you paid compensation because of termination exempted from tax, e.g. under the Finnish Acts on collaboration and gender equality at the workplace, do not enter it here.
  • Fees for lectures, conferences, membership in a board, where no employer/employee relationship exists, and where no pension insurance premium is payable, according to applicable law governing mandatory pensions. However, any paid amount is to be reported in line 36, if a voluntary pension contract exists, and pension insurance premiums have been paid on the basis of the voluntary contract.
  • Yields or withdrawals from a wage-earner fund, as defined in relevant Act, and additional yields that have been transferred to a wage-earner fund.
  • Bonuses referred to in the Act governing wage-earner funds, if paid in cash, and if their amount has depended on the performance of the company or depended on profit-based employee rewarding.
  • Bonuses payable, to all personnel or staff, as based on company decision at Annual General Meeting.

Do not write the following in line 36:

  • Employee stock options, and employee stock grants, because line 35 is intended for that.
  • Benefit arising from an employer-subsidized home loan with a low interest rate; because line 30 is intended for that.

Payments made to beneficiaries less than 16 years old and to beneficiaries older than 68 years in line 36

No healthcare contribution is levied on the wages (and comparable nonwage income) paid to workers younger than 16 and to workers who have turned 68. The obligation to pay this contribution legally begins on the month immediately following the calendar month of the 16th birthday, and legally ends after the calendar month during which the 68th birthday occurs (Chpt 18, §5.2 Sickness Insurance Act). If the payment is wages, no employer's health insurance contribution is payable in this case.

Line 36 (136) is designed for P, PY, PT, YT, 1, 1Y, P3, 2, 2Y, 5, 5Y, 6, 7M and 7N Types of Payments when the payments have been made prior to the month after the beneficiary's 16th birthday, or when the payments have been made after the month of the beneficiary's 68th birthday. In other words, use line 36 to report payments to a 15-year-old or to a younger person; and to a 69-year-old or to an older person.

Line 36 (136) is also designed for H, HT, H2, H3, H4, H5, H6, 7Q Types of Payment when the payments have been made prior to the month after the beneficiary's 16th birthday, or when the payments have been made after the month of the bene­ficiary's 68th birthday. Nevertheless, no amounts are to be reported in this line/data element at all if the beneficiary's age is 17–67 years.

Example:

If the insured worker turns 16 on 8 June 2017, wages paid to him or her will be subject to the healthcare contribution and the employer's health insurance contribution starting 1 July 2017. Enter the payments made up to 1 July 2016 in line 36.

Example: The worker turns 68 on 1 September 2017. The worker's normal monthly wages are €2,000 through the year. In addition, the entire staff receives admission vouchers to gyms and other physical exercise for €800 per year. Thus, this worker receives a taxable fringe benefit valued at €400 and reportable in line 36.

Line 10: enter P
Line 14: enter gross cash wages for the entire year: €24,400
Line 36: enter the gross cash wages paid after the month of the 68th birthday (€6,000) and the collective fringe benefit (€400) i.e. €6,400.

Tax-exempt reimbursement for expenses (50–56)

This line is intended for reimbursement payable to wage earners. Tax-exempt reimbursement for expenses may also be paid to individual recipients, who are not in an employer/employee relationship, if a secondary employment is in question and the individual recipient also receives wages for it.

See below for guidance on expenses covered for other beneficiaries, such as independent contractors, and see Compensation for work, payable to independent contractors.

Travel expense reimbursement payable to wage earners will be exempt from tax if it remains within the limits defined by the Tax Administration’s Official Decision. For enumeration of specific travel allowances, go to www.tax.fi > Precise information > Official decisions.

If worker has presented a train ticket or other similar document as the receipt, travel expenses are paid back to him as tax-exempt reimbursements, and no inclusion in EPR is required.

Reference is made to the Official Decision on tax-exempt travel allowances. Entire employer-paid amounts will be fully taxed as wages if no relevance exists with the kilometre and travel time requirements, specified in the text of the Official Decision. Then the payments should be reported in line 14, and completely left out from lines 50–56.

If some relevance exists with the kilometre and travel time requirements, specified in the text of the Official Decision but the amounts paid are higher, a portion of them is tax-exempt and the remainder is taxed as wages. The portion exceeding the levels set out by the Official Decision is reportable in line 14. Lines 50–56 should show the tax-exempt portion.

Example: Employer pays worker €300 as per diem. However, Tax Administration’s Official Decision on tax-exempt travel allowances only prescribes €200 as the permitted amount.
Conclusion: Add €100 to line 14, enter €200 in line 50.

Public bodies are also required to report their payments

The reporting-requirement also concerns Finnish public bodies i.e. the State, its agencies, districts of local government and also churches, local church parishes and universities. This means that they are required, similarly as other payors, to report information on any paid reimbursements for travel expenses that have been exempt from tax and paid as instructed by the Official Decision of the Tax Administration. The information must be reported in lines 50–56.

Per diem allowances and meal money (50–54)

Line 50 (150): Enter the total of per diem allowances and meal money. Include the following tax-exempt payments relating to work in a foreign country

  • Worker’s and family members’ relocation and two-way travel costs.
  • Employer-paid private servants in countries where this is the custom.
  • Employer-paid secondary school and upper secondary school for worker’s child.

Lines 51–54 (151–154): Tick appropriate boxes to show types of allowance. Where full per diem amounts, domestic or foreign, have been halved because of employer-provided meals, also include the halved amounts in line 50. Similarly, where partial per diem has been halved, also include the halved amounts in the total sum.

Kilometres – mileage allowances (55–56)

Line 55 (155): Enter the amount of kilometres serving as the basis for the amount paid.

Line 56 (156): Separately from other reimbursement for travel expenses, report tax-exempt paid amounts here. This allowance is not to be included in line 50 (150).

Daily travel expenses, or commuting expenses, reimbursed by employers in building, construction, and installation industries

See the original guidance in Finnish or Swedish.

Taxable reimbursement of expenses

This line is only for reimbursement payable to wage earners and situations where employer has not included the amount in wages subject to withholding (under § 15, Prepayment Act). Other recipients, such as independent contractors (H, H1, H3, H4, H6 and G Payment Types), and cases where a non-profit organization is the payer of allowances for travel expenses (H5 Payment Type) are discussed below under the heading Compensation for work, payable to independent contractors.

Not only travel expenses, but also other worker-paid expenses can be reimbursed by employer. For example, the Finnish collective agreement within building, construction, and installation industries stipulates that employers pay for certain tools, owned and maintained by construction workers themselves. No tax withholding or payment of employer's health insurance contributions will take place. Nevertheless, the amounts are part of worker’s taxable income, and always subject to reporting in line 57. To receive the relevant deduction, worker is expected to specify the actual costs in Pre-Completed Tax Return form. However, if worker has made purchases of tools on behalf of employer, passed documents and receipts on, and received payment, they are employer’s own costs and should not be reported here.

Line 57 (157): Enter the amount of reimbursement, not subject to withholding, for certain tools, owned and maintained by workers, or other similar costs. Such a reimbursement is not viewed as wages, and should not be included in the total gross of line 14.

Example: The employer reimburses their worker for use of a personal chain saw. Gross wages equal €20,000 per year, and €14,000 of this gross amount relate to work in which the worker's chain saw is utilized. The employer also pays reimbursement for the chain saw to the tune of €4,500. Only the wages, €20,000, are subject to withholding. Conclusion: Enter €20,000 in line 14, and enter €4,500 in line 57. Worker should fill out his Pre-Completed Tax Return form so as to claim the deduction, and include the €14,000 amount as the total wages directly relating to the use of the chain saw. In the final tax assessment calculations, the tax office will apply the deduction to the wage amount of €18,500 (consisting of €14,000 + €4,500).

Example: The employer is a construction company. Under the Finnish collective agreement within building, construction, and installation industries, employers pay for certain tools, owned and maintained by construction workers themselves. No tax withholding or payment of health insurance will take place. Enter the total in line 57.

Premiums for voluntary additional pension insurance (80–82)

Premiums for collective additional pension insurance taken out 6 May 2004 or later (80–81)

Report the premiums paid for any collective additional pension insurance policy, taken out 6 May 2004 or later, in lines 80 and 81. Use lines 80 and 81 only if both you and your worker paid a part of the premiums. If you paid the entire premiums for collective additional pension insurance you are not expected to report them on this form. Use line 80 for the premiums that you paid, and line 81 for the premiums that your worker paid. If you had a collective additional pension insurance policy taken out earlier than 6 May 2004, use line 16.

Premiums for voluntary individual pension plans (82)

Report any premiums for voluntary individual retirement pension schemes. Use line 82 to report the entire amount. In addition, enter the amount (exceeding €8,500) regarded as wages in line 40 "Other taxable fringe benefits". If the beneficiary of a voluntary individual retirement pension scheme is a partner of a partnership or a shareholder-entrepreneur of a limited company, not insured according to the employment pension legislation TyEL, report all the premiums paid during the tax year here.

Compensation for work, payable to independent contractors

Nonwage compensation for work — "trade income" (H)

This payment is payable for work, labour or personal services, but it is not wages (§ 25.1, provision 1, Prepayment Act). If paid out by a local municipality, the fee to a household employee in caregiving sector also falls into this category (H3 Payment Type), and so does certain support paid by Kela.

If the beneficiary has no prepayment registration, nonwage compensation (i.e. trade income) must be reported annually. The information-reporting requirement is valid even if the payment goes to a corporate body, such as a limited company or partnership. The payer should withhold tax on amounts paid out. Nevertheless, nohealth insurance contribution is payable.

How to fill out the form

Line 10 (110): Enter H for nonwage pay for work, subject to withholding.

Line 14 (114): Enter the gross amount.

If payments have been made to people, i.e. natural persons, enter the total annual gross amount.

Enter total gross amount of compensation, do not subtract any VAT or cost-reimbursement portion. If employer has paid for a physical person’s travel expenses, it should be included. No tax withholding or payment of health insurance will take place. Nevertheless, the amounts are part of recipient’s taxable income, and always subject to reporting. To receive the relevant deduction, recipient should claim the actual costs in Pre-Completed Tax Return form.

Line 15 (115): Enter amount withheld.

Line 17 (117): If any VAT was included, enter the amount of VAT.

Line 12 (112): If compensation is paid to a general or limited partnership or to a corporate entity (such as a limited company, cooperative, association or other organization), the payments and withheld amounts must be specified month-for-month. Use separate forms to show each month of the year and write the appropriate number from 1 to 12 in line 12 ”Month of payment of compensation”.

Example: If October has been the month when taxes were withheld from nonwage pay, enter ‘10’ in line 12 ”Month of payment of compensation”. This will enable the tax office to reconcile the withholding tax records, if the recipient has a non-calendar accounting year.


Dividends based on work effort (nonwage pay) (HT)

The company, or in the case of a distribution of profit surplus, a cooperative society, must report the amounts under this Type of Payment if it distributes dividends/profit surplus to shareholders who have performed work, labour and personal services. To determine the correct time to report this, the year of payment is the year when the dividends/surplus was first available for payment — or the year when it was actually paid. It is important to specify the natural person (name and personal identity number) who actually worked for the company or cooperative.

Pursuant to the provisions of § 33 b.3, Income Tax Act, if the company has decided to pay dividend to shareholder (or family member) who works for the company, the receipt of dividend should be taxable as earned income instead of capital income. If distributions of profit surplus are paid, the provisions of § 33 b.3 on dividends are applicable (§33 e.7, Income Tax Act).

The company is only expected to file the EPR, Form 7801, for paying out dividends/profit surplus based on work efforts. This also concerns situations where a holding company is the technical recipient of the dividend. If there is a holding company in between, payment to the holding company is reported on Form 7801, and the holding company’s dividend payment further to the shareholder is reported on Form 7812.

Pursuant to § 13 a, Prepayment Act, receipts of dividends (based on work) can be taxable either as wages or as nonwage pay (i.e.either as employment income or as trade income). Use the PY Type of Payment to report dividend that falls into the category of nonwage pay, i.e. it cannot be regarded as wages within the meaning of § 13, Prepayment Act. Nonwage pay is defined by § 25.1, subsection 1, Prepayment Act.

Withholding of tax should be carried out on nonwage amounts, if the recipient is not entered in Prepayment Register. If the company paid dividend, but withheld no tax because the recipient of dividend is another person, not the person who worked and whose taxable earned income should consequently include the receipts of dividend, leave line 15 (115) blank.

When a distribution of profit surplus is paid to a beneficiary because of their work effort, the applied tax rules are the same as in the case of dividends based on work effort.

If this kind of dividends or profit surplus were paid, the company must file the EPR, Form 7801, even if the amounts were paid to someone registered for tax prepayment as a nonwage compensation.

How to fill out the form

Line 10 (110): Type of payment is HT, if dividend or a profit-surplus distribution will be taxable as nonwage compensation, paid because of work effort.

Line 14 (114): Enter the gross amount paid.

Line 15 (115): Enter the amount of taxes withheld

Compensation for use including royalties (G, G1)

This compensation is paid to recipients to cover photograph, immaterial right, trademark, or patent utilization (§ 25, Prepayment Act). As this payment is subject to tax withholding, payers should report all paid-out compensation for use. The information-reporting requirement also includes amounts paid to physical persons, even if they are prepayment-registered. Even though prepayment registration usually means that payer does not have to include the amounts in annual information reporting, in this case the tax office uses the payer-provided facts and information to assess the beneficiary’s taxes.

How to fill out the form

Line 10 (110): Where compensation is considered earned income, write G. Conversely, where it is considered capital income (income from investment), write G1. Compensation will fall into the latter category if it is based on the use of a right or privilege, which the owner had purchased, inherited or acquired as a legacy. Otherwise, the Payment Type will be G, and consequently, recipient will pay earned-income tax on the compensation.

Line 14 (114): Enter the total gross amount of compensation for use, do not subtract any VAT or cost-reimbursement portion.

Line 15 (115): Enter the amount of tax withholding. If recipient has no prepayment registration, payor has the obligation to withhold tax. However, no social security contribution is paid.

Line 12 (112): If compensation is paid to a general or limited partnership or to a corporate entity (such as a limited company, cooperative, association or other organization), the payments and withheld amounts must be specified month-for-month. Use separate forms to show each month of the year and write the appropriate number from 1 to 12 in line 12 ”Month of payment of compensation”.

Wages paid to sportsmen or athletes (H2)

Tax must be withheld on all payments made in compensation for athletic endeavours and appearances. However, fees of this type are not subject to the employer's health insurance contribution. Nevertheless, the amount of the fee must always be included in the base of the healthcare contribution.

The definition of 'fees' includes sports awards for competitions, fees that depend on advertising and sponsor contracts, fees for participation and other fees connected with the athlete's or sportsman's status in situations where no employment contract exists between the payor and the beneficiary.

See the reporting instructions under Wages, sourced from a special fund, paid to athlete/sportsman if money has been saved in the special fund and then paid out.

How to fill out the form

Line 10 (110): H2 Type of payment – use this code to report the amounts paid to a sportsman when there is no employment contract between the payor and the sportsman. However, if there is an employment contract e.g. a soccer player is receiving wages from the professional association, use the P Type of payment. For more information, see "Wages paid to athletes/sportsmen".

Line 14 (114): Enter the amounts i.e. fees paid out. If the payment was made in the form of giving some goods instead of cash to the sportsman, enter the gross cash equivalent in line 14.

Line 15 (115): Enter the amount of tax withheld.

Lines 50–56 (150–156): Enter the reimbursements of travel expenses.

Other taxable income, deemed as earned income (H4)

Use H4 Payment Type to report taxable, occasionally paid-out fees, prizes, and similar payments that involve no employer/employee relationship or independent contractor’s service engagement. Examples of such payments are prizes for a contest, game or competition, benefits given to a client-company employee (such as gift cards or travel tickets), finder’s fee, fees that banks sometimes pay to customers who have reported an accounting error, and prizes for an arts contest.

If the value is €100 or more per calendar year, occasionally paid-out fees, prizes, and similar payments are concerned by the information-reporting requirement. Whether tax was withheld on payment is of no significance. The information-reporting requirement is based on the Decision of the Finnish Tax Administration. The full text (in Finnish; Swedish) of the Decision: Verohallinnon päätös yleisestä tiedonantovelvollisuudesta.

Line 10 (110): H4 Payment Type – other taxable income, deemed as earned income.

Line 14 (114): Enter the amounts paid out.

Out-of-pocket expenses in addition to fees or compensation

If you have paid reimbursements for expenses to independent contractors (H, H1, H3, H4, H5, H6 and G Payment Types), and to volunteer workers performing other activities than promoting for the public good (the H4 Payment Type), you should include them in the total amount, which you report in line 14 “Amount of cash wages/remuneration”.

If a fee or any other form of compensation for work has been paid (H, H1, H4 or G being the Type of payment), you cannot use lines 50-57 to report expenses. The only exception from this rule are the amounts reportable in line 57, paid in connection with H3, H5 and H6 Payment Types.

More guidance is given later regarding reimbursement paid in connection with H5.

Paid reimbursements for out-of-pocket expenses to independent contractors and to volunteer workers performing other activities than promoting for the public good are specified in a different way than the reimbursement paid to wage earners. This is because the exemption from tax related to travel allowances and expenses presupposes that the employer is paying them. They are connected with an employer/employee relationship. Nevertheless, the recipient is entitled to important tax deductions for such reimbursement, and he can claim the deductions in the Pre-Completed Tax Return form. However, if the recipient is an independent contractor, with the legal obligation to keep books and records, he or she can use the business tax return procedure to claim the deduction.

If you pay reimbursements for out-of-pocket expenses to independent contractors, it is usually not possible to subtract any amounts (if applicable, to be written in line 17) prior to withholding tax from the gross amount. However, travel allowance, payable to physical persons, in amounts corresponding to the Decision of the Tax Administration, are subtracted in this way. No tax has to be withheld on such a reimbursement. Nevertheless, they are not regarded as tax-exempt payments under the circumstances, so you should include them in line 14.

Special situation:

Wages, sourced from a special fund, paid to an athlete/sportsman (PU)

If a special sports fund has made a payment from the fund's assets to a sportsman and there is an employer/employee relationship, it must be reported by the payor using the PU Type of payment – Wages, sourced from a special fund, paid to athlete/sportsman. The fund does not have to pay the employer's health insurance contribution. If the original payment received by the sportsman was not based on an employment contract, the reporting must be done using H2 Type of payment.

How to fill out the form

Line 10 (110): PU Payment Type – if the original payment was wages within an employer/employee relationship. However, use H2 Payment Type if the original payment was other than wages.

Line 14 (114): Enter the total amount paid.

Line 15 (115): Enter the amount of tax withheld.

International tax situations

Finnish worker posted to another country – wages as basis for insurance premiums, subject to 6-month rule (5, 5Y)

The 6-month rule that allows a tax exemption (under § 77, Income Tax Act) may be applicable when a Finnish company sends off a worker from Finland to perform work, labour and personal services in another country. In this case, only the minimum level of withholding will be carried out on the worker’s pay, covering only healthcare insurance premiums.

Exemption for Finnish taxes is in force, if both the following criteria are satisfied:

  1. There is no provision preventing taxation in the Tax Treaty between Finland and the foreign country where the worker works (or no tax treaty exists)
  2. The continuous period of working in the country is at least six months, during which no longer than 6-day interruptions occur per month.

The rule is not applicable to work performed on board a ship or airplane. For more information, search the words ”Ulkomaantyöskentelyn verotus” at www.tax.fi.

When a worker is assigned to work in a foreign country, the employment contract should include an agreed basis for health insurance premiums (vakuutuspalkka). The agreed amount should be notified to the insurance company. If the six-month rule is applicable, the agreed basis for health insurance premiums (vakuutuspalkka) will determine the health insurance premium of the insured party, and the employer’s health insurance contribution. If no such basis (vakuutuspalkka) has been agreed in the employment contract, actual gross pay will determine the amounts of health insurance.

If worker has been sent out to a foreign country for very long, the period of expiration of the certificate from ETK/Kela/Stm will cause the coverage by the Finnish social security system to cease, and Employer Payroll Reports will no longer be required. However, the employer will be expected to file form 5053a ”Työnantajan ilmoitus ulkomaanpalkasta” to the local tax office of worker’s Finnish home municipality.

If the worker from Finland continues to be a Finnish tax resident, even though he is working in another country, form 7801 should be used. In the opposite case, when he has become a nonresident, because full liability to tax in Finland/Finnish tax residency is no longer valid, form 7809 should be used. However, if reimbursements for costs/expenses have been used, the employer will be expected to file form 5053a ”Työnantajan ilmoitus ulkomaanpalkasta” to the Tax Administration.

Furthermore, Finnish companies should report the agreed basis for health insurance premiums (vakuutuspalkka) when a worker of a Finnish company within a multinational corporation is transferred to another subsidiary or company in a foreign country. In this case, the Finnish company should fill in the space ”Payer’s name and address” and use 5 Type of Payment for reporting.

How to fill out the form

Line 10 (110): Use 5 Payment Type for wages subject to the six-month rule. If a worker has been sent out to another country, and the pension laws called YEL or MYEL are applicable to this individual, use 5Y Payment Type.
If worker continues to be a Finnish tax resident, and the 6-month rule cannot be applied to him, report wages using P or 1 Types of Payment, or if relevant, using another Type of Payment. However, do not use 5 Type of Payment.

Line 14 (114): Enter the amount serving as the basis for computation of insurance premiums. Do not report any fringe benefits. However, in exceptional cases where no statement exists as to the amount serving as the basis for computation of insurance, simply enter the actual gross cash wages in line 14 and fringe benefits in appropriate lines.

Line 15 (115): Enter the amount that has been withheld in order to cover the worker’s health insurance liability (minimum withholding)

Line 16 (116): Enter pension and unemployment insurance contributions. (They should also be reported in situations where these contributions have not been withheld but invoiced from the worker who has covered them by paying back money to the employer.)

Line 5 (105): Enter country code. If the worker has worked in several countries in the course of the year, enter the code of the country where he/she worked the greatest length of time. 

Worker arriving in Finland

Instructions to Finnish and foreign employers with PE in Finland

Worker will be deemed as a Finnish tax resident after six months of stay. In this case, the payor/employer has the information-reporting requirement to file an employer payroll report to the Finnish tax authority, using the usual VSPSERIE specification or form 7801e. This form is to be used as the only relevant EPR form, and it is to be filed even if source tax had been withheld during the first months of stay. The purpose of these requirements is to ensure that the Pre-Completed Tax Return system will contain precise information. It is emphasized that form 7809e should not be used for reporting. Any source tax withheld during the first months should be included in line 15 ”Taxes withheld”.

Worker will remain a tax nonresident if duration of stay is shorter than six months. It should be noted that total duration is of relevance, without regard to calendar years. However, wages and other amounts paid out during this time are to be reported using the VSRAERIE specification or form 7809e.

As an exception to the rule, the foreigner working in Finland may qualify for a special income tax at the flat rate of 35 percent during a 24-month period if he receives any Finnish-source income for duties requiring special expertise. Such a ‘key employee’ enjoys tax concessions according to Act no 1551/1995. Wages should be reported using the VSRAERIE specification or form 7809e, and A7 as Payment Type, even if the worker were to stay in Finland for longer than six months.

The usual situation requires that the employer withhold tax and collect health insurance contributions from worker’s wages, except in cases discussed below in these instructions. Employers should submit EPRs even if wages are not within Finland’s taxing rights.

Worker is covered by the Finnish social insurance system (P or 1)

Whenever the worker cannot present evidence proving otherwise (such as the A1 (E101) Certificate or other similar document), and the worker is not an ‘au pair’ housemaid or caregiver (see guidance below), whose wages or employment contract duration are below threshold (the conditions of inclusion in the Finnish social security system are not fulfilled), or the worker is not an asylum seeker who has not yet received a residence permit, wages paid to the worker are to be reported as P or 1 Types of Payment.

Example: Worker arrived in Finland 1 February 2017, and the planned duration of stay was less than six months. However, actual duration was longer, and the worker continued to perform labour and personal services in Finland for the same employer. Employer withheld tax at source, because during the first months, worker had a tax-at-source card. Similarly, during the first months, worker was entitled to the deductions in connection with the source tax (€510 per month or alternatively €17 per day). However, during the end months of the year, usual withholding was carried out, and worker had a usual tax card obtained from the local tax office. Employer has submitted Self-Assessed Tax Returns on employer contributions (formerly Periodic tax return) to show wages subject to source tax during the first months (relevant line of the form being "Tax at source on wages etc"). In spite of that, the annual Employer Payroll Report must be handed in on form 7801e. Any source tax withheld during the first months should be included in its line for  ”Taxes withheld”, and correction should be made of the earlier source taxes into withholding tax (Self-Assessed Tax Return on employer contributions).

  • Line 10 (110): Enter P as Type of Payment.
  • Line 14 (114): Enter gross cash wages for the entire year (relating to the period worked in Finland).
  • Line 15 (115): Enter total amount of withheld source tax and the amounts withheld during the later months. Also include the withheld health insurance contributions in line 15.
  • Line 16 (116): Enter pension and unemployment insurance contributions.

If any deduction was made during the first months from monthly pay in connection with the source tax (€510 per month, or €17 per day), it does not have to be reported.

Worker is not covered by Finnish social insurance system (7K)

Example:

: Worker has performed labour and personal services in Finland for 10 months. He or she has presented the A1 (E101) Certificate to employer, showing coverage by home-country social security system, or alternatively, he or she is an asylum seeker who has not yet received a residence permit. The local tax office has taken this information into account and prepared the tax card (i.e. the withholding instructions to the employer).

  • Line 10 (110): Enter 7K as Type of Payment.
  • Line 14 (114): Enter gross cash wages for the entire year (relating to the period worked in Finland).
  • Line 15 (115): Enter amount of tax withholding.
  • Line 16 (116): Enter pension and unemployment insurance contributions, if any. No payment of the social security contribution is required because the worker is not insured by the Finnish social security system.

Examples involving special situations

Au pair or similar employee arriving in Finland (e.g. intern, trainee)

Duration of stay in Finland is shorter than two years but longer than six months, and their gross wages (including fringe benefits) stay below €1,187 per month, or her weekly hours stay below 18h.

  • Line 10 (110): Enter 7K Type of Payment.
  • Line 14 (114): Enter gross cash wages.
  • Line 15 (115): Enter amount of tax withholding.
  • Line 16 (116): Enter pension and unemployment insurance contributions, if any. No payment of the health insurance contribution is required because the worker is not insured by the Finnish social insurance system.

Example: An au pair employee arrives in Helsinki 30 April 2017. During 2017, total duration of working will equal 8 months. Net wage income in the hands of the au pair is €300/month. Furthermore, she receives a free bus ticket, worth €52.40/month. She also receives full room and board in a single room, taxable value €490/month. Gross wages is computed as €904.35 per month, using the progressive scale of state taxation. No employer’s health insurance contribution will be payable, because gross wages stay below €1,187 per month.

Employer withholds 5% from the au pair’s gross pay for taxes and also another amount for pension contributions under the TyEL laws, and unemployment contributions. As a result, approximately €300 has been received net-of-taxes.

Line 10: Enter 7K Type of Payment.
Line 14: Enter gross cash wages
Line 15: Enter taxes withheld
Line 16: Enter pension and unemployment insurance
Line 40: Enter fringe benefits.

Example:

An au pair is covered by the Finnish social security system (having no A1 (E101) Certificate or similar document proving otherwise) and one or the other of the following requirements is met:

  • Worker has stayed in Finland for longer than 4 months; wages paid to worker have reached or exceeded €1,173 monthly, or weekly hours — 18 hours per week.
  • Worker has stayed in Finland for longer than 2 years, but wages paid to worker have not reached €1,173 monthly, or weekly hours — 18 hours per week.

Line 10 (110): Enter P or 1 Type of Payment.
Line 14 (114): Enter total gross amount of cash wages.
Line 15 (115): Enter the amount of tax withholding.
Line 16 (116): Enter pension and unemployment insurance premiums, if collected.
Line 40 (140): Enter the taxable values of accommodation, room and board, and/or other benefit.

For more information, see Ariiving in Finland to work "au pair"

Inhabitants of border/frontier districts, cross-border commuter workers

If cross-border workers are nonresidents, i.e. having limited liability for tax, the annual information reporting format must be Form 7809e or the electronic VSRAERIE specification format, and A1 or A2 Types of Payment must be used.  Only in the case that the cross-border workers are Finnish residents, i.e. having full liability to pay tax, the annual information reporting format is the usual Annual Information Return of employers (Employer Payroll Report) or other payers, Form 7801e.

The Nordic Tax Treaty provides tax exemptions to cross-border workers, so as to allow tax to be levied only in the state of residence. Thus, cross-border workers are persons resident in Norway/Sweden/Finland in districts bordering on Sweden, Norway or Finland, respectively, who work in a border district on the other side of the border. Special tax rules apply to cross-border commuters. A condition for this is that the worker stay regularly at least two days a week (spending the night) at the permanent address in Norway/ Sweden/Finland. List of relevant Finnish and Swedish districts: Enontekiö, Kolari, Muonio, Pello, Tornio and Ylitornio in Finland; Haparanda, Kiruna, Pajala and Övertorneå in Sweden. List of relevant Finnish and Norwegian districts: Enontekiö, Inari and Utsjoki; Karasjok, Kautokeino, Kåfjord, Nesseby, Nordreisa, Storfjord, Sör-Varanger and Tana in Norway.

No income tax is levied in Finland on wages paid out on the above conditions in the above circumstances. Nevertheless, even if wages are tax-exempt, the requirement to submit an Employer Payroll Report remains in force. The exemption only concerns wages, not pensions or other social benefits.

The Finnish employer must pay health insurance contributions and collect health insurance premiums from the workers. However, this obligation is waived if the duration is shorter than 4 months, or if the worker holds the A1 (E 101) Certificate or a similar document.

  • Line 10 (110): Type of Payment is 5 for the wages paid out.
  • Line 14 (114): Enter total gross amount of cash wages.
  • Line 15 (115): Enter collected healthcare payment (also known as minimum withholding).

If worker partly works in another district in Finland, in addition to working in a border district, usual tax rules will apply to the income sourced in the ‘normal’ area. Employers should use P, 1 or 7K Payment Types. In such a situation, employers are expected to hand in two Employer Payroll Reports, one for the cross-border work, the other for the work in districts in the ‘normal’ area.

Instructions to foreign employers with no permanent establishment (PE) in Finland

The annual information-reporting requirement concerns foreign employers, if wages have been paid to a Finnish tax resident or to an individual who has stayed longer than six months in Finland. To facilitate the filing of the EPR and other reports, the employer should have a Finnish Business ID, and the workers should have Finnish personal identity numbers. If the employer company has no PE in Finland, no taxes need to be withheld when paying out wages to workers. Nevertheless, in these situations, the workers themselves should turn to the local tax office to make arrangements for self-initiated monthly prepayments of income tax. However, if the employer company has voluntarily requested for entry in the Tax Administration's register of employers, taxes should be withheld in the usual way. The employer company also pays the withheld amounts forward to the Tax Administration. If no PE exists in Finland, there is no requirement to pay sthe health insurance contributions to Finland. However, the employer may wish to pay these contributions voluntarily. For more information, read .

If other currency than euros has been used when paying wages, the exchange rate for purposes of reporting is that of the date of wage payment and receipt by worker.

Employers do not have to report any withheld health insurance contributions, payable forward to worker’s home-country authority. The scope of the Finnish information-reporting requirement does not extend itself to these payments.

Wages paid by employer (no PE in Finland) to employees not covered by Finnish social insurance (7L)

Employee has presented an A1 (E101) Certificate or other proof of not being covered by the Finnish social-security system.

Submit separate EPR itemizations to show each employee.

Line 10 (110): Enter 7L Type of Payment. However, if the employment contract has been defined for net-of-tax pay, see relevant section (7N).

Line 14 (114): Enter gross cash wages (in euros). Gross amount should include taxes that may have been withheld.

Line 15 (115): If withholding through the employer’s payroll system was carried out, enter the amount that was withheld. However, if a net-of-tax arrangement exists, and the employer is paying the tax on behalf of employee, do not report it in line 15.

Line 16 (116): Enter any pension contributions and unemployment contributions that you may have withheld.

Wages paid by employer (no PE in Finland) to employee who is covered by Finnish social insurance (7M)

The employee is fully liable to tax in Finland (tax resident), either living in the country for an indefinite period, or having exceeded the 6-month threshold, and has no A1 (E101) Certificate or other document showing coverage by any other country’s social security system. However, if the employment contract has been defined for net-of-tax pay, see the relevant section (7N) below.

Wages paid to each Finland-covered employee should be reported separately:

Line 10 (110): Enter 7M.

Line 14 (114): Enter gross cash wages (in euros). Gross amount should include taxes that may have been withheld.

Line 15 (115): If withholding through the employer’s payroll system was carried out, enter the amounts of tax and health-insurance premiums withheld. However, if a net-of-tax arrangement exists, and the employer is paying the tax and health insurance on behalf of employee, do not report the amounts in line 15.

Line 16 (116): Enter any pension contributions and unemployment contributions that you may have withheld.

Line 36 (136): Enter the amounts of wages that are not included in the base of the health insurance contribution (Chapter 11, § 2.4 of Sickness Insurance Act).

Wages paid by foreign employer (with no PE in Finland) having responsibility to pay and discharge employee’s taxes (employment contract “net-of-tax”) (7N)

See web article ”Employment contracts that define pay in terms of net salary”.

Line 10 (110): Enter 7N Type of Payment.

Line 14 (114): Enter gross-up amount (sum total of net pay + Finnish taxes).

Leave line 15 blank.

Line 16 (116): Enter any pension contributions and unemployment contributions that you may have withheld.

Line 36 (136): Enter the amounts of wages that are not included in the base of the health insurance contribution (Chapter 11, § 2.4 of Sickness Insurance Act).

Wages paid by employer (no PE in Finland) to employees who have not stayed longer than 183 days in Finland during a Tax-Treaty-defined sojourn period (7Q)

The income is not within Finland’s taxing rights, but the information-reporting requirement remains in force, because wages have been paid out. If the employees are covered by the Finnish social insurance, health insurance premiums are payable and should be reported.

Example: Hungarian employee arrives 1 November 2016 and leaves 31 May 2017. He or she is fully liable to tax in Finland (tax resident). However, the period of 183 days per each calendar year is not exceeded. It should be noted that the period is defined in Hungary-Finnish tax treaty as "per each calendar year". The income is not within Finland’s taxing rights. Nevertheless, the employer should submit an EPR using 7Q Type of Payment.

  • Line 10 (110): Enter 7Q.
  • Line 14 (114): Enter gross cash wages (in euros).
  • Line 5 (105): Enter the country code for the country that has the taxing rights.