Wages from a special organisation have no impact on the progressive income-tax rate for individual employee's other earningsNews, 7/1/2021
Finland’s Supreme Administrative Court handed down a ruling on 30 April 2021 that addressed the tax treatment of wages and fees received from an international organisation. According to the Court ruling, when the tax authority assesses an individual employee’s income taxes for the year, any receipts of tax-exempt wages from the United Nations and the UN Special Organizations must not be included in the employee’s annual gross income.
As a result, the wages do not affect the progressive tax rate in circumstances where the individual also has earned other income during the year. This principle additionally applies to other international organisations if there is an agreement that Finland grants exemption to paid-out wages, and if no clauses are in effect that would cause a specific wage payment to have an impact on progressive taxes.
It is standard practice for the organisations to enter into an agreement with the host country regarding the privileges that the organisation can enjoy. A number of international organisations have set up offices in Finland. Some of them have agreed with Finland on tax-related arrangements, which in some cases provide for special tax treatment for the organisation’s employees.
If you receive wages, which under an agreement with the international organisation are tax-exempt, and if you also received other earnings, your tax rate would not be raised along a progressive scale because wages from the organisation would not be included.
The previous practice had been the contrary: if individuals received income from an international organisation, it was included in the annual total on which the progressive rate depends. In addition, the previous practice also required that the Finnish health insurance contribution be paid if the employee was covered by the Finnish health insurance system.
Check your tax decision for the 2020 taxable year to make sure that your wage income was treated as fully exemptible if you received it from the UN, a special organisation of the UN, or from another organisation or specialised agency. Apply for an adjustment of income taxes if necessary. If you need to apply for adjustment, you are also entitled to do so in respect of earlier tax years. Claims for adjustment against income taxes can be made within 3 years from the beginning of the calendar year following the tax year.
Ruling of the Supreme Administrative Court no KHO:2021:54, dated 30 April 2021.