Foreign-sourced rental income

If you receive rental income in any form from another country, you must report it on your tax return in Finland.  As agreed in Finland's tax treaties with other countries, rental income may be taxed in the foreign country where its source is located if the property you have is immoveable — i.e. real property such as a house or apartment — and you receive rent under a rental contract concerning that property.  However, if you have personal property — moveable property — that you have rented out to someone, your receipts of rental income are taxed in Finland only.

The credit method

With a number of countries (including the Nordic countries), Finland has a tax treaty that provides for elimination of international double taxation through the credit method. This means that the country of taxation will be Finland for any foreign-sourced income, but any taxes that you have paid overseas are credited against Finnish tax.

In this way, if you have had rental income from such a country, the Finnish tax authorities will assess it at the 30-percent rate (if your capital income amounts to more than €30,000, the rate is 34%) and subtract any foreign-paid taxes from the tax payable in Finland. 

If you pay interest because you have borrowed money to finance your purchase of real property in another country, your interest expenses are deductible against your rental income.  This deduction is made against your capital income.  Similarly, if you pay real property tax in the other country it is deductible against your rental income because such a tax is treated as your expense for the production of income.

The exemption method

If the real property that you are renting out is located in Spain, Portugal, France or Egypt, you will be entitled to removal of double taxation through the exemption method, provided by the tax treaties that are in force between Finland and these countries. This means that your rental income is not taxed in Finland, but it may raise the rate of tax on your other capital income. For this reason, you must report it in your Finnish income tax return. It should be noted that where the exemption method is used, you cannot deduct the expenses for the production of income, and the portion of your interest expense that exceeds the amount of income received.

Do not forget to report your overseas rental income

If you have had receipts of rental income from foreign sources, fill out:

• Form 7H Rental income – Apartment rented out (3011e) or;
• Form 7K Rental income – Real property rented out (3012e)

Tick the Located in another country box. If you paid any taxes in the country of location, give details in Additional Information. Transfer the net rental income (or loss) in your Pre-completed tax return form. Hand in Form 7H or 7K as an enclosure.