Foreign leasing corporations

If a foreign agent arranges to lease employees to work for a business in Finland, it has certain obligations as a employer in Finland. These obligations differ slightly depending on whether the agent has a permanent establishment or not.

What is employee leasing?

Employee leasing is an arrangement by which one company provides employees to another (the hirer) under a leasing contract.

In this way, leased employees have an employer-employee relationship with the foreign employee leasing agent, which pays their wages. However, they usually work at the premises of the Finnish recipient of the service, the hirer. They use the hirer’s tools and materials, and are under their direction and supervision.

It is important to be aware of the difference between employee leasing and sub-contracting, in which the direction and supervision of workers is the responsibility of the (foreign) subcontractor, as are in most cases tools and materials.

Leased employees must register within one month at their local register office or tax office

Leased employees must pay Finnish income tax on their wages from their first day of work, if the country where they come from has no tax treaty with Finland, or if it is one of the following:

Estonia, Latvia, Lithuania, Sweden, Norway, Denmark, Germany, Iceland, Moldova, Georgia, Belarus, Isle of Man, Guernsey, Bermuda, Jersey, Poland, Kazakhstan, Cayman Islands, Turkey, Cyprus, Tadzikistan or Turkmenistan.

Leased employees from such countries must register to get Finnish personal identity codes within six months of starting work by contacting their local register office (maistraatti; magistraten) or tax office. They must in any case contact the tax office in order to get a tax card or a set of bank slips for regular tax prepayments.

Registering for prepayment helps hirers

If you are a leased employee from a country with no tax treaty with Finland, or one of the following:

Estonia, Latvia, Lithuania, Sweden, Norway, Denmark, Germany, Iceland, Moldova, Georgia, Belarus, Isle of Man, Guernsey, Bermuda, Jersey, Poland, Kazakhstan, Cayman Islands, Turkey, Cyprus, Tadzikistan or Turkmenistan.

  • You must register to get Finnish personal identity codes within six months of starting work at your local register office (maistraatti; magistraten) or tax office
  • You must contact the tax office to get a tax card or set of bank slips for regular tax prepayments.

Foreign employee leasing agents should register for prepayment. We recommend that they do so before the Finnish hirer pays the first invoice. If the foreign agent is registered for prepayment in Finland, the hirer does not have to withhold tax at source (13%) when paying for any employees they have leased

For more information, Starting up business in Finland - foreign company

Foreign leasing agents must register as employers

If the employee leasing agent is treated as having a permanent establishment in Finland, it must register as an employer in Finland before the first payday. Agents are also entitled to ask for voluntary entry in the Register of Employers even if no permanent establishment exists.

When the agent is registered as an employer, its employees are relieved of their personal obligation to make prepayments. Instead, the employer simply withholds tax on their wages and pays it to the Finnish Tax Administration. The employer must apply the withholding rates that are printed on each individual worker's tax cards. Employees staying for no more than six months are given a tax-at-source card (lähdeverokortti; källskattekort) instead of the usual tax card. Those staying longer get tax cards, and for them the withholding rates follow the usual, progressive income-tax scheme.

Employee Leasing Notice must be filed within two months

A foreign employee leasing agent must file an Employee Leasing Notice by the end of the calendar month that follows the month when its employees start work in Finland. Each employee must be reported separately. Use this Form: Employee Leasing Notice, employer and payer of wages in another country

The Notice should cover any employees from countries with no tax treaty with Finland, or any of the following countries:

Estonia, Latvia, Lithuania, Sweden, Norway, Denmark, Germany, Iceland, Moldova, Georgia, Belarus, Isle of Man, Guernsey, Bermuda, Jersey, Poland, Kazakhstan, Cayman Islands, Turkey, Cyprus, Tadzikistan or Turkmenistan.

All agents must file the Notice, even if they are registered in the Finnish Register of Employers.

Social security for employees

Employees from other countries start being covered by the Finnish social security system after they have worked in the country four months. Once they are covered, pension insurance, unemployment insurance, and health insurance contributions must be withheld from their pay. However, employees with A1 or E101 Certificates showing they have 'posted employee' status will not be covered by the Finnish social security system; they will remain under the social insurance regime of their home countries.

A foreign leasing agent is responsible for buying insurance and for paying the employer's share of Finnish-covered employees' pension insurance, employment insurance and accident insurance contributions. Foreign agents may also have to pay the employer's health insurance contribution (previously the employer's social security contribution), the amounts of which depend on the level of pay.

For more information on mandatory pension insurance, contact the Finnish Centre for Pensions or any insurance company. For more information on accident and unemployment insurance policies, contact any insurance company.

Registered employee leasing agents must report employer’s contributions to the Tax Administration

As of 2017 there will be changes in how to report and pay employer’s contributions. Employer's contributions must be filed on-line. Read more (tax.fi/changes2017)

Foreign employee leasing agents registered in Finland must pay any amount of taxes withheld to the Tax Administration – including employer's health insurance contributions if applicable – and report these on their reports of employer's contributions. Report of employer's contributions must be filed by the 12th day of the calendar month following the month when you paid wages to employees. Reports of employer's contributions must be filed on-line, for example in the Finnish Tax Administration's MyTax e-service.

Filing an Employer Payroll Report at the end of the calendar year

An Employer Payroll Report must be submitted detailing all employee pay during the calendar year. The deadline is the end of January.

Consequences of non-reporting

If you represent a foreign employee leasing agent that fails to file an Employee Leasing Notice on time, the Tax Administration may fine you for negligence.

If you fail to file a report of employer’s contributions on time the Tax Administration imposes a late payment charge. If no report of employer’s contributions is filed at all the Tax Administration can estimate the amount of tax to be paid for the tax period and impose a punitive tax increase.

If you fail to file an Employer Payroll Report the Tax Administration may impose a fine for negligence and remove your company from the Prepayment Register.

For more information on employer obligations