Obligations of a foreign employer

If you have a business based outside Finland that pays wages to an employee working in Finland, you may have tax and social security-related employer obligations to fulfil.

These obligations depend on whether or not your company is considered to have a permanent establishment in Finland.

More information on permanent establishments for purposes of income tax.

Businesses with no permanent establishment

If your business has no permanent establishment in Finland for income tax purposes, it does not have to seek entry in the Register of Employers. However, you are entitled to request employer registration on a voluntary basis.

Reporting obligations in force for employees staying longer than 6 months

If an employee of yours stays in Finland for more than 6 months, you must file an Employer Payroll Report at the end of the year, and report all wages paid. In these circumstances, you as the employer do not have to withhold tax on the wages that you pay out, because the employee must make tax prepayments independently each month. However if you withhold tax on the wages you are obliged to submit reports of employer's contributions (previously periodic tax return).

However, if your employee is paid through the payroll system of a Finland-based substitute payer who is not the actual employer then the usual procedure of withholding tax on wages applies. In this case the employee does not have to make tax prepayments.

If you apply for the employer payroll register you have the same reporting obligations as those companies which have a permanent establishment in Finland.

Businesses with a permanent establishment

  • You must register your company as an employer if you pay wages to two or more people on a permanent basis, or if you pay wages to at least six people at the same time, even though their employment contracts are temporary and meant to be valid for a short term only.
  • For having your company registered as an employer, submit Start-Up Form Y1, Y2, or Y3. Visit ytj.fi to download Y forms.
  • You must withhold money on all wages paid out.
    The amount to be withheld is dependent on the percentage rates printed on the employee's tax card or tax-at-source card. Taxes are based on the entire gross amount, including cash wages and fringe benefits.


  • You must pay the employer's health insurance contribution if your employees do not hold documentation establishing that they are posted employees. Your company must pay the Employer’s health insurance contribution to the Finnish Tax Administration.
  • Your company must file reports of employer’s contributions and in addition Annual Information Returns.
  • The amount of taxes withheld and employer's health insurance contributions must be filed and paid monthly to the Tax Administration on your own initiative.
  • As for Annual Information Returns, you must file them every year by the end of January.


Social security obligations

Do posted employees have A1 (E 101) Certificates or similar documents?

Foreign companies sometimes send employees to Finland from their domicile countries. If the domicile (the country of tax residence) is in the European Union or is Norway, Iceland, Liechtenstein or Switzerland, the social security authorities of that country may give the employee an A1 or E 101 certificate of posting. This means that the employee is still covered by home-country social security. As long as the certificate is valid, no social security contributions have to be paid in Finland.

Employees without a document establishing posted employee status

In this case, your business must take out pension insurance for the employee with a Finnish pension insurance company. You must pay the premiums, about 20% of wages. These include the employee’s own contribution, which you must withhold every time you pay wages. Foreign employers are usually subject to the same obligation as Finnish employers to arrange for pension insurance as set out in the Act governing employment pensions (TyEL) for employees working in Finland.

For more information, visit the website of Finnish Centre for Pension

In addition to pension insurance, other insurance contracts to be covered by the employer may include:

  • Accident insurance
  • Unemployment insurance and
  • Group life insurance.

For further information, contact:

Employer’s health insurance contributions payable

If you are considered to have a permanent establishment in Finland for income tax purposes, your company has to pay not only the insurance premiums but also the employer's health insurance contribution (previously the employer's social security contribution).This contribution is paid to the Tax Administration.

Consequences of non-reporting

If you report employer’s contributions after the deadline, we impose a late-payment penalty charge – the level of which depends on the amount of tax reported. If no report of employer’s contributions is filed, we can estimate the amount of tax that you have to pay and impose an additional surtax.

If you are late or if you do not follow the formatting instructions for Employer Payroll Reporting, we may have to impose a charge for negligence. If no Employer Payroll Report is filed, we may have to remove you from the Prepayment Register.

If you do not withhold tax on wages you pay out to your employees, we may later have to collect the taxes from you and remove you from the Prepayment Register.