Buying services from a foreign company
If you are a Finnish-based company or a foreign company with a permanent establishment in Finland paying a foreign company to perform services in Finland, you must withhold tax at source on payments to it. 'Foreign companies' are those that have a foreign location as their residence or domicile for tax purposes. A foreign company may have a Finnish Business ID.
However, you do not have to withhold tax if the foreign company:
- is registered for prepayment in Finland or
- shows you a zero-rate tax card for tax at source or
- presents documentation establishing that it has no permanent establishment in Finland. (Company's country of tax residence must have a tax treaty with Finland).
In general, you must withhold tax on payments
- in the construction industry
- relating to a building site or construction, assembly or installation project or related supervisory activities
- for shipbuilding
- for transportation services
- for cleaning services
- for nursing services or medical treatment given by nurses
- for employees leased from foreign companies
- to companies from countries with no tax treaty with Finland.
The rates of tax at source are:
- 13% on payments to companies or partnerships.
- 35% on payments to self-employed individuals.
You must pay the tax at source to the Finnish Tax Administration and include the amounts on your reports of employer's contributions (previously periodic tax return) and annual information returns. You must provide the foreign company with a receipt showing that you have withheld Finnish tax at source on the payments it receives.
If a foreign company selling services to Finnish customers wishes not to have tax withheld, it should apply to register for prepayment in Finland or get zero-rate a tax-at-source card from a Finnish tax office.
Refunds of withheld tax
You may be shown a retroactive zero-rate card by a foreign company, the effect of which is to show that no tax should have been withheld at source on payments to it. If this is the case and it is still the same calendar year as when you withheld the tax, you may refund it to the foreign company and file a periodic tax return reflecting what has happened. If it is no longer the same calendar year, the foreign company can ask the Tax Administration for a refund. Entry of the foreign company in the Prepayment Register is not sufficient grounds for a refund.