Employees from overseas

If you are a company resident in Finland, you can employ foreign workers in Finland, either directly or under leasing contracts; and you can also employ foreign workers at your permanent establishments abroad.  Taxation and employer obligations vary from country to country.

If you lease employees, you may have to submit reports giving details of any from abroad. For more information, see Work done by foreign leased employees.

Employees staying in Finland for 6 months — nonresidents

If your employees stay for six months or less, they are considered nonresident. You must withhold 35% of their gross pay including any fringe benefits you may provide. However, before calculating the total tax, you must see your employee's tax card showing the deduction they are entitled to, which is €510 per month or €17 per day from their gross compensation.

You must calculate your payroll taxes (including your employer's social security and health insurance contributions) on the basis of the gross amount before deduction.

An alternative regime for nonresidents' income is the progressive schedule, which can be applied to earned income but not capital income/dividends.  To enter it, your employee must ask the tax office to issue a nonresident's tax card instead of a source tax card.

Besides tax, you must also withhold employer's social security and insurance contributions unless your employee has a certificate showing they are covered by another country’s social insurance system.

Covering out-of-pocket expenses

When professionals are invited to work in Finland for a short period to provide specialist services or give lectures, payments of a tax-exempt allowance (a per diem) are permitted. Similarly, travel, accommodation and freight charges may be covered tax free, but vouchers should be retained.   Construction workers may have per diems, travel and accommodation covered free of tax, even if they have no primary place of work in another country.

If a nonresident works full time in Finland in a retail store, government office or factory, this place is considered their primary place of work. In such cases, no tax exemption is granted for any travel or accommodation reimbursed.  The same rule applies to students and trainees who work in Finland but have no primary place of work overseas;  they are not entitled to any tax exemptions for per diems, travel or accommodation unless they are sent off on a business trip elsewhere in Finland.

Paying nonresidents who are not directly employed

When you pay a nonresident individual, they do not have to pay income tax in Finland unless your company is treated as having a permanent establishment.

You must withhold tax at source when you pay someone not directly employed by you, unless they are entered in the Prepayment Register.  To reduce the withholding rate, nonresidents can apply for a tax card for trade income. The card instructs you as the employer to deduct the monthly 510-euro deduction before computing the amount to be withheld. Because trade income is different from employment income, there is no requirement to pay the employer's social security contribution.  However, you must always include the amounts in your annual Employer Payroll Report even in cases where you have not had to withhold any tax on what you have paid.

Foreign employees abroad

If you employ foreign citizens residing abroad and have them working at a location outside of Finland, the money you pay them – be it employment income or trade income – is normally not taxable in Finland (unless they work on board a Finnish ship or aircraft).  However, you must include payments to them in your Employer Payroll Report.  Even where pay is not subject to Finnish tax, a Finnish employer - typically a transport company, airline or shipping company - may have to pay Finnish social security contributions and withhold and pass on Finnish health insurance contributions.

If a foreign employee of yours working in another country is not there as a posted employee (i.e. you did not send them there), they are not covered by the Finnish social insurance system.  There is no requirement for you as employer to pay social security or to withhold health insurance.

However, if an employee of yours working in another country is a Finnish citizen who lives there permanently, their tax treatment must be cleared up on a case-by-case basis. You must contact a Finnish tax office and apply for a tax-at-source card on their behalf.

Giving pay slips to beneficiaries

When you pay wages or salary you must give the recipient a pay slip with the following information printed on it: beneficiary's name, amount paid, category or type of payment, year of payment, amounts of withheld tax, insurance contributions, and your name.   We recommend that you use English because your employees may need to show their pay slips to foreign tax authorities when making requests for elimination of double taxation etc. We also recommend that employees keep their pay slips safe to ensure that they can check the amounts on their income tax returns in their home country.

Employees staying in Finland longer than 6 months — resident taxpayers

People arriving in Finland for more than six-months are considered tax resident in Finland and are subject to unlimited tax liability. This means that their income is taxed progressively in the same way as that of people living in Finland permanently. You must withhold tax on the wages or salary you pay them, according to the instructions printed on the employee’s tax card.

If they do not show you a tax card or proof of prepayment registration, you must withhold tax at 60%.  Unless you are paying fees to athletes or sportsmen, you must also pay the employer's social security contribution. However, you don't have to pay it if the employee shows you an E 101 or an A1 certificate proving their "posted employee" status and a document from Kela – the Social Insurance Institution of Finland – stating that they are not covered by the Finnish residence-based or work-based social insurance system.

For more information on the tax treatment of people arriving from foreign countries an on that of special groups (such as teachers, students, researchers, frontier workers, foreign key employees, sportsmen and performing artists), see:  Taxation of employees from other countries

 

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