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Income taxation of foreign corporate entities

Tax liability, permanent establishment and corporate tax rate

  • The tax liabilities of a foreign company depend on its business activities in Finland and whether the company has a permanent establishment in Finland or whether its place of effective management is in Finland.
  • Permanent establishment: A foreign company's operations in Finland may give rise to a permanent establishment in Finland in income taxation. In this case, the foreign company is liable to pay income tax to Finland on all income attributable to this permanent establishment. If a company has a permanent establishment in Finland, it is a nonresident taxpayer.
  • Place of effective management: If a company’s place of effective management is in Finland, it is a resident taxpayer. Resident taxpayers pay tax to Finland on income they receive both from Finland and from abroad.
  • For in depth guidance regarding tax liability and tax residency:

Attribution of income to permanent establishment and corporate tax rate

  • A nonresident foreign corporate entity with a permanent establishment (PE) in Finland must pay taxes to Finland on the income received by the permanent establishment.
  • The taxable income from the permanent establishment of the nonresident foreign corporate entity is calculated in a manner similar to that of the taxable income of a Finnish limited liability company. The PE and the parent company or head office are viewed as separate corporate entities for income taxation purposes.
  • All proceeds generated from the operations of a permanent establishment are regarded as income from the same source. This includes all income that the (PE) has gained from Finland and abroad. Interest charges, dividends, royalties and capital gains are also regarded as income. Expenses incurred by the acquisition and maintenance of permanent establishment income are, for their part, deductible.
  • Corporate income tax: Income tax rate for limited liability companies and for other corporate entities is 20%. Corporate tax is paid on the company’s profit. The profit is what remains after deductible expenses are deducted from the company’s income that is subject to tax.

Tax-at-source on trade income

  • When foreign companies receive trade income from Finland, the income normally falls outside the Finnish taxing rights, unless the foreign company has a permanent establishment in Finland. The payer is obligated to withhold tax-at-source.
  • The payer must withhold tax-at-source on trade income if the foreign company
    • is not entered in the prepayment register or
    • has not presented a tax-at-source card for zero-rate withholding.
  • A tax-at-source card is issued for a fixed time period and for a specific assignment. A foreign company can be issued a tax-at-source card with a withholding rate of 0% if the company’s activities in Finland do not give rise to a permanent establishment.
  • If the company has a permanent establishment in Finland, a tax-at-source card with a withholding rate of 13% is issued. 
  • Tax-at-source cards must be applied separately for each assignment.
  • If too much tax has been withheld at source, the foreign company can apply for a refund of tax-at-source from the payer during the payment year, and from the Finnish Tax Administration after the payment year.

Prepayment register

  • If the company has multiple assignments, the company is advised to request entry into the prepayment register. The company should request entry for the prepayment register before the assignment begins or at the latest before the invoicing starts in Finland.
  • When work is done by someone who has a valid registration in the prepayment register, the payor does not need to withhold tax on the compensation (such as royalties, trade income or other nonwage compensation).
  • It is not necessary for your business to be started and ongoing when you ask for the registration: it is enough if you are likely to start operating a trade or business soon. If you have started up recently, your prospective customers may be reluctant to give you any orders unless you have a registration.

Removal of international double taxation

  • Foreign-sourced income may be taxable in the source country as well as in Finland, which may lead to a double taxation situation.
  • International double taxation refers to situations where at least two countries have the right to tax the same income according to their internal legislation.
  • In order to eliminate international double taxation, states have concluded tax treaties, which have been used to agree on the distribution of the right to tax different incomes between the country of residence and the country of source of income.
  • Double taxation can be eliminated in two ways: by reimbursement or exemption, and in principle it is done in the country of residence. The removal method is the method specified in the tax treaty between the states.
  • The main method is the refund method. In the refund method, Finland generally taxes the income received by the taxable entity from abroad but deducts the tax paid abroad from the tax paid to Finland.
  • The exemption method is applied to income received from a foreign country only if Finland has waived its right to tax in a tax treaty. Waiver of the right to tax according to the exemption method means that Finland generally does not tax the income received by the taxable entity from abroad.
  • A nonresident taxpayer that has paid taxes for income of its permanent establishment to Finland, must by principle claim for removal of double taxation in its home country.
  • If the permanent establishment has received income from other countries and paid taxes on that income, the company must request the removal of double taxation in Finland. 
  • If a resident taxpayer has income for which, in addition to Finland, another country also has the taxing rights, the company must demand reimbursement or exemption from Finnish taxation of taxes paid elsewhere than in Finland. The right to tax the company's income can arise, for example, in a situation where a company that is a resident taxpayer in Finland has a permanent establishment in another country.

Filing an income tax return

  • A foreign corporate entity must file a tax return on its taxable income and deductible expenses if at least one of the following conditions applies:
    • The foreign corporate entity has
      • a permanent establishment in Finlan
      • immovable property in Finland (a real estate unit or shares in housing companies)
      • a right to a profit share from a partnership in Finland
  • The tax return must be filed within four months after the end of the calendar month in which the company's accounting period ends. The accounting period of the permanent establishment of a foreign corporate entity is the same as the accounting period of the head office.
  • If the foreign corporate entity believes its business activities in Finland do not give rise to a permanent establishment for income tax purposes, it must  file an account on local operations.

Page last updated 4/24/2025