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 send reports to the Tax Administration giving details of the individuals who have arrived to work for you as leased workers. For more information, see Work done by foreign leased employees.
Employees staying in Finland for 6 months — nonresidents
If your workers stay for six months or less, they are considered nonresidents. 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 worker's tax card showing the deduction he or she is entitled to, which is €510 per month, or €17 per day, from their gross compensation. Deduct the above amounts from the entire gross amount that contains both cash wages and fringe benefits. The deduction is €510 per month i.e. €17 per day.
You must calculate your payroll taxes (including your employer's health insurance contributions) on the basis of the gross amount before the deduction.
An alternative tax regime for nonresidents' income is the progressive scheme, which can be applied on earned income (but cannot be applied on dividends). To enter this regime, your worker must ask the tax office to issue a nonresident's tax card in place of a source tax card. Besides tax, you must also withhold employer's health insurance contributions and other insurance premiums unless your worker has a certificate that establishes that they are covered by the social insurance system of a foreign country.
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 make payments of nonwage remuneration i.e. trade income to any beneficiary 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 health insurance contribution.
However, you must always send a report to the Tax Administration on a paid amount of trade income even in cases where you have not had to withhold any tax on it. You are required to report the paid trade income on the earnings payment report, which you must send to the Incomes Register after each payment.
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, as a Finnish employer, you must report the payments you made. Report it on an earnings payment report, which you must send to the Incomes Register after each payment.
Even if the pay is not subject to Finnish tax, the Finnish employer – typically a transportation company, airline or shipping company – may have to pay Finnish health insurance contributions and withhold and pass on the workers’ Finnish health insurance premiums.
If the foreign worker 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 the employer to pay the insured person’s health insurance premiums or to withhold the employer’s health insurance contribution.
However, if a worker 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: a Finnish tax office must be contacted and an application for a tax-at-source card must be submitted.
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 workers may need to show their pay slips to foreign tax authorities when making requests for elimination of double taxation etc. We also recommend for the workers that they 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 in Finland progressively and in the same way as that of people living in Finland permanently. You must withhold tax on the wages or salary you pay to them, according to the instructions printed on each worker’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 health insurance contribution. However, you don't have to pay it if the worker has shown you an E 101 or an A1 certificate proving their "posted employee" status or shows you 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