Tax at source procedure applied to a non-resident taxpayer’s income and a key employee’s wage income

This is an unofficial translation. The official instruction is drafted in Finnish (Rajoitetusti verovelvollisen tulon ja avainhenkilön palkkatulon saajan lähdeverotusmenettely, record number VH/1987/00.01.00/2022) and Swedish (Källskatteförfarande för begränsat skattskyldiga inkomsttagare och nyckelpersoner, record number VH/1987/00.01.00/2022) languages.

These instructions discuss the tax at source procedure applied to an income earner who is a non-resident taxpayer in accordance with the act on the taxation of non-residents’ income (Laki rajoitetusti verovelvollisen tulon verottamisesta 627/1978) and a recipient of a key employee’s wage income in accordance with the act on the taxation of foreign key employees (Laki ulkomailta tulevan palkansaajan lähdeverosta 1551/1995).

These instructions replace the Finnish Tax Administration’s instructions ‘Interest to be paid on refunds of taxes withheld at source’. The previous instructions have been updated in these instructions with regard to interest paid on payments made after 2017.

1 General

1.1 Foreword

According to section 9, subsection 1 of the act on income tax (Tuloverolaki 1535/1992), tax liability in Finland is divided into resident and non-resident tax liability. The tax liability determines to what extent Finland can tax a taxpayer’s income. Resident taxpayers are liable to pay tax in Finland on income earned here and elsewhere. Non-resident taxpayers are liable to pay tax in Finland on income earned here. Section 10 of the act on income tax includes a list of the types of income that are regarded as earned in Finland.

If a natural person is not a resident of Finland, they are a non-resident taxpayer here (section 9, subsection 1 of the act on income tax). A natural person is considered a resident of Finland if they have their permanent residence and home here, or if they stay in Finland for a continuous period of more than six months. In addition, the three-year exception applies to Finnish citizens. On the basis of this, a Finnish citizen moving abroad usually becomes a non-resident taxpayer only from the beginning of the fourth year following the move (section 11 of the act on income tax). More information on the resident and non-resident tax liability of natural persons is available in the Finnish Tax Administration’s instructions Tax residency, nonresidency and residency in accordance with a tax treaty – natural persons.

A corporate entity established or registered abroad is a non-resident taxpayer, unless its place of effective management is located in Finland (section 9, subsection 1 of the act on income tax). A party in accordance with foreign legislation is regarded as a corporate entity in Finnish taxation when it is considered to be comparable to any of the corporate entities listed in section 3, paragraphs 1–7 of the act on income tax. For example, companies generally deemed comparable to Finnish limited liability companies (Oy) are the Swedish aktiebolag (AB) and Estonian osaühing (Oü). In addition, foreign death estates are also taxed as corporate entities (section 3, paragraph 6 of the act on income tax). More information on the resident and non-resident tax liability of corporate entities is available in the Finnish Tax Administration’s instructions Resident and nonresident tax liability of corporate entities.

If a non-resident taxpayer has a permanent establishment in Finland for engaging in business activities, the non-resident taxpayer will be liable to pay tax on all income attributable to the permanent establishment, regardless of whether the income has been received from Finland or elsewhere (section 9, subsection 3 of the act on income tax). More information on the formation and taxation of a permanent establishment is available in the Finnish Tax Administration’s instructions Income taxation of nonresident foreign corporate entities.

1.2 Taxation at source of non-resident taxpayers

Income earned by a non-resident taxpayer in Finland is taxed in accordance with the act on the taxation of non-residents’ income. The payor withholds non-resident taxpayers’ state and municipal income tax as final tax at the source of income (tax at source) or the Finnish Tax Administration imposes tax as laid down in the act on assessment procedure (Laki verotusmenettelystä 1558/1995, section 2, subsection 1 of the act on the taxation of non-residents’ income). The types of income subject to tax at source are listed in section 3, subsection 1 of the act on the taxation of non-residents’ income.

Part of non-resident taxpayers’ income is taxed as laid down in the act on assessment procedure. Income taxed in accordance with the act on assessment procedure is listed in section 13 of the act on the taxation of non-residents’ income. For example, a natural person can request their wage or dividend income within the scope of tax at source to be taxed in accordance with the act on assessment procedure (section 13, subsection 1(3 and 6) of the act on the taxation of non-residents’ income). In these situations, tax is levied as a progressive tax in accordance with provisions of the income taxation of resident taxpayers (section 13a of the act on the taxation of non-residents’ income). In addition, the Finnish Tax Administration imposes any unwithheld tax at source on the taxpayer in accordance with the act on assessment procedure if tax at source was not withheld due to a reason other than the payor’s neglect (section 16, subsection 2 of the act on the taxation of non-residents’ income).

The taxation of employees arriving in Finland from other countries is discussed in more detail in the Tax Administration’s instructions Taxation of employees from other countries. In addition, the taxation of certain special groups is discussed in the following instructions:

• Income taxation of foreign self-employed individuals
• Taxation of people working for higher education institutions – international situations
• Taxation of cross-border commuters
• Leased employees from other countries and taxation in Finland
• Taxation of students and trainees in international situations
• Taxation on fees of members of administrative bodies and managing directors, section 12 (in Finnish)
• A performing artist’s tax treatment in international situations
• Taxation of income received from sports in international situations

As a rule, the payor must withhold tax at source on payments in accordance with the tax at source rates defined in the act on the taxation of non-residents’ income. However, the income earner may be entitled to a lower tax at source rate or an exemption from tax at source based on a tax treaty or another international convention, for example.

The provisions of a tax treaty or another international convention can be applied at the time of the payment by the payer of the income if the income earner provides the payer with a declaration of their residence and other requirements for applying the tax treaty before making the payment. As a declaration of the applicable tax treaty, the income earner may present a tax at source card or indicate their name, date of birth and any other official identifier, and their address in their country of residence (section 10 of the act on the taxation of non-residents’ income). More information on the most general provisions of tax treaties is available in the Finnish Tax Administration’s instructions Articles of tax treaties. In addition, more information on the taxation of non-resident taxpayers’ dividend, interest and royalty income is available in the Finnish Tax Administration’s instructions Payments of dividends, interest and royalties to non-residents.

Section 10b of the act on the taxation of non-residents’ income applies to dividends paid for a listed company’s nominee registered shares, according to which the dividend provisions of an international convention can be applied if the dividend payer or the intermediary that is closest to the dividend recipient and is registered in the Finnish Tax Administration’s Register of Authorised Intermediaries has taken reasonable measures to determine the dividend recipient’s country of residence and to verify that the dividend provisions can be applied to the dividend recipient (section 10b, subsection 2 of the act on the taxation of non-residents’ income). A tax at source card issued by the Finnish Tax Administration, a certificate issued by the tax authority of the dividend recipient’s country of residence or an investor self-declaration by the dividend recipient that indicates the dividend recipient’s information necessary for taxation at source can be deemed to be a reasonable measure to determine the dividend recipient’s country of residence (section 10b, subsection 4 of the act on the taxation of non-residents’ income).

More information on the withholding of tax at source and the related procedures is available in the Finnish Tax Administration’s following instructions:

• Withholding tax at source on dividends, interest and royalties, and the payor’s obligations
• Paying nonwage compensation to a nonresident foreign company

1.3 Taxation at source of key employees’ wage income

The taxation of foreign key employees is laid down in the act on the taxation of foreign key employees. Foreign individuals coming to Finland for periods longer than six months and who are granted the status of resident taxpayers are in certain cases treated as foreign key employees who only pay tax at source of 32 per cent on their wage income instead of progressive tax.

The income earned by resident taxpayers is taxed in accordance with the act on assessment procedure, and the taxation is based on progressive tax system. However, a tax at source of a key employee can be collected from the earnings a of key employee even if the individual in question is a resident taxpayer in Finland. The collection of tax at source of key employees’ wage income requires that the employee presents a key employee’s tax card to their employer. Tax is collected as a final tax so that the employer deducts the tax from the wages paid (section 3 of the act on the taxation of foreign key employees). More information on the taxation of key employees is available in the Finnish Tax Administration’s instructions Taxation of key employees.

2 Tax at source card and advance ruling

2.1 A non-resident taxpayer’s tax at source card

2.1.1 Applying for a tax at source card

The tax at source card of an income earner who is a non-resident taxpayer provides the payor with guidance for withholding tax. The tax at source card protects sincere payors.

The Finnish Tax Administration provides non-resident taxpayers with a tax at source card at request for the application of provisions on tax at source (section 5 of the act on the taxation of non-residents’ income). A taxpayer can apply for a tax at source card if they are about to receive income subject to tax at source in Finland and want final tax at source to be withheld at the correct amount at the source of the income. For example, the tax at source card can address the taxpayer’s right to a tax rate lower than the fixed tax rate laid down in section 7 of the act on the taxation of non-residents’ income. The tax at source rate applied to income received by a taxpayer is generally independent of the amount of income.

The applicable provisions indicated in the tax at source card may be based on national law or a tax treaty’s provisions that restrict national tax law. The taxpayer must provide evidence of the grounds for their claims and also, in other respects, cooperate in the examination of the matter which they have filed (section 31, subsection 2 of the Administrative Procedure Act).

The taxpayer must present the tax at source card to the payor. Alternatively, the taxpayer can present the tax at source card to an Authorised Intermediary in the case of dividends received from a publicly listed company on nominee-registered shares as referred to in section 33a of the act on income tax. The payor can withhold the tax at source rate defined in the tax at source card on the income payment date or adjust previously withheld tax at source on the basis of section 10, subsection 2 of the act on the taxation of non-residents’ income before paying the excessively withheld tax to the state (quick refund procedure).

Natural persons who are non-resident taxpayers can apply for a tax at source card using the form Non-resident’s application for tax at source card, tax card, tax prepayment or tax number. Foreign corporate entities can apply for a tax at source card using the form Foreign corporation’s tax-at-source card application for dividend, interest and royalty income or Application for a tax-at-source card for trade income received by a foreign corporation.

2.1.2 Application of certain special provisions to the tax at source card

In certain situations, the non-withholding of tax or the granting of a deduction in accordance with the act on the taxation of non-residents’ income may require a tax at source card. Before withholding tax, the payor can make a tax at source deduction from the total amount of monetary wages and fringe benefits. When tax at source is withheld, the payor deducts €510 per month from the total amount of such income from which a 35% tax at source is withheld. When the income has been accrued during a period of less than a month, the payor deducts €17 per day from the total amount. However, the maximum amount of deduction equals the amount of income. The deduction requires that the deduction be indicated in the tax at source card (act on the taxation of non-residents’ income, section 6). The tax at source deduction is not granted for fund units paid or any surplus funds distributed by a personnel fund, or fees of board members or members of other administrative bodies.

Tax at source can be left unwithheld from dividends paid to a foreign contractual fund equivalent to a Finnish investment fund or special investment fund which meets the requirements for tax exemption laid down in section 20a of the act on income tax if the dividend recipient presents a declaration of fulfilling the requirements for tax exemption to the Finnish Tax Administration (act on the taxation of non-residents’ income, section 3, subsection 10). In practice, the fulfilment of the requirements for tax exemption is presented to the Finnish Tax Administration when applying for a tax at source card or processing refund applications. More information on the requirements for tax exemption for foreign investment funds is available in the Finnish Tax Administration’s instructions On the taxation of investment funds and the provisions of section 20a of the Income Tax Act.

If non-wage compensation for work as laid down in section 25 of the act on tax prepayments (Ennakkoperintälaki 1118/1996) is paid for building construction, earthmoving, water construction or other construction work, installation or assembly work, shipbuilding work, transporting or cleaning, caring and nurturing work, the service recipient can only leave tax at source unwithheld if the compensation recipient is registered in the prepayment register or presents a 0% tax at source card (act on the taxation of non-residents’ income, section 10f).

Expenses that have a direct financial link to the compensation in question can be deducted from compensation paid based on the personal activities of an artist or athlete. The requirement is that the taxpayer is a resident of a country belonging to the European Economic Area and the taxpayer presents a request regarding the matter. The deduction requires a tax at source card applied for the purpose (act on the taxation of non-residents’ income, section 7a).

2.2 A key employee’s tax card

The act on the taxation of foreign key employees is applicable at a key employee’s request. A key employee must apply for a tax card for the collection of tax at source on wage income from the Finnish Tax Administration within 90 days of the date on which the work referred to in the act on the taxation of foreign key employees started. If the requirements for the application of the act exist, the Finnish Tax Administration will enter information on the decision in the employee’s tax card, i.e. grants a key employee’s tax card (act on the taxation of foreign key employees, section 4).

The employer must withhold tax in accordance with the act on tax prepayments in place of collecting tax at source on wage income, even if the key employee’s tax card included the entry referred to in section 4 of the act on the taxation of foreign key employees, if the requirements for collecting tax at source on wage income are not met or no longer exist. The employer is responsible for withholding tax and paying the amount withheld as laid down in the act on tax prepayments (act on the taxation of foreign key employees, section 8, subsection 2).

More information on applying and requirements for a key employee’s tax card is available in the Finnish Tax Administration’s instructions Taxation of key employees.

2.3 Appeal procedure applied to a tax at source card

If there have been changes in a non-resident taxpayer’s conditions, due to which the tax at source card granted to the taxpayer no longer corresponds to the changed conditions, the taxpayer can apply for a new tax at source card from the Finnish Tax Administration.

If the request of a non-resident taxpayer or key employee has not been approved in full when granting a tax at source card, the taxpayer can request a separate appealable decision from the Finnish Tax Administration. The appeal procedure in a case concerning a tax at source card requires that an appealable decision has been requested, and no appeal can directly be submitted for a tax at source card.

No deadline is defined by law for requesting an appealable decision.  Furthermore, the Tax Recipients’ Legal Service Unit may request an appealable decision from the Finnish Tax Administration if it wants to appeal against a decision on a tax at source card granted to a taxpayer.

An appealable decision must include a justification as laid down in the Administrative Procedure Act (act on the taxation of non-residents’ income, section 8, and act on tax prepayments, section 18, subsection 3).

An appealable decision can be requested to be changed by submitting a written claim for adjustment to the Assessment Adjustment Board. The claim for adjustment must be submitted within 60 days after the appellant received information on the decision of the Finnish Tax Administration. The calculation of the deadline of the Tax Recipients’ Legal Service Unit starts from the issuance of the decision (act on assessment procedure, section 65a). More information on the appeal procedure is available (in Finnish) in the Finnish Tax Administration’s instructions Appeal procedure applied to the Finnish Tax Administration’s decisions. 

2.4 Advance ruling for the tax at source procedure

2.4.1 Advance ruling for a non-resident taxpayer

Non-resident income earners and payers can request an advance ruling from the Finnish Tax Administration on how to apply a specific provision of a tax treaty, whether tax at source needs to be withheld or what needs to be otherwise followed in the withholding of tax at source. The advance ruling is subject to a separate charge.

The application must indicate the question for which an advance ruling is requested and present the information required for settling the matter. An advance ruling is issued for a specific time; however, until the end of the calendar year following its issuance at maximum.

An advance ruling issued at the payor’s request must be followed in the withholding of the tax for which it was issued. This is also the case when an advance ruling is issued at the request of a non-resident income earner if the taxpayer has demanded the payor to follow the advance ruling (section 12a of the act on the taxation of non-residents’ income). More information on applying for an advance ruling is available (in Finnish) in the Finnish Tax Administration’s instructions Applying for an advance ruling and the decision issued.

Non-resident income earners can lodge an appeal regarding an advance ruling issued by the Finnish Tax Administration with the administrative court within 30 days of the appellant receiving notice of the decision (section 21, subsection 2 of the act on the taxation of non-residents’ income, and section 85a of the act on assessment procedure).

2.4.2 Advance ruling for a key employee

Applying for an advance ruling on the taxation at source of a key employee’s wage income is not laid down by law. However, an advance ruling (act on tax prepayments, section 45, act on assessment procedure, section 85) can be requested in a situation where the taxpayer has already applied for and received a key employee’s tax card but the circumstances have changed to such an extent that it is unclear whether the act on the taxation of foreign key employees is still applicable. By requesting an advance ruling in accordance with section 45 of the act on tax prepayments, the employer can ensure whether tax at source can still be collected from the key employee’s wages or whether tax must be withheld from the wages in accordance with the act on tax prepayments. An advance ruling on tax prepayments may be requested by the key employee or their employer. More information on applying for an advance ruling is available (in Finnish) in the Finnish Tax Administration’s instructions Applying for an advance ruling and the decision issued.

Taxpayers can lodge an appeal regarding an advance ruling issued by the Finnish Tax Administration with the administrative court within 30 days of the appellant has receiving notice of the decision (act on tax prepayments, section 48, and act on assessment procedure, section 85a).

2.4.3 Requesting an advance ruling from the Central Tax Board

An advance ruling can also be requested from the Central Tax Board if the matter is significant in principle or the decision on the matter will make the tax practice more harmonised. With regarding to the taxation at source of a non-resident taxpayer, an advance ruling can be requested by the taxpayer and the party liable to withhold tax. More information on requesting an advance ruling from the Central Tax Board is available (in Finnish) in the instructions Requesting an advance ruling from the Central Tax Board.

An advance ruling issued by the Central Tax Board can be appealed by lodging an appeal with the Supreme Administrative Court. The appeal period is 30 days from receiving notice of the decision. No appeal can be lodged against a decision on which the Central Tax Board has decided not to issue an advance ruling (act on the Finnish Tax Administration, section 16).

3 Refunding tax at source to the income earner

3.1 Correcting excessively withheld tax at source during the payment year

The payor may identify, after making the payment, that too much tax at source was withheld from a payment received by a non-resident taxpayer or key employee. For example, this may result from a situation where the payment recipient only presents a tax at source card or another evidence of the fulfilment of the requirements for the application of a tax at source benefit after the payment was made.

If the amount of tax at source withheld is too high, the payor can correct the withholding of tax in conjunction with another payment made later during the same year or adjust the withholding of tax at source until the end of the payment year. The requirement is that the recipient provides the evidence of the fulfilment of the requirements for applying a tax at source benefit regarding the payment in question. The payor must verify the fulfilment of the requirements for applying a tax at source benefit in the same way as on the payment date.

With regard to dividends paid for nominee registered shares, for which an authorised intermediary has assumed responsibility in conjunction with an adjustment during the payment year, the payor must verify that the intermediary has been registered in the Finnish Tax Administration’s Register of Authorised Intermediaries when it reports information for the adjustment.

3.2 Requesting a tax at source refund from the Finnish Tax Administration

3.2.1 Requesting a tax at source refund

A non-resident taxpayer or key employee can request the refund of excessively withheld tax at source from the Finnish Tax Administration. The requirement for the tax refund is that the party liable to withhold tax has not adjusted the tax overpayment (act on the taxation of non-residents’ income, section 11, subsection 2; act on the taxation of foreign key employees, section 8; and act on tax prepayments, section 22). Correspondingly, a non-resident taxpayer from whom tax has incorrectly been held as a prepayment instead of tax at source can request the excessively withheld tax to be refunded (act on the taxation of non-residents’ income, section 18, subsection 2).

The Finnish Tax Administration can also refund excessively withheld tax at source ex officio. However, the Finnish Tax Administration does not generally have all the information required to refund tax at source. Therefore, it is necessary in practice that taxpayers request the refund of tax at source.

The taxpayer must provide evidence of the grounds for their claims and also, in other respect, cooperate in the examination of the matter which they have filed. The Finnish Tax Administration will ensure that a matter is sufficiently and appropriately examined, by acquiring the information and evidence necessary for a decision to be made on the matter (Administrative Procedure Act, section 31). If the matter cannot be resolved directly based on the information presented in the taxpayer’s application, the Finnish Tax Administration will request the information and evidence required to resolve the matter from the taxpayer. The taxpayer is responsible for giving the evidence requested.

The non-resident taxpayer’s tax at source refund application must be submitted using a form verified by the Finnish Tax Administration (section 11, subsection 5 of the act on the taxation of non-residents’ income). A natural person who is a non-resident taxpayer or a key employee must request the refund of tax at source using the Finnish Tax Administration’s form Application for refund of Finnish withholding tax – individual. A corporate entity that is a non-resident taxpayer must request the refund of tax at source using the Finnish Tax Administration’s form Application for Refund of Finnish Withholding Tax – Foreign Corporations and Organisations.

The non-resident taxpayer’s tax at source refund application may be based on higher tax having been withheld than what is required in an international convention. This may result from a situation where the income earner who is a non-resident taxpayer was not identified when the payment was made or where the provisions of a tax treaty were not applied for another reason when the payment was made. Tax may have also otherwise been withheld incorrectly. This may result from a situation where the payor was unable to verify the fulfilment of the requirements for tax exemption in accordance with the act on the taxation of non-residents’ income before the payment was made or where the payor withheld tax at source from tax-exempt items.

A tax at source refund application for a key employee’s wage income may be based on the payor having withheld tax at source from tax-exempt compensation or an international convention restricting Finland’s right to tax wage income. This may result from a situation where a key employee worked partly outside Finland and, if they are a resident of another country in accordance with a tax treaty, Finland does not have the right to tax wages earned for working abroad in accordance with the tax treaty.

A tax at source refund application can be submitted within the deadlines set, regardless of any previously rejected or non-investigated application, if the application was rejected due to insufficient evidence, for example. In this case as well, the taxpayer must present the evidence required to resolve the matter.

Tax at source transferred to a foreign country will not be refunded to a taxpayer (act on the taxation of non-residents’ income, section 11, subsection 3; act on the taxation of foreign key employees, section 8; and act on tax prepayments, section 22, subsection 1). More information on the transfer of tax to a foreign country is available in the Finnish Tax Administration’s instructions Nordic Agreement Concerning the Collection and Transfer of Tax.

3.2.2 Deadlines for submitting refund applications

Tax at source refund applications must be submitted within three years of the end of the calendar year in which the tax was withheld. Following the same deadline, the Finnish Tax Administration can also refund tax ex officio. A refund application submitted by a taxpayer before the end of the deadline can also be resolved after the three-year deadline (act on the taxation of non-residents’ income, section 11, subsection 2; act on the taxation of foreign key employees, section 8; and act on tax prepayments, section 22).

However, exceptional deadlines apply to payments made in or before 2016. Non-resident taxpayers can request a tax at source refund no later than during the five calendar years following the withholding of tax. For example, a tax at source refund for income paid in 2016 must have been requested by 31 December 2021. Key employees can request a refund of tax at source withheld from wage income within six years of the end of the year for which tax at source was withheld. For example, a tax at source refund for tax at source on wage income paid in 2016 must have been requested by 2 January 2023.      

Application deadlines are not typically defined in tax treaties. However, if a tax treaty includes provisions on the taxation of income, they will apply in place of the provisions of the act on the taxation of non-residents’ income (act on the taxation of non-residents’ income, section 1, subsection 3). For example, according to chapter VII of the protocol of the tax treaty between Finland and the Netherlands (84/1997), where tax has been withheld at source in excess of the maximum amount of tax referred to in articles 10, 11 or 12, applications for the refund of the excess amount of tax have to be lodged within a period of five years after the expiration of the calendar year in which the tax has been withheld.

3.3 Interest to be paid on refunds of taxes withheld at source

3.3.1 Interest to be paid on refunds of a non-resident taxpayer’s taxes withheld at source

3.3.1.1 General

Interest is paid on refunds of tax withheld at source in accordance with section 11.4, subsection 4 of the act on the taxation of non-residents’ income. Non-residents and Finnish resident taxpayers are treated equally when calculating interest on tax refunds. The legal amendment on interest payable on refunds of tax withheld at source (HE 95/2014) entered into force in early 2015. The legal amendment (under the Government Proposal HE 95/2014) came into force at the beginning of 2015 and the new practice first applies to refunds relating to 2014 and the following years.

However, because of the Court ruling (Supreme Administrative Court 2013:148), the Tax Administration pays interest also to refunds for the year 2013 or earlier if a claim for interest is lodged within the appeal period specified below.

Interest will be automatically added when refunding tax withheld at source.

3.3.1.2 Calculation of interest for a refund of a non-resident taxpayer’s tax withheld in 2017 or thereafter

The valid interest calculation rules are first applied to refunds that concern withholding taxes withheld in 2017. According to section 11.4 of the act on the taxation of non-residents’ income, the rules given in section 37 of the Act on Tax Collection apply when calculating interest on a withholding tax refund. According to Section 37 of the Act on Tax Collection, if not otherwise provided in the tax legislation in question, the interest shall be calculated as annual interest, which shall be the reference interest rate in force during the six-month period preceding each calendar year, minus two percentage points, as referred to in section 12 of the Interest Act (633/1982). However, the interest rate is always at least 0.5%. More information on the reference rate is available (in Finnish) in the Finnish Tax Administration’s instructions Basic rate and reference rate in taxation.

The same interest calculation rules apply to both corporate and individual taxpayers. According to section 38.2 of the Act on Tax Collection, interest on tax withheld at source is calculated from the first day of the second month following the end of the tax year in which the tax was withheld or, if the tax is paid after the month following the end of the tax year, from the day following the payment date to the day on which the refundable amount is debited from the Finnish Tax Administration’s account or used in lieu of a tax payment.

Interest payable on tax withheld at source is no longer calculated for corporate applicants based on the final deadline for tax returns in accordance with the applicant’s accounting period, but on the basis of the end of the applicant's tax year. According to section 3.2 of the act on assessment procedure, the tax year is the calendar year or, if the accounting period as described in the Accounting Act (1336/1997) is not a calendar year, the accounting period or periods which ended during the calendar year.

The same interest calculation rules also apply to any refund of tax withheld paid as a result of an accepted appeal.

3.3.1.3 Calculation of interest on refunds of a non-resident taxpayer’s tax withheld before 2017

The rules on interest paid on tax withheld at source were revised in a legal amendment effective from 1 November 2017. However, for refunds concerning taxes withheld in 2016 or earlier, the cancelled and amended interest calculation rules of the previous act as described in this section still apply.

Interest paid on corporate tax refunds and refund interest paid to taxpayers other than a corporation or benefit under joint administration is based on the reference rate referred to in section 12 of the Interest Act, for the six-month period preceding each calendar year, minus two percentage points. However, the provisions of sections 40 and 43 of the act on assessment procedure have set out the minimum applicable rate as 0.5%. According to section 11.4 of the act on the taxation of non-residents’ income, the interest to the refund is paid in accordance with the interest calculation rules described in sections 40–46 and 77 of the act on assessment procedure. Therefore, non-residents and Finnish resident taxpayers are treated equally when calculating interest on tax refunds.

When the Tax Administration pays Finnish-resident corporate taxpayers interest on tax prepayment refunds, the interest added under section 41 of the act on assessment procedure is calculated from the day after the deadline of the taxpayer’s income tax return. Correspondingly, interest is paid on refunds of tax withheld at source from the day after the deadline of the corporate taxpayer’s income tax return, in accordance with the recipient’s accounting period. When the applicant is an individual, the interest is calculated the same way as for a Finnish resident individual: the refund earns interest under section 44 of the act on assessment procedure, starting from 1 February of the year following the tax year. This way, under section 77 of the act on assessment procedure, the above dates serve as the start dates of the interest periods relating to adjustments of a corporate or individual taxpayer’s taxes, and the period end date is the date when the refund is paid.

Corporate taxpayers must file their income tax returns within four months from the end of their accounting period. If two accounting periods have ended during a single calendar year, the start date of an interest period is the day after the deadline date of income tax return filing for the accounting period that ended last. For the calculation of interest, a corporate entity, as the beneficiary and applicant, must submit documentation of the accounting periods during which the income mentioned in the application was paid.

Calculations are performed separately for each tax year.

*) The Tax Administration additionally pays interest for a period starting on the date of the decision and ending on the date of the actual payment transaction. Interest is then calculated on the refund of tax withheld and also on the unpaid interest.

3.3.2 Interest to be paid on refunds of a key employee’s taxes withheld at source

No separate provisions exist on interest to be paid on refunds of tax at source on a key employee’s wage income. Because no interest is paid of refunded tax in accordance with section 22 of the act on tax prepayments, no credit interest is paid on refunded tax at source on a key employee’s wage income.

3.4 A refund decision adjusted at the authorities’ initiative

3.4.1 Tax at source withheld in or after 2017

The provisions of chapter 4 of the act on assessment procedure on adjusting tax to the benefit or detriment of the taxpayer apply to the adjustment of a decision issued for a non-resident taxpayer’s tax at source refund application and a decision to refund tax at source on a key employee’s wage income (act on the taxation of non-residents’ income, section 11, subsection 2; act on the taxation of foreign key employees, section 8; and act on tax prepayments, section 22, subsection 4).

In chapter 4 of the act on assessment procedure, section 55 lays down provisions on adjusting taxation to the benefit of the taxpayer and section 56–56c on adjusting taxation to the detriment of the taxpayer. A decision can be adjusted applying continued, extended or criminal adjustment requirements and deadlines, for example, in situations where such new information that could have affected the resolution of the case has been identified after the issuance of the decision. Furthermore, an error in a decision, including a calculation or typing error, can be adjusted. If a case has been resolved through a decision issued on an appeal, the decision cannot be adjusted.

The calculation of deadlines for adjusting decisions start from the end of the calendar year during which tax was withheld. Decisions will be adjusted within the deadline if the Finnish Tax Administration’s decision is issued before the deadline set for making a decision has ended (act on assessment procedure, section 57, subsection 2).

The taxpayer must always be heard before issuing a decision if the decision is adjusted at the authorities’ initiative to the detriment of the taxpayer (act on assessment procedure, section 26, subsection 3). More information on adjusting taxation at the authorities’ initiative is available (in Finnish) in the Finnish Tax Administration’s instructions Adjusting taxation at the authorities’ initiative.

3.4.2 Tax at source withheld before 2017

With regard to tax at source withheld before 2017, tax law does not include any provisions on adjusting refund decisions at the authorities’ initiative. As a result, the general provisions of the Administrative Procedure Act on correcting errors in decisions apply to adjusting decisions at the authorities’ initiative (Administrative Procedure Act, sections 50–53). The initiative must be made or the request to correct an error must be submitted within five years of the issuance of the decision. More information on correcting factual and typing errors in accordance with the Administrative Procedure Act is available (in Finnish) in the Finnish Tax Administration’s instructions General procedural rules of taxation, section 8.

3.5 Appeal procedure applied to refund decisions

3.5.1 Refund decisions issued in or after 2017

A decision on a tax at source refund can be requested to be adjusted by submitting a written claim for adjustment to the Assessment Adjustment Board. An adjustment can be requested by the taxpayer and everyone else, whose taxes the decision may have a direct impact on or who is responsible for the tax, and the Tax Recipients’ Legal Service Unit.

The claim for adjustment must be submitted within 60 days after the appellant received notice on the decision of the Finnish Tax Administration. The calculation of the deadline for the Tax Recipients’ Legal Service Unit starts from the issuance of the decision (act on the taxation of non-residents’ income, section 21, subsection 2; act on tax prepayments, section 48, subsection 2; and act on assessment procedure, section 65a). The claim for adjustment must be submitted to the Finnish Tax Administration within the deadline (act on assessment procedure, section 63, subsection 2).

Claims for adjustment are resolved by the Assessment Adjustment Board. However, the Tax Administration may resolve a claim for adjustment insofar as the claim made is approved, if the applicant is a party other than the Tax Recipients’ Legal Service Unit (act on assessment procedure, section 61, subsection 1). More information on the appeal procedure is available (in Finnish) in the Finnish Tax Administration’s instructions Appeal procedure applied to the Finnish Tax Administration’s decisions.

A decision on a tax at source refund can be requested to be adjusted from the Assessment Adjustment Board using the form Appeal against a Decision on refunds of tax at source.

3.5.2 Refund decisions issued before 2017

A decision on a tax at source refund cannot be requested to be adjusted by lodging an appeal before the Finnish Tax Administration has been requested to adjust the decision. The claim for adjustment must be submitted to the Finnish Tax Administration no later than within five years of the beginning of the calendar year following the year during which the decision was made. The Tax Recipients’ Legal Service Unit must submit a claim for adjustment within 60 days of the issuance of the decision (act on the taxation of non-residents’ income, section 21; and act on tax prepayments, section 48).

4 Imposing tax at source on the income earner

4.1 Requirements for imposing tax at source on the income earner

4.1.1 The payor’s primary responsibility for withholding tax

Obligations related to the withholding and payment of a non-resident taxpayer’s tax at source and tax at source on a key employee’s wage income concern the payor. As a rule, the payor has, therefore, the primary responsibility to withhold tax at source at the correct amount (act on the taxation of non-residents’ income, section 8, section 16, subsection 2; act on the taxation of foreign key employees, section 8; and act on tax prepayments, section 9, subsection 1). More information on the withholding of tax at source on dividends, interest and royalties and the payer’s obligations related to the withholding is available in the Finnish Tax Administration’s instructions Withholding tax at source on dividends, interest and royalties, and the payor’s obligations.

An Authorised Intermediary registered in the Finnish Tax Administration’s Register of Authorised Intermediaries can also assume responsibility for ensuring the correctness of tax at source on dividends received by non-resident taxpayers for nominee registered shares in a Finnish listed company (section 10c of the act on the taxation of non-residents’ income). In this case, the Authorised Intermediary is responsible for any taxes remaining unwithheld due to its negligence. More information on the authorised intermediary’s responsibility is available in the Finnish Tax Administration’s instructions Authorised Intermediary’s responsibilities and liabilities.

If tax at source has remained unwithheld due to neglect by a party liable to withhold tax, the party liable to withhold tax will be responsible for tax at source. More information on imposing tax is available (in Finnish) in the Finnish Tax Administration’s instructions Adjusting taxation at the authorities’ initiative.

4.1.2 Requirements for imposing tax at source on a non-resident taxpayer

If no negligence on the part of the payer or authorised intermediary has taken place but tax at source has remained unwithheld on income subject to tax at source, tax payable on the income will be imposed on the income earner.

For example, tax is imposed on the income earner when the income is made entirely as a non-cash payment and the payer cannot withheld tax at source on the payment (section 8 of the act on the taxation of non-residents’ income, and section 11, subsection 2 of the act on tax prepayments). Typically, a non-cash payment concerns fringe benefits or non-cash dividends. More information on the taxation of non-cash dividends and the obligations of dividend recipients is available in the Finnish Tax Administration’s instructions Taxation on non-cash dividends.

If the amount of tax unwithheld from income subject to tax at source received by an income earner who is a non-resident taxpayer from the same payor during a calendar month is at most €10, no tax will be imposed (act on the taxation of non-residents’ income, section 9, subsection 3, and section 16, subsection 2).

4.1.3 Requirements for imposing tax at source on a key employee’s wage income

Unwithheld tax at source on a key employee’s wage income can be imposed on a taxpayer even if tax was left unwithheld due to the payor’s neglect (act on the taxation of foreign key employees, section 9). Tax is also imposed on the income earner when the income is made entirely as a non-cash payment and the payer cannot withhold tax at source on wage income from the payment (section 8 of the act on the taxation of foreign key employees, and section 11, subsection 2 of the act on tax prepayments). This may be the case when income has been received in the form of stock options or fringe benefits.

4.2 Imposing tax at source

4.2.1 Imposing tax in general

Unwithheld tax at source is imposed on the income earner as laid down in the act on assessment procedure (act on the taxation of non-residents’ income, section 16, subsection 2, and act on the taxation of foreign key employees, section 9). However, with regard to non-resident taxpayers, the Finnish Tax Administration will without undue delay verify the taxpayer’s income and impose tax on it. The amount of the tax imposed is determined as in situations where no tax at source was left unwithheld.

The taxpayer must indicate their income for imposing tax at source on their tax return or request tax at source to be imposed using the form Information on income for the calculation of tax at source (Tax Administration decision on information provided on the tax return, section 1, in Finnish). Tax must be requested to be imposed no later than when the taxpayer should submit a tax return on the income. If the taxpayer applies for tax at source to be imposed late, this may result in a punitive tax increase.

If the taxpayer has not requested tax at source to be imposed on its own initiative, the Tax Administration will impose the missing tax at source and any punitive tax increase on the taxpayer.

If the taxpayer wants that tax treaty provisions apply to the imposition of tax at source, the taxpayer must provide the information required for the application of the tax treaty.

The tax at source deduction laid down in section 6 of the act on the taxation of non-residents’ income can be granted when tax at source is imposed afterwards on the income earner, and the question was not, therefore, of the payor’s neglect in withholding tax at source. In these situations, tax at source cannot have been withheld when making the payment, and it has not been necessary for the taxpayer to present a tax at source card to the payor as laid down in section 6 of the act on the taxation of non-residents’ income.

4.2.2 Payments concerning the 2017 tax year or subsequent tax years

The provisions of the act on assessment procedure on tax adjustments apply to the imposition of tax. Tax is imposed based on sections 56–56c of the act on assessment procedure, regardless of whether the taxpayer requests tax at source to be imposed or whether it is imposed at the authorities’ initiative. Sections 56–56c of the act on assessment procedure lay down provisions on the adjustment of tax to the detriment of the taxpayer. Tax can be imposed applying continued, extended or criminal adjustment requirements and deadlines.

The calculation of the deadlines for imposing tax starts at the beginning of the year following the end of the tax year. Tax will be imposed within the deadline if the Finnish Tax Administration’s decision is issued before the deadline set for making a decision has ended (act on assessment procedure, section 57, subsection 2).

More information on imposing tax is available (in Finnish) in the Finnish Tax Administration’s instructions Adjusting taxation at the authorities’ initiative.

4.2.3 Payments concerning the 2016 tax year or earlier tax years

With regard to tax years preceding 2017, the imposition of tax at source on the income earner is referred to as the debiting of tax at source in legislation. The provisions of the act on assessment procedure on tax adjustments apply to the debiting of tax at source. Section 56 of the act on assessment procedure lay down provisions on the adjustment of tax to the detriment of the taxpayer. Tax can be debited from the taxpayer within five years of the beginning of the year following the end of the taxpayer’s taxation.

4.3 Adjusting a decision to impose tax at source at the authorities’ initiative

The Finnish Tax Administration can adjust a decision on the imposition of tax by applying the provisions of the act on assessment procedure on tax adjustments. More information on adjusting taxation at the authorities’ initiative is available (in Finnish) in the Finnish Tax Administration’s instructions Adjusting taxation at the authorities’ initiative.

4.4 Appeal procedure applied to a decision to impose tax at source

4.4.1 Decisions on imposing tax issued in or after 2017

A decision on imposing tax at source on a non-resident taxpayer and tax at source on a key employee’s wage income can be requested to be adjusted by submitting a written claim for adjustment to the Assessment Adjustment Board. An adjustment can be requested by the taxpayer and everyone else, whose taxes the decision may have a direct impact on or who is responsible for the tax, and the Tax Recipients’ Legal Service Unit.

The claim for adjustment must be submitted within three years of the beginning of the year following the end of the tax year. However, the claim for adjustment can always be submitted within 60 days of the day on which the party entitled to appeal received information about the decision (act on the taxation of non-residents’ income, section 21, subsection 2; act on the taxation of foreign key employees, section 9a; and act on assessment procedure, section 64). The claim for adjustment must be submitted to the Finnish Tax Administration within the deadline (act on assessment procedure, section 63, subsection 2).

The Tax Recipients’ Legal Service Unit must submit a claim for adjustment within four months of the end of the taxpayer’s taxation or within 60 days of the issuance of the decision (act on the taxation of non-residents’ income, section 21; act on the taxation of foreign key employees, section 9a; and act on assessment procedure, section 64). The claim for adjustment must be submitted to the Finnish Tax Administration within the deadline (act on assessment procedure, section 63, subsection 2).

Claims for adjustment are resolved by the Assessment Adjustment Board. However, the Tax Administration may resolve a claim for adjustment insofar as the claim made is approved, if the applicant is a party other than the Tax Recipients’ Legal Service Unit. More information on the appeal procedure is available (in Finnish) in the Finnish Tax Administration’s instructions Appeal procedure applied to the Finnish Tax Administration’s decisions.

A decision on imposing tax at source can be requested to be adjusted from the Assessment Adjustment Board using the form Claim for adjustment of decision on tax at source.

4.4.2 Debiting decisions issued before 2017

4.4.2.1 Decisions on non-resident taxpayers

A decision on debiting tax at source from a non-resident taxpayer cannot be requested to be adjusted by lodging an appeal before the Finnish Tax Administration has been requested to adjust the decision. The claim for adjustment must be submitted to the Finnish Tax Administration no later than within five years of the beginning of the calendar year following the year during which the decision was made. The Tax Recipients’ Legal Service Unit must submit a claim for adjustment within 60 days of the issuance of the decision (act on the taxation of non-residents’ income, section 21, subsection 4; and act on tax prepayments, section 48).

4.4.2.2 Decisions on key employees

A decision on debiting tax at source on a key employee’s wage income can requested to be adjusted by submitting a written claim for adjustment to the Assessment Adjustment Board. An adjustment can be requested by the taxpayer and everyone else, whose taxes the decision may have a direct impact on or who is responsible for the tax, and the Tax Recipients’ Legal Service Unit.

The claim for adjustment must be submitted within five years of the beginning of the year following the end of the taxpayer’s taxation. However, the claim for adjustment can always be submitted within 60 days of the appellant receiving notice of the decision of the Tax Administration. The calculation of the deadline for the Tax Recipients’ Legal Service Unit starts from the issuance of the decision (act on the taxation of foreign key employees, section 9; and act on assessment procedure, section 64). The claim for adjustment must be submitted to the Finnish Tax Administration within the deadline (act on assessment procedure, section 63, subsection 2).

Claims for adjustment are resolved by the Assessment Adjustment Board. However, the Tax Administration may resolve a claim for adjustment insofar as the claim made is approved, if the applicant is a party other than the Tax Recipients’ Legal Service Unit.