Taxation of income received by nonresidents – natural persons

This is an English translation of the Tax Administration's detailed guidance concerning income received by nonresident individuals from sources in Finland. Whereas the English version is a translation, the official instruction is released in Finnish (Rajoitetusti verovelvollisen tulon verotus – luonnolliset henkilöt, record number VH/4469/00.01.00/2026) and Swedish languages (Begränsat skattskyldigas inkomstbeskattning – fysiska personer, record number VH/4469/00.01.00/2026).

1 Introduction

In accordance with the provisions of § 9, subsection 1 of the Income Tax Act (Tuloverolaki (1535/1992)), tax liability in Finland is divided into resident and nonresident tax liability. The provisions of § 9, § 10 and § 13 of the Income Tax Act contain special tax rules to be applied on nonresident taxpayers. A nonresident individual must pay taxes in Finland on income received from Finland only (§ 9, subsection 1, paragraph 2 of the Income Tax Act). A nonresident taxpayer is also subject to tax on wages or other compensation earned on board a Finnish vessel or aircraft, and any pension based on such work (§ 13 of the Income Tax Act)

An individual is a nonresident taxpayer if they are not considered Finnish taxresidents (fully liable to tax) by the definition of § 9, subsection 1, paragraph 1 of the Income Tax Act. An individual is a tax resident in Finland if they reside in Finland. The provisions of § 11 of the Income Tax Act determine when a natural person is a resident taxpayer in Finland. A person is considered to reside in Finland if that person has their permanent residence and home in Finland, or if the person stays in Finland for a continuous period of more than six months, a temporary absence not being considered as interrupting such a continuous period.

Nonresident individuals are people living abroad. The status of a nonresident individual will continue unchanged if they have come to Finland for max. 6 months and have no permanent residence or home here.

In general, the tax residency in Finland of a foreign citizen or an individual with no citizenship will terminate upon moving away from Finland. However, an individual is still considered not to have left Finland if their permanent residence and home remain in Finland, or if they are deemed to continue residency by virtue of being physically present in this country.

Special tax rules apply on the residency status of Finnish citizens. When a citizen of Finland moves to another country, they are normally regarded as a resident taxpayer in Finland for the year when they move away and the three following years. However, a Finnish citizen may become a nonresident before that, if they present evidence that no substantial ties to Finland have existed during the tax year (§ 11, subsection 1 of the Income Tax Act). Finnish citizens working in foreign countries on certain special assignments remain tax residents in Finland even if three years since the calendar year of their leaving have elapsed (§ 11, subsections 2 and 3 of the Income Tax Act).

For more information on residency and nonresidency, see Tax residency, nonresidency and residency in accordance with a tax treaty – natural persons.

Finland’s national legislation provides a definition of ‘income from sources in Finland’ and outlines the extent of a nonresident taxpayer’s liability for paying income tax here. Nonresident individuals are liable to pay Finnish tax on their income sourced to Finland only. There is a list of examples of income sourced to Finland in § 10 of the Income Tax Act. However, besides these examples, there are still other types of income that can be seen as sourced to Finland.

The Act on the Taxation of Nonresidents' income (Laki rajoitetusti verovelvollisen tulon verottamisesta (627/1978), often abbreviated as LähdeVL) contains detailed legal rules on tax treatment. Normally, the payor must withhold tax at source when making payments to a nonresident individual. Another alternative is to apply the provisions of the Act on Assessment Procedure (Laki verotusmenettelystä (1558/1995)), which means that the Finnish Tax Administration levies income tax within the meaning of the Tax Assessment Procedure (§ 2, subsection 1 of the Act on the Taxation of Non-residents' Income). The tax withheld at source is a final tax, and the percentage depends on the category of the income. The categories of income subject to taxation at source are listed in § 3, subsection 1 of the Act on the Taxation of Non-residents' Income. Correspondingly, categories taxed according to the provisions of the Tax Assessment Procedure are listed in § 13 of the Act on the Taxation of Non-residents' Income.

Certain tax treaties on income taxation may restrict Finland’s taxing rights that would apply based on the provisions of internal legislation. Tax treaties are bilateral or multilateral agreements between Finland and other countries, which determine how the taxing rights with respect to personal income should be divided between Finland and the other contracting state(s). It may be that a tax treaty contains restrictions that prevent Finland to impose a certain amount of tax. Sometimes, a treaty prevents the levying of tax on a certain item of income fully. For example, when an individual receives dividends, the payor is normally under obligation to withhold tax at source at the percentage laid down by the Act on the Taxation of Non-residents' Income.. However, based on the applicable tax treaty, the income earner may be entitled to a lower percentage rate or entitled to an exemption from tax.

If an individual is a non-resident taxpayer in Finland, they cannot be considered a resident of Finland pursuant to a tax treaty. In cases where Finland does not have a tax treaty with the country the nonresident individual is a fiscal resident of, the taxing rights of Finland are determined under provisions of Finland’s national legislation only. For more information on the impact of tax treaties, see Chapter 10.5 of this guidance. For a discussion of the standard provisions of tax treaties, see Articles of tax treaties.

This guidance addresses nonresident individuals’ receipts of Finnish-sourced income and the process of Finnish tax assessment when the taxpayer is a nonresident individual. For more information on matters related to insurance, see Health insurance contributions in international employment situations. For guidance concerning Incomes Register data in international situations, see Reporting data to the Incomes Register: international situations.

A ‘foreign estate of a deceased person’ is formed if the person lived abroad at the time of their death but had income subject to Finnish taxes. Under Finnish law, nonresident foreign estates are corporate entities (§ 3, paragraph 6 of the Act on income taxation). For more information, see Income taxation of nonresident foreign corporate entities.

Chapters 2–9 contain information about income sourced to Finland. These chapters discuss the different categories of income listed under § 10 of the Income Tax Act, and certain other items that are considered income from Finnish sources according to the established practice of tax assessment. Chapter 10 addresses the assessment of tax on income received from Finland by nonresident individuals.

2 Wages

2.1 General remarks

The compensation paid for work, a task or a service is considered either wages or a “trade work” i.e. non-wage compensations for work. Under provisions of § 13 of the Prepayment Act (Ennakkoperintälaki (1118/1996, EPL)) ‘wages’ refers to the consideration, compensation, financial or other benefits, received in connection with employment, and further, fees for attendance in a meeting, fees for giving a lecture or presentation, fees received for membership in an administrative or governing body, fees paid to Managing Directors, salaries of a partner in a general partnership or limited partnership, or compensation received when holding a position of trust.

In addition, to receive benefits referred to in § 66, § 67 and § 68 of the Income Tax Act is deemed to be wages. For example, the benefit arising from receipt of corporate stocks through an employee offering is considered wages. For more information, see Taxation of employee stock options and employee offerings in cross-border circumstances.

According to § 25, subsection 1, paragraph 1 of the Prepayment Act, trade income refers to consideration paid in exchange for work, assignments, or services, not paid in the form of wages. Therefore, when an individual taxpayer receives trade income, it is not treated as wages for tax purposes. For more information on the distinctions between wages and trade income, see Palkka ja työkorvaus verotuksessa (in Finnish and in Swedish, link to Finnish).

2.2 Wages received from payors other than the public sector

Income earned in Finland includes wage income earned in the service of other than the public sector, for instance a private sector employer, if the work, task or service is solely or mainly carried out in Finland for an employer or principal based in Finland (§ 10, paragraph 4 of the Income Tax Act).

An employer based in Finland i.e. a ‘Finnish employer’ includes a company registered in Finland and a foreign company that has a permanent establishment in Finland, as well as a foreign organisation when its place of effective management is located in Finland. If a foreign-located branch entity of a Finnish corporation pays wages to an employee for work in Finland, the Finnish corporation will be treated as being the Finnish employer within the meaning of § 10, paragraph 4 of the Act on income taxation. If a nonresident individual works in Finland for a foreign employer, their wages are not considered as income sourced to Finland.

Work is mainly carried out in Finland if more than half of the work performed during the pay period has been carried out in Finland (ruling of the Supreme Administrative Court KHO 1994-B-556). The work hours counted for each pay period must be equal to the true hours worked. When more than half of the work performed during the pay period is carried out in Finland, the entire amount of wages paid for that period is income sourced to Finland. For more information on the taxation of nonresident wage earners, see Taxation of employees from other countries.

A nonresident individual is liable to pay tax to Finland on income received from sources in Finland even if the income is paid to them at a later date. For example, when an employer pays out a holiday compensation to a nonresident individual who spent 5 months working in Finland, and the compensation is being paid in reference to the nonresident’s work done here, the received income is sourced to Finland even if payment were to take place later, at a time when the nonresident is no longer working in Finland. For more information about severance payments to terminated employees, see “Taxation of various severance payments” — Työsuhteen päättymiseen liittyvien suoritusten verotus. (in Finnish and Swedish, link to Finnish)

Ifa nonresident individual receives income after having worked abroad and the work was done outside of Finland exclusively; this income is not subject to Finnish tax even if the income were paid after the nonresident individual had become a Finnish resident. When a severance payment is received by a Finnish tax resident individual for work that they performed abroad exclusively, being a non-tax resident at the time, the income is not subject to Finnish tax. For more information about severance payments to terminated employees, see Työsuhteen päättymiseen liittyvien suoritusten verotus. (in Finnish and Swedish, link to Finnish)

2.3 Wages received from a public sector organisation

Wages received from a Finnish entity of the public sector is income sourced to Finland (§ 10, paragraph 3 of the Act on income taxation). Whether the work was done in Finland or abroad is irrelevant. The following is a non-exhaustive list of entities in the Finnish public sector: the State of Finland, municipalities, joint municipal authorities, regions in charge of health and social services, the Åland Islands, the Evangelical Lutheran Church of Finland and the Finnish Orthodox Church, Bank of Finland, the Social Insurance Institution of Finland (Kela) and the Academy of Finland. Finnish universities and Finnish universities of applied sciences are not public entities for income tax purposes.

When the State of Finland makes payments of wages or fees to a nonresident individual for work performed at a foreign diplomatic mission, the income is not subject to Finnish tax unless the nonresident individual is a citizen of Finland (§ 76, paragraph 4 of the Income Tax Act).

In general, international organisations or international bodies in Finland are not deemed as part of the public sector within the meaning of § 10, paragraph 3 of the Income Tax Act, nor are they considered ‘Finnish employers’ within the meaning of § 10, paragraph 4 of the Income Tax Act. For this reason, wages and salaries received from these organisations are not regarded as income sourced to Finland. Correspondingly, wages and salaries received from diplomatic missions of foreign countries are not regarded as income sourced to Finland. For more information on the treatment of wage income from international organisations, see Taxation of income from international organisations, the EU and diplomatic missions.

2.4 Fees connected to membership of a Board of Directors

Fees paid to members of a board or similar body of a Finnish company, corporate entity, partnership, etc. are income sourced to Finland (§ 10, paragraph 4 a of the Income Tax Act). Whether the work was done in Finland or outside Finland is irrelevant. From this, it follows that even if a board meeting is actually held in another country, the fee for attending such a meeting is still deemed to be income received from a Finnish source.

Example 1: At the board meeting of a Finnish limited-liability company, one person participates over a remote connection from Sweden. This person is a nonresident individual. The fee for attendance is income sourced to Finland.

For more information on fees paid to members of administrative bodies and to managing directors, also in international situations, see “Taxes on fees of members of administrative bodies and managing directors” Hallintoelimen jäsenen ja toimitusjohtajan palkkion verotus (available in Finnish and Swedish, link to Finnish).

2.5 Wages paid to leased employees

Employee leasing refers to a contractual arrangement through which a business (the leasing company) leases employees to another business against a charge. The leased workers – or employees – do their work for the other business (the service recipient company). Income sourced to Finland includes wages paid by a foreign employer for work performed in Finland, if the foreign employer, under terms of an employee-leasing contract, has leased the worker to a recipient company in Finland (§ 10, paragraph 4 c of the Income Tax Act).

Example 2: A contract between an Estonian and a Finnish company was signed in order to arrange for a worker, resident of Estonia, to begin working at the Finnish company’s construction site in Finland. The party paying wages to the worker is the Estonian employer. The work is directed and any necessary decisions are taken by the Finnish company. This is a case of employee leasing. Under the provisions of § 10, paragraph 4 c of the Income Tax Act, the worker is receiving wages sourced to Finland.

For a detailed discussion on the taxation of leased employees coming to Finland from abroad, see Leased employees from other countries and taxation in Finland.

2.6 Income received by artists or athletes for their personal activity

Income from personal activities or services performed by an artist or athlete either in Finland or on board a Finnish vessel is considered income from Finland (§ 10, paragraph 4 b of the Income Tax Act). The Act does not require that the activity should be performed for a Finnish employer or for a Finnish principal. If the income is earned for the artist’s/athlete’s activity in Finland, it is treated as Finnish-sourced income regardless of whether payment takes place in Finland or in a foreign country (the Supreme Administrative Court’s ruling KHO 2005:31).

For more information on the tax treatment of income derived from sports activities, see Taxation of income received from sports and Taxation of income received from sports in international situations. For more information concerning artists, see A performing artist’s tax treatment in international situations.

2.7 Income received for work done on board a vessel or aircraft

Section 13 of the Income Tax Act lays down a special provision concerning nonresidents who work on board a Finnish vessel or aircraft: they must pay tax to Finland on their wages, either earned on board, or – if the employer has ordered them to work in another location for a temporary period – earned in that other location for the vessel or aircraft. What is regarded as a 'Finnish vessel or aircraft' also includes a leased foreign ship or aircraft if the Finnish employer has a leasing contract for it, and there is but a limited foreign crew or no such crew.

The provisions of § 13 of the Income Tax Act are applicable not only to work performed on board the vessel or aircraft, but also to all work directly related to such work that is performed elsewhere than on board.

Example 3: An individual who is a tax resident of Spain is employed by a Finnish airline, and he does the work of a flight steward. The place where work is done is a Finnish aircraft flying international routes. Although no part of the work is performed in Finland, wages received by the nonresident individual for work on board a Finnish aircraft are subject to Finnish tax fully.

2.8 Work contribution dividend

A dividend distributed on the basis of a person's work contribution constitutes earned income pursuant to Section 33 b(3) of the Income Tax Act. Dividend income received by a nonresident taxpayer that is based on the taxpayer's work contribution (a so-called work contribution dividend) is treated either as salary or as compensation for work. A work contribution dividend is considered income derived from Finland under the same conditions as salary income or business income pursuant to Section 10 of the Income Tax Act, depending on the nature of the income.

The taxation of work contribution dividends is discussed in guidance Työpanokseen perustuvan osingon ja ylijäämän verotus (in Finnish and Swedish, link to Finnish).

3.1 Pensions from payors other than the public sector

Under the main rule, the taxing rights of pensions are closely related to those of wages, as defined in § 10 of the Income Tax Act (§ 10, paragraph 5 of the Income Tax Act). Income sourced to Finland includes a pension, based on past employment with an employer outside of the public sector, if the pension is directly or indirectly based on work, assignment or services, within the meaning of § 10, paragraph 4 of the Income Tax Act, which was either exclusively or primarily performed in Finland for a Finnish employer or for a Finnish customer that ordered the service. If someone is a recipient of several pensions based on several different employment contracts, there must be an appraisal carried out, regarding each one of the employment contracts, to examine whether the work was primarily done in Finland (Supreme Administrative Court’s ruling KHO 2014:146).

Income sourced to Finland also includes a pension based on past employment as a leased employee referred to in § 10, paragraph 4 c of the Income Tax Act. In addition, income sourced to Finland also includes a pension received by virtue of past personal activities carried out in Finland (or on board a Finnish vessel) by an artist or athlete.

A nonresident individual’s pensions from past employment on board a Finnish vessel or aircraft are regarded as Finnish-source income (§ 13 of the Income Tax Act). This income is subject to tax in Finland regardless of whether the work was done in Finland or in foreign countries. For example, receipts of seafarers’ pensions are taxed in Finland even if the retired person had not worked in Finland.

3.2 Pensions from the public sector

If a pension is received from the State of Finland, a Finnish municipal entity, wellbeing services counties or other public entity, it is sourced to Finland (§ 10, paragraph 5 of the Income Tax).

However, a pension that the Finnish State pays to a retired person, who is a citizen of a country other than Finland and has had a past employment in a diplomatic mission, is income exempted from Finnish taxes (§ 76, paragraph 4 of the Income Tax Act). It is required that the retired person has been and continues to be a nonresident individual, both during the time when they worked and at the time when the pension is paid, and that the decision concerning the individual’s pension was made on 1 January 1996 or later, and that the relevant tax treaty poses no restriction on the residence country against taxing the pension (§ 76, subsection 2 of the Income Tax Act).

3.3 Pension based on voluntary pension insurance

Receipts of a pension based on a Finnish insurance company’s non-mandatory pension insurance contract are income sourced to Finland (§ 10, paragraph 5 of the Income Tax Act). In addition, a pension based on an employer-paid pension insurance contract with a foreign insurer is also treated as income sourced to Finland if the reason for the pension, either directly or indirectly, is the past employment of the person receiving the pension having worked in Finland primarily, for an employer treated as being a Finnish employer.

In addition, retirement income or other receipts of money that are based on an individual, non-mandatory pension insurance contract made with an insurance company in another state is sourced to Finland insofar as the premiums were deducted in the retired person’s past Finnish tax assessments (§ 10, paragraph 12 of the Income Tax Act). The party that enters an arrangement of non-mandatory character i.e. “voluntary” pension insurance may be the individual or the employer.

Old-age pension insurance and family pension insurance contracts, including related contracts of insurance against the loss of the employee’s ability to work and against unemployment, are deemed as voluntary when the distributions of income are to be received by the retired person once year or with shorter intervals on a regular basis, either during the retired person’s remaining life or at least during 2 years (§ 34, subsection 9 of the Income Tax Act).

Employers can supplement their employees’ statutory pension cover by taking out voluntary individual pension insurance. For more information on employer-provided pension on a non-mandatory basis, see Työnantajan ottamat vapaaehtoiset eläkevakuutukset (in Finnish and Swedish, link to Finnish).

For more information on the taxation of pension income, see Eläketulon verotus (in Finnish and Swedish) and Taxation of pension income in cross-border circumstances.

3.4 Income based on indemnities from accident insurance, traffic insurance

Receipts of a pension based on a Finnish insurance company’s motor liability insurance contract are income sourced to Finland (§ 10, paragraph 5 of the Income Tax Act). By extension, other distributions received from a Finnish insurer, based on accident insurance contracts or motor liability insurance contracts are income sourced to Finland as well.

Although not included in the list provided in § 10 of the Income Tax Act, items of income sourced to Finland include parental allowance, sickness allowance, study grants, etc., which are received from Finnish payors and are based on the legislation governing social security.

For more information on the tax treatment of study grants received by nonresident individuals, see Taxation of students and trainees in international situations.

3.6 Other distributions based on an insurance policy

In accordance with established practice of tax assessment, any received amounts in the form of life insurance indemnity or other distributions are deemed as income sourced to Finland when a Finnish insurance company or a Finnish branch of a foreign insurance company has paid them. ‘Life insurance’ refers to insurance for the life or death of a person (the insured). Because Finnish internal legislation governs whether income is subject to Finnish taxes, it may be that a life insurance indemnity can be exempt from income tax not only to Finnish residents but also to a nonresident individual, as provided in § 36, subsection 1 of the Income Tax Act. For more information on life insurance and taxes, see Henkivakuutuksen verotus (in Finnish and Swedish, link to Finnish).

Income sourced to Finland also includes profits yielded by a capital redemption agreement when an insurance company or other insurer located in Finland is the party with which the agreement was made. ‘Capital redemption agreement’ refers to the types of savings and investment contracts defined in the provisions of § 18 of the Act governing insurance types (Laki vakuutusluokista (526/2008)). For more information on the tax treatment of capital redemption agreements, see Kapitalisaatiosopimuksen verotus (in Finnish and Swedish, link to Finnish).

3.7 Income in the form of long-term savings transactions ‘PS’

Income derived from a ‘PS’ long-term savings agreement and its individual retirement account, is treated as being sourced to Finland under § 10, paragraph 11 of the Income Tax Act. ‘PS long-term savings’ refers to contracts fulfilling the requirements set out in the Act governing ‘PS’ savings (Laki pitkäaikaissäästämisestä (1183/2009)).

For more information on taxes on retirement income based on voluntary pension insurance and PS savings, see Pitkäaikaissäästämissopimuksen ja yksityishenkilön ottaman vapaaehtoisen yksilöllisen eläkevakuutuksen verotus (in Finnish and Swedish, link to Finnish).

4 Income derived from business, trade, agriculture and forestry

4.1 Income derived from a business or trade operated in Finland

Income sourced to Finland includes income derived from business, trade, agriculture or forestry in Finland (§ 10, paragraph 2 of the Income Tax Act). The provisions of § 10, paragraph 2 contain no requirement that the taxpayer should have a permanent establishment in Finland. An example of income sourced to Finland and derived from business or trade is the receipt of trade income (nonwage compensation) for work done in Finland.

In addition to the above, nonresident individuals who receive income are liable for paying tax on the entire income attributable to a permanent establishment they have in Finland (§ 9, subsection 3 of the Income Tax Act), regardless of whether this income is otherwise deemed as sourced to Finland or not. This way, in addition to the items of income discussed in the previous chapter, both Finnish-source and foreign-source income are within the charge of Finnish tax when attributable to a permanent establishment. The legal definition of ‘permanent establishment’ is found in § 13 a of the Income Tax Act.

For more information on income taxes of the self-employed, see Income taxation of foreign self-employed individuals.

4.2 Income derived from agriculture

Nonresident individuals are liable for paying Finnish income tax on any income the nonresident receives from operating an agricultural farm situated in Finland (§ 10, paragraph 2 of the Income Tax Act). The items of income listed in the Agricultural income tax act (Maatilatalouden tuloverolaki (543/1967)) are income from agriculture.

For more information on agricultural income and expenses, see Maatalouden tulot ja menot (in Finnish and Swedish, link to Finnish).

4.3 Income derived from forestry

Income sourced to Finland includes income from a forestry operation in Finland (§ 10, paragraph 2 of the Income Tax Act). The incomes listed in § 43 of the Income Tax Act are income from forestry. Income from the selling of timber from a parcelled plot of land, such as the land around a summer cottage, the income is not considered income from forestry. Under the main rule, when the area is smaller than 2 hectares the land is regarded as a plot, not forest. However, under the provisions of § 10, paragraph 1 of the Income Tax Act , other income may be treated as being an item of income sourced to Finland although it is not forestry income (for more information, see Chapter 7).

For more information on income from woodlands, see Metsästä saadut muut tulot (in Finnish and Swedish, link to Finnish).

5 Income derived from a partnership

5.1 General remarks

Income derived from a Finnish partnership is treated as being sourced to Finland (§ 10, paragraph 6 of the Income Tax Act). The term partnership refers to “tax partnerships” (verotusyhtymä; beskattningssammanslutning) and “business partnerships” (elinkeinoyhtymä; näringssamman-slutning) alike. For Finnish tax purposes, business partnerships and tax partnerships are not independent taxpayers but calculation units for taxable income (§ 15 and § 16 of the Income Tax Act).

A ‘business partnership’ is any partnership other than a corporate entity, established by two or more people for pursuing business activities and intended to function for the benefit of the partners, such as a shipping company under joint ownership, a general partnership, a limited partnership, and certain others (§ 4, subsection 1, paragraph 1 of the Income Tax Act). For more information on the taxation of general partnerships and limited partnerships, see Tuloverotus – general partnerships and limited partnerships.

‘Tax partnership’ means a partnership of two or more persons conducting farming activities or managing a farm, or conducting forestry or managing a unit of real estate for which the partnership is liable to pay VAT or has applied for VAT liability for the transfer of the right of use immovable property (§ 4, subsection 1, paragraph 2 of the Income Tax Act). For example, a tax partnership engaging in forestry is formed when at least two natural persons (other than 2 spouses) have become owners of forest land. For more information on partnerships formed for tax purposes, see “Tax partnerships” — Verotusyhtymän verotus. (in Finnish and Swedish, link to Finnish)

When a partnership is registered with the Finnish registration authority for legal entities or when a partnership has been founded in accordance with the laws of Finland, it is deemed to be a Finnish partnership. The founding of a ‘tax partnership’ is based on no action by the owners. Profit-shares from a Finnish partnership are considered income sourced to Finland, regardless of whether the partnership had gained its revenues in Finland or abroad. Due to the fact that a Finnish partnership is no separate taxpayer, its taxable income is divided between the partnership’s owners. In the case of a nonresident owner (partner, shareholder), the profit-shares become taxable capital income and taxable earned income. The parts subject to capital-income tax and earned-income tax are formed in the same way as when a Finnish resident is the recipient of similar profit-shares.

5.2 Profit-shares from a limited partnership operating investment activities

The special tax rule contained in § 9, subsection 5 of the Income Tax Act concerns limited partnerships’ profit-shares going to a nonresident who is a silent partner and a fiscal resident of a country that has signed a tax treaty with Finland. For a nonresident silent partner of a limited partnership that only operates capital investment activities, a portion of the income from the limited partnership, proportional to the nonresident partner’s share in the partnership, is income subject to tax only to the extent that this income would have been subject to tax if the nonresident silent partner had received it directly. For example, if stocks of a Finnish corporation were sold and a capital gain was made, the resulting income in a nonresident silent partner’s hands would be subject to Finnish tax only if it is sourced to Finland within the meaning of § 10, paragraph 10, or paragraph 10a of the Income Tax Act.

For the special tax rule of § 9, subsection 5 of the Income Tax Act to be applicable it is required that:

The limited partnership operating investment activity must be an alternative investment fund, and its sole and actual purpose according to the partnership agreement must be ‘capital investment activity’.
The income received by a nonresident silent partner, in a limited partnership operating investment activity, is assessed in accordance with the provisions of the tax treaty between Finland and the partner’s country of residence.

In these circumstances, the nonresident individual has to present a document, on the Tax Administration’s request, providing evidence that they are entitled to tax treatment in Finland as is allowed under the provisions of § 9, subsection 5 of the Income Tax Act. Suitable documentation to be presented include a photocopy of the Partnership Agreement and a certificate of tax residence proving their country of residence (Government proposal HE 64/2005).

If the requirements are fulfilled, the income-tax assessment will be the same as in the case that the nonresident partner would have received the income directly. For example, if income in the form of a profit-share consists of the partnership’s revenues of dividends, distributed by a Finnish company to the limited partnership, this income in the nonresident individual’s hands is taxed in the same way as direct receipts of dividends are taxed. Under § 10, paragraph 6 of the Income Tax Act, receipts of dividends from a Finnish limited-liability company are deemed to be income sourced to Finland. However, whether the income is subject to tax in Finland will also depend on the provisions of the tax treaty between Finland and the nonresident partner’s country of residence.

The maximum amount of income subject to tax in the nonresident partner’s hands is the profit-share that the limited partnership has distributed to the partner. Any income subject to tax exceeding the size of the profit-share, as income is generated, will be transferred to the 10 following tax years for later assessment.

Example 4: A nonresident individual is a tax resident of Germany. She is a silent partner in a venture capital investment company, the legal form of which is limited partnership. She sent the Tax Administration a photocopy of the Partnership Agreement and a certificate of fiscal residence proving that she a resident of Germany pursuant to the tax treaty between Finland and Germany.

The limited partnership received rental revenues (€50,000), as the partnership had rented out real estate located in Finland, and dividends (€60,000) by virtue of its shareholding in a Finnish limited-liability company. This way, the profit for the year stands at €110,000 (= €50,000 + €60,000). There are 10 partners, and each one of them receives equal profit-shares. The profit-share going to the German partner equals €11,000.

Both the rent and the dividends are income sourced to Finland (§ 10, paragraphs 1 and 6 of the Act on income taxation). Finland also has the taxing rights for this income according to the provisions of the Finland–Germany tax treaty. However, the maximum percentage rate for Finnish income tax on dividends is 15% due to the limitation imposed by the treaty. This means that the dividends can maximally be subject to €900 of tax at source (€60,000/10 × 15%). The treaty imposes no limit on Finland’s taxing rights concerning rental income. As a result, Finland levies income tax, in accordance with the provisions of the Act on assessment procedure, on the €5,000 that consists of rent received by the partnership.

5.2.1 Profit-shares distributed by a fund of funds

The special rule in § 9, subsection 5 of the Act on income taxation is also applied on nonresident taxpayers when a portion corresponding to the nonresident’s profit-share, referred to in subsection 5, consists of profit-shares coming from one or more Finnish or foreign partnerships (§ 9, subsection 6 of the Act on income taxation). This provision of the Act on income taxation mainly applies to assessment of income derived from investments in funds of funds. These are funds that place their investments in other capital-investment funds, so the fund of funds only owns assets consisting of shares in other funds. In general, funds of funds are not regarded as separate taxpayers at their own right. Instead, the taxpayers are the final investors, whose receipts of profit-shares become taxed (government proposal HE 306/2018). The typical and frequently used legal entity form of funds of funds is the limited partnership.

To apply the special rule in § 9, subsection 5 requires that a tax treaty between Finland and the nonresident individual’s country of fiscal residence is applied on the nonresident, and that the foreign partnership is registered in a jurisdiction or founded under the laws of a jurisdiction with which an agreement has been made on the exchange of tax-related information between authorities. The profit-share’s taxability depends on the category of the original revenue that the partnership had received, in reference to the provisions of § 9, subsection 9. This means that assessment will be the same as in the case that the nonresident partner would have received the income directly – instead of indirectly, through the Finnish limited partnership being the investment fund and through one or more other partnerships.

If requested to do so, the nonresident individual needs to present documentation to the Tax Administration to prove that the requirements are fulfilled. Suitable documentation for this purpose include a record that confirms the nonresident individual’s shareholding in the fund of funds, or a record that confirms that the fund of funds is a shareholder in a Finnish alternative investment fund having the legal form of a limited partnership, and a certificate of tax residence proving evidence of the nonresident individual’s residency within the meaning of the relevant tax treaty. The documentation and records must be presented separately for each fund. (Government proposal HE 306/2018)

Calculations are performed on a proportional basis in order to determine the size of the partnership’s income going to the nonresident individual.

Example 5: When a limited partnership in the capital-investment business sells some corporate stocks, it gains €1,000,000. A nonresident individual owns 5% of the fund of funds, which receives 10% of the limited partnership’s profit-shares. As a result, the nonresident is treated as having received €5,000 in capital gains. To receive capital gains is tax-exempt for the nonresident unless the underlying cause of the capital gains has been a sale of immovable property within the meaning of § 10, paragraph 10 and paragraph 10a of the Act on income taxation.

6 Income from investments, received dividends and other distributions, interest and royalties

6.1 Dividends

Dividends, surplus received from a cooperative, and other income equivalent to these are sourced to Finland if the distributing corporate entity is a Finnish limited liability company, cooperative or other corporate entity (§ 10, paragraph 6 of the Act on income taxation). A hidden dividend is also income derived from Finland.

For more information on assessment of taxes on dividends in the hands of a nonresident, see Payments of dividends, interest and royalties to nonresidents.

Dividend income received by a nonresident taxpayer that is based on the taxpayer's work contribution constitutes either salary or compensation for work. Accordingly, whether a work contribution dividend is regarded as income derived from Finland is determined under the provisions of Section 10 of the Income Tax Act concerning either salary income or business income, depending on the nature of the income.

6.2 Interest

Interest is income sourced to Finland, if the debtor paying interest is a Finnish-resident individual or a Finnish corporate entity, partnership, benefit under joint administration or an estate of a deceased person (§ 10, paragraph 7 of the Act on income taxation). However, because of the limitations of tax liability under the provisions of § 9, subsection 2 of the Act on income taxation, most receipts of interest from Finnish payors in a nonresident’s hands are tax-exempt.

For more information on taxation of nonresident’s income in the form of interest from Finland, see Payments of dividends, interest and royalties to nonresidents.

6.3 Royalties

Subject to certain conditions, royalties, licensing fees and other compensations similar to these are income sourced to Finland (§ 10, subsection 8 of the Act on income taxation). Source of the income is Finland if the underlying assets or rights for the royalties, licensing, crediting are used in business activities in Finland. Royalties, licensing and other similar credit transactions are also treated as income sourced to Finland in situations where the payor is a Finnish-resident corporate entity, partnership, benefit under joint administration, or an estate of a deceased person.

The concept of royalties is defined in § 3, subsection 3 of the Act on the taxation of nonresidents’ income. In addition, reimbursements for the use of a cinematographic film, or for the right to use a film, as laid down in § 13, subsection 1, paragraph 4 of the Act on the taxation of nonresidents’ income, are considered royalties. For more information on royalties in the hands of a nonresident, see Payments of dividends, interest and royalties to nonresidents.

6.4 Receipts of profit-shares from investment funds

Income sourced to Finland includes income in the form of profit-shares distributed by a Finnish investment fund (§ 10, paragraph 9 of the Act on income taxation). An investment fund is a collective of assets, consisting for the most part of various financial securities. The Finnish Act on Common Funds (213/2019) contains legal norms governing investment funds. Investment funds are divided into fund shares. There are two categories of fund shares: profit shares and growth shares. When the fund pays shareholders a part of its profit – the yield (return) of profit shares – it is considered income sourced to Finland. For more information on investment funds, see Shares in investment funds. Income sourced to Finland additionally includes income in the form of profit-shares distributed by a Finnish special funds for investment (erikoissijoitusrahasto; speciell investeringsfond).

6.5 Receipts of income from an employees’ fund

Income sourced to Finland includes income received from a Finnish employees’ fund (henkilöstörahasto; löntagarfond), in the form of growth-shares and profit-shares (§ 10, paragraph 9 of the Act on income taxation). This income is sourced to Finland regardless of whether the income earner had performed the work in Finland.

For more information on the taxation of income from an employees’ fund, see Henkilöstörahastosta saatavien tulojen verotus. (in Finnish and Swedish, link to Finnish)

6.6 Withdrawals from the yield on an equity savings account

Income sourced to Finland includes withdrawals from a Finnish equity savings account (§ 10, paragraph 14 of the Act on income taxation). ‘Equity savings accounts’ are accounts, opened in a deposit bank or in a Finnish branch of a foreign credit institution, where the account holder has agreed to make regular deposits as set out in § 2 of the Act governing equity savings (Laki osakesäästötilistä (680/2019). The profits that the savings generate are only taxed when the account holder withdraws money from the account. For more information on the taxation of yields or profits produced by equity savings, see Osakesäästötilin verotus. (in Finnish and Swedish, link to Finnish)

7 Income derived from immovable property and housing-company apartments

Income sourced to Finland includes income from real estate or from an apartment, which shares in a Finnish housing company provide the ownership rights of, and income from other apartments or units that other shares of a limited liability company or membership in a housing cooperative or another cooperative provide the ownership of (§ 10, paragraph 1 of the Act on income taxation). Income from immovable property is usually rental income received by virtue of a rental contract for a residential apartment, or rental income received for renting out real estate property, or income from the sale of soil, and proceeds for sales of timber from a plot of land located in Finland.

‘Rental income’ is defined as consideration received in exchange of letting the other contracting party use a property or asset. For more information on the taxation of rental income, see Vuokratulojen verotus (in Finnish and Swedish, link to Finnish).

Examples of soil include gravel, clay, dirt, peat and various types of stones. For more information about income from the selling of soil, see Maa-aineksista saatavat tulot luonnollisen henkilön verotuksessa (in Finnish and Swedish, link to Finnish).

Income sourced to Finland includes income from the selling of timber felled on a plot of land located in Finland. Examples of such income include timber sales based on trees cut down in the garden of a house or on the land surrounding a summer cottage. In general, when the area is smaller than 2 hectares the land is regarded as a plot, not forest.

8 Capital gains

8.1 Capital gains from disposals of real estate or corporate stocks

When a taxpayer has sold a real estate property and a building, structure or other constructed unit and made a profit, the income is sourced to Finland. In addition, profits from the selling of a right of possession concerning these or concerning the land where they are located, including the land’s possession rights, rights of use, privileges to receive yields are also income sourced to Finland (§ 10, paragraph 10 of the Act on income taxation). The tax rules that apply to real estate property are also applied on a building, structure or other constructed unit located on land belonging to another landowner but encumbered by a right of possession, which allows the taxpayer to sell the building, etc. to an outside buyer without the landowner’s consent.

The provisions of the Act on income taxation determine how received profits are subjected to taxation. For example, under the special tax rules that concern selling one’s home, it is often tax-exemptible to sell a house (real estate property) that the seller had lived in on a permanent basis. For more information on the exemption offered to sellers of their own home, see Verovapaa oman asunnon luovutus. (in Finnish and Swedish, link to Finnish)

Profit (a capital gain) resulting from the transfer or sale of shares, holdings or rights relating to a totality of assets managed to the benefit of a corporate entity, partnership or another person is income subject to Finnish tax if, on the date of transfer or within 365 days prior to the transfer/sale, more than 50% of their assets, directly or indirectly, consist of immovable property located within Finnish territory (§ 10, paragraph 10 a of the Act on income taxation).

Capital gains resulting from disposals, sales, or transfers of other securities than those described above, or from disposals, sales, or transfers of moveable property are generally not considered Finnish-sourced income in the hands of a nonresident taxpayer. Capital gains resulting from disposals, sales, or transfers of corporate stocks or other shareholdings in a stock-exchange-listed company are not considered Finnish-source income even if the assets of the company were to consist, for more than 50%, of immovable property located in Finland.

For a discussion of the general principles of capital gains tax, see Omaisuuden luovutusvoitot ja -tappiot luonnollisen henkilön tuloverotuksessa (in Finnish and Swedish, link to Finnish). The taxation of capital gains and capital losses in international situations from the perspective of the application of the Income Tax Act and tax treaties is discussed in guidance Capital gains and losses from the sale of assets in cross-border situations — natural persons.

8.2 Capital gains generated from swap contracts

Subject to certain conditions, income sourced to Finland includes the capital gains that may result from swap contracts (§ 10, paragraph 13 of the Act on income taxation). In a swap (or exchange) of corporate stocks, a company acquires ownership of another company to the extent that the first company’s holding will grow to more than half of the votes in the other company. A swap also takes place if a company acquires more stocks in a company where it already has more than half of the votes (§ 52 f of the Act on the taxation of business income).

Taxable income is generated in connection with a swap in circumstances referred to in § 52 f, subsections 3 and 4 of the Act. If an individual received corporate stocks due to a swap arrangement, and has later left Finland to start living in another EEA state, and sells the received stocks within 5 years, the capital gain that had not been taxed when the swap took place will be subject to taxation in Finland. Correspondingly, if an individual received corporate stocks due to a swap arrangement, and has later left Finland to start living in a non-EEA state before 5 years have passed from the end of the tax year when the swap occurred, the capital gain that was not taxed when the swap took place becomes subject to taxation in Finland. In these circumstances, the capital gains that result from the swap are taxable income sourced to Finland (§ 10, paragraph 13 of the Act on income taxation). For more information about swap contracts and exit taxation, see Arvopaperien luovutusten verotus. (in Finnish and Swedish, link to Finnish)

9 Other items of income from sources in Finland

9.1 Shareholder loans

Based on established tax-assessment practice, income sourced to Finland includes shareholder borrowing from a Finnish limited-liability company. According to the definition in § 53 a of the Act on income taxation, a ‘shareholder loan’ means a situation where a shareholder or their family member has taken an amount of cash out of the financial assets of a limited-liability company. Any amount outstanding at the end of a tax year from such a loan, where the limited-liability company is the lender and the shareholder is the debtor, is considered capital income subject to tax if the shareholder-taxpayer, his or her family member or the shareholder-taxpayer together with a family member directly or indirectly own at least 10% of the company’s shares or hold 10% of the company’s total votes based on their shareholding. For more information on company-provided lending of money to shareholders, see Luonnollisen henkilön osakeyhtiöstä nostaman osakaslainan verotus (in Finnish and Swedish, link to Finnish).

9.2 Academic grants and scholarships

Based on established tax-assessment practice, income sourced to Finland includes various grants and scholarships that the taxpayer receives from a Finnish issuer. For more information on academic grants and scholarships, see Taxation of grants, scholarships and awards for merit.

For more information concerning the taxation of students, see Taxation of students and trainees in international situations.

9.3 Reindeer husbandry income

Income sourced to Finland includes income derived from the husbandry of reindeer if this activity is carried out in Finland. The legal statute that applies to reindeer herding is the Reindeer Husbandry Act (848/1990).

9.4 Trade income

A nonresident taxpayer may receive income in the form of trade income derived from income-earning activities that do not constitute a business or professional activity.

Taking into account Section 9(2) and Section 10 of the Income Tax Act, such trade income derived from income-earning activities constitutes income derived from Finland according to principles corresponding to those applicable to salary income derived from Finland.

Accordingly, trade income is considered income derived from Finland if the work is performed exclusively or predominantly in Finland for a principal located in Finland.

10 Taxation of income received by nonresident taxpayers

10.1 General remarks

Income earned by a nonresident individual is taxed in accordance with the Act on the taxation of nonresidents’ income. Payors must withhold tax at source when making payments to a nonresident. The amount withheld provides coverage both for the state income tax and the municipal income tax. In some cases, the provisions of the Act on assessment procedure are applied, which means that the Finnish Tax Administration levies the state and municipal income taxes (§ 2, subsection 1 of the Act on the taxation of nonresidents’ income). Income earned by a nonresident athlete from personal activity performed in Finland can be taxed in three different ways: either through tax withholding at source, or through progressive tax withheld at source, or through a progressive assessment procedure. For more information on the taxation of a nonresident athlete, see Taxation of income received from sports in international situations.

The income received by nonresident leased workers is taxed in a special process. While assessment is carried out in the same way and at the same time as that of Finnish resident individuals, the income is taxed at the flat percentage rate of tax at source of 35%. For more information on the taxation of nonresident leased employees, see Leased employees from other countries and taxation in Finland.

Individual taxpayers can be treated as residents during one period within the calendar year, and as nonresidents for another period of the same year. Accordingly, someone who has only lived in Finland for part of the tax year will be treated as a resident taxpayer during their fiscal residency in Finland, and otherwise treated as a nonresident taxpayer.

The authorities will first look into the extent of the income, and then decide on the assessment procedure to be used. In other words, the first question to be addressed is whether the income in the individual’s hands is sourced to Finland, and if the answer is yes, the next step is to determine the assessment procedure. The individual’s status at the time when they receive income is decisive. For example, if the income consists of wages, the individual’s status as a taxpayer will determine whether withholding will take the form of tax at source or whether an amount should be withheld in the usual way as it is done for Finnish residents. If the income in an individual’s hands is received during a nonresidency period from sources other than Finland, it is not subject to tax in Finland even if the individual in question, at the time when the income is received, would be a resident individual here, liable to tax on their worldwide income.

Example 6: A nonresident wage earner worked in Finland, from January to the end of March, having an employment contract with a Finnish employer, and working 1 to 2 days a week. Because the wage earner did not work primarily in Finland during any pay period, in reference to the provisions of § 10 of the Act on income taxation, their wages are not income sourced to Finland. At the beginning of April, the wage earner came to Finland to start living here and has thereby become a resident individual. The Finnish employer does not pay the wages for March until 15 April. Because the wage earner was a nonresident individual for purposes of Finnish tax in March, and because the related wages are not income sourced to Finland according to § 10 of the Act on income taxation, Finland will not levy income tax on these wages although the date when the wage earner receives them comes after the point of time when the wage earner became a Finnish resident. In this connection, it is possible for the wage earner to get a tax card indicating that no withholding should be carried out on wages based on work done during March.

Example 7: For a period of 4 months, from January to the end of April, a nonresident wage earner worked in Finland. He received wages at that time, which in accordance with § 10 of the Act on income taxation is considered income sourced to Finland. The employer withheld tax at source when paying him the wages.

Next year, at the beginning of January, the wage earner came to Finland to start living here and became a Finnish resident. At the end of January, the employer paid him a bonus because of his good work performance during the previous year’s four-month period when he worked in Finland and was a tax nonresident here. The bonus is subject to Finnish tax because it is based on work done for a Finnish employer and because Finland was the place where work was performed. Because the individual employee is a Finnish tax resident at the time of the bonus payment, the employer needs to withhold tax on it according to the percentage rate stated on the individual employee’s tax card.

10.2 Taxes withheld at source

The categories of income subject to taxation at source are listed exhaustively in § 3, subsection 1 of the Act on the taxation of nonresidents’ income. Payors must withhold tax at source on dividends, interest and royalties (excluding royalties from cinematographic films), wages, fund units paid out of an employees’ fund and surplus distributed to members of the fund, and on other payments (excluding pensions) that are defined as withholdable in accordance with the Prepayment Act. Taxation at source also concerns compensation based on an artist’s or athlete’s personal activity. Payors of student grants to nonresident individuals must withhold tax at source in accordance with § 3 of the Act on the taxation of nonresidents’ income.

The tax treatment of business income from Finland depends on whether the income is seen as “trade income” i.e. nonwage compensation, as some other income withholdable under the Prepayment Act, or as falling under some other category of income. If it is withholdable income according to the Prepayment Act, Finnish payors must always withhold tax at source unless the recipient shows the payor a tax card indicating that no tax needs to be withheld. Taxes on other income derived from the conduct of trade or business are assessed in accordance with the provisions of the Act on assessment procedure. For more information on the taxation of foreign self-employed individuals, see Income taxation of foreign self-employed individuals in Finland.

Tax at source, a final tax, is remitted to the State of Finland in its entirety (§ 7, subsection 1 of the Act on the taxation on nonresident’s income). In most cases, the payor must withhold tax at source applying the percentage rates laid down in the Act on the taxation of nonresidents’ income. However, by virtue of the provisions of a tax treaty, the income earner may be entitled to a lower rate or to an exemption from withholding at source.

Payors must withhold 35 percent tax at source on wages, on fund shares and surplus of an employees’ fund, on nonwage compensation within the meaning of § 25 of the Prepayment Act, on constructive dividends and on other amounts that under the provisions of the Act on income taxation are considered earned income (§ 7 of the Act on the taxation of nonresidents’ income). To receive income subject to source-tax withholding does not entitle the individual taxpayer to claim deductions. An exception from this rule is the “deduction for tax at source” (lähdeverovähennys; källskatteavdraget) defined by law (§ 6 of the Act on the taxation of nonresidents’ income). It means that employers deduct €510 per month from the total pay on which the withholding rate at source is 35 percent. If the relevant period for earning the income has been shorter than one month, €17 per day is deducted instead. However, the maximum amount of the deduction for tax at source equals the amount of the income. No deduction is granted if the income received by the individual recipient consists of fund units or surplus distributed by an employees’ fund, or of fees for board membership or membership of other governing bodies. A taxpayer may claim the source tax deduction only if they present a source tax card to the payer of the income (Section 6(3) of the Act on the taxation of nonresidents' Income).

The withholding rate is 30% when the income falls under the categories of dividends, interest and royalties, of insurance indemnities or other insurance-related amounts, and when the income consists of any other amounts that – under the provisions of the Act on income taxation – are income from capital (§ 7, paragraph 4 of the Act on the taxation of nonresidents’ income). Payors must withhold 35 percent tax on dividends paid on the basis of nominee-registered holdings of a Finnish listed company, if the payor or authorised intermediary does not have the information on the dividend recipient as laid down in § 15 e of the Act on assessment procedure (§ 7, subsection 2 of the Act on the taxation of nonresidents’ income). Nonresidents can request a tax-at-source card (lähdeverokortti; källskattekort) designed for their income subject to source taxation. For more information on the tax-at-source card for non-resident taxpayers, see The tax-at-source procedure, applied to a nonresident taxpayer’s income and a key employee’s wage income.

10.3 Taxation under the Act on assessment procedure

Items of income not falling into the categories subject to tax withholding at source are taxed according to the Act on assessment procedure (§ 13 of the Act on the taxation of nonresidents’ income). Examples of income taxable according to the Act on assessment procedure include pensions and comparable retirement income derived from voluntarily concluded pension insurance contracts, long-term savings accounts, compensation for use or for copyrights of cinematographic films, and income derived from forestry. Further examples are rental income, grants and scholarships, amounts borrowed by a company shareholder that are taxed as income to the shareholder, and business income when it is not taxed by withholding at source. Assessment under the Act on assessment procedure also concerns any income attributable to a permanent establishment or fixed place of business located in Finland.

The tax treatment of business income from Finland depends on whether the income is seen as “trade income” i.e. nonwage compensation, as some other income withholdable under the Prepayment Act, or as falling under some other category of income. If the provisions of the Prepayment Act determine that the payor must withhold money upon paying the income to the recipient, Finnish payors must withhold tax when making any payments to the person receiving the income unless the latter has a valid prepayment registration or has shown the payor a tax card indicating that no tax needs to be withheld at source.

Taxes on other income derived from the conduct of trade or business are assessed in accordance with the provisions of the Act on assessment procedure. In addition to the above, income-tax assessment in accordance with the provisions of the Act on assessment procedure also concerns any income attributable to a permanent establishment or fixed place of business located in Finland. If the nonresident self-employed person who operates trade or business receives other, additional Finnish-sourced income, the assessment process would follow the rules of the Act on the taxation of nonresidents' income or, depending on the income categories, the rules of the Act on assessment procedure. For more information on the taxation of foreign self-employed persons, see Income taxation of foreign self-employed individuals in Finland.

When the assessment process of an individual taxpayer’s taxes is carried out in accordance with the provisions of the Act on assessment procedure, it means that the rules on the tax assessment of Finnish residents are followed. This way, a nonresident individual is entitled to tax deductions under the same rules as Finnish residents are. Accordingly, the nonresident individual would be entitled to tax credits for household expenses and other deductions. For detailed information on deductions for expenses, including pension insurance premiums and expenses for the production of income, see Individual taxpayers’ right to expense deductions in cross-border circumstances.

Receipts of income from capital are subject to 30% income tax. For the part that goes over €30,000, the rate is 34%.

The progressive tax schedule applies to the earned income that is subject to state tax. In addition to income tax going to the state, nonresidents for the whole tax year are also liable to pay municipal income tax on the income subject to municipal taxation. The percentage rate is determined as an average percentage of Finnish municipal tax rates in force. However, for individual taxpayers who live in Finland for only a part of the tax year, the income subjected to municipal income tax is entirely taxed by the municipality where the individual taxpayer lived during the tax year. In this case, the percentage rate is the rate in force in that local municipality. Every year, under the provisions of § 91 a, subsection 3 of the Act on assessment procedure, the Tax Administration issues an official decision that determines the Finnish municipalities’ and church parishes’ percentage rates.

If nonresidency in the Åland Islands has been determined for a natural person in accordance with the provisions of the Act governing municipal income taxes on Åland (Kommunalskattelagen för Åland (ÅFS 119/2011), the liability for paying municipal income tax is governed by the provisions of Åland’s Act on fiscal nonresidents (Landskapslagen om beskattning av begränsat skattskyldig (ÅFS 12/1973)). For more information about taxes in the Åland Islands, see Ahvenanmaan verotus. (in Finnish and Swedish, link to Finnish)

Nonresidents do not need to pay church tax, public broadcasting tax or Åland media charges.

Only the earned income subject to Finnish tax is included in the progression of the percentage rate when the applicable rate is being determined for taxation of earned income in accordance with the provisions of the Act on assessment procedure. For example, regarding the percentage rate of income tax on pensions classified as earned income, no impact on rate progression is caused by pensions sourced to countries other than Finland.

In order to carry out tax payments, the process of advance collection of income tax is conducted in accordance with the relevant provisions of the Prepayment Act. The nonresident individual is issued a special tax card as referred to in the Prepayment Act (a nonresident’s tax card) to enable the payor of income to withhold the correct amount of tax when paying wages, etc. The card is specific to every tax year. The Finnish Tax Administration issues a tax card for each tax year, effective from the beginning of January.

For income not subject to withholding, the taxpayer is required to pre-pay income tax independently, according to the instructions indicated on a decision on preassessment.

If a nonresident individual receives income subject to assessment in accordance with the provisions of the Act on assessment procedure, the nonresident individual must submit a tax return for the year. The amounts pre-printed on the tax return’s pages show the nonresident individual’s taxable income, deductions, and the final results of the Finnish tax assessment for the year. The individual taxpayer must make corrections to any information on the pre-completed tax return that contains errors and send the corrections to the Tax Administration. Those who operate trade, business, agriculture or forestry in Finland are required to submit specific tax returns for these activities. The specific tax returns for trade or business and agricultural operations must be submitted for every tax year regardless of whether the nonresident taxpayer conducted any operations during the year concerned. However, as for the specific tax return for forestry, no submittal is required for a tax year when the taxpayer has nothing to report. (§ 7, subsections 2 and 3 of the Act on assessment procedure).

10.4 To claim tax treatment under the Act on assessment procedure

A nonresident individual can make a demand to have their earnings taxed in accordance with the progressive tax schedule instead of the tax-at-source system. This option is open to nonresidents whose country of fiscal residence is a country belonging to the European Economic Area, or a country that has made an agreement with Finland on administrative assistance and exchange of information; and to any nonresidents who are holders of a Finnish residence permit within the meaning of the EU Council Directive on Scientific Researchers (§ 13, subsection 1, paragraph 6 of the Act on the taxation of nonresidents’ income).

10.4.1 Earned income subject to assessment under the Act on assessment procedure

The demand that nonresident individuals can make for tax treatment under provisions of the Act on assessment procedure can only concern earned income, i.e. wages, trade income (nonwage compensation), the part considered earned income within business income, reindeer husbandry income, and agricultural income, or income in the form of received royalties (except cinematographic film royalties). While Finland only taxes income in the nonresident individual’s hands when the income is sourced to Finland, the assessment of tax on earnings also takes account of any wages, pensions and social benefits that would be taxed in Finland and that have been received:

Outside Finland and the income is treated as taxable income in the country of tax residence, or
In Finland and the income is not taxed due to provisions of the tax treaty preventing Finland from taxing it (§ 14, paragraph 1 of the Act on the taxation of nonresidents’ income).

Items of income from sources outside of Finland include the income on which the nonresident must pay tax to their country of residence, which is either sourced to the country of residence or sourced to a third country. However, these types of income are not taken into consideration if at least 75% of the nonresident’s worldwide annual gross income consists of taxable income from Finnish sources, and the country of residence is an EEA country or the nonresident holds a residence permit within the meaning of the EU Council Directive on Scientific Researchers. To apply this provision, the nonresident must present a certificate issued by the fiscal authority in their country of residence regarding the tax year’s income to the Finnish Tax Administration (§ 14, subsection 5 of the Act on the taxation of nonresidents’ income).

Example 8: A Finnish company hires an employee, who lives in Denmark, to work in Finland between 1 September and 16 October 2024. The employee earns €15,000 from Finland. He demands that the Tax Administration assess his income under the provisions of the Act on assessment procedure.

He also had income, during the tax year, in the form of wages sourced to Denmark – €8,000 – and wages sourced to Germany – €30,000. Because the net taxable income earned in Finland is less than the required threshold of 75% of the total amount of all income earned worldwide including Finland, the wages both from Denmark and from Germany need to be included in the progressive calculation for the Finnish tax on the wages sourced to Finland.

Income from countries other than Finland has no impact on progression if the taxpayer only has received the types of earned income – typically, a pension – for which the tax assessment is effected according to the provisions of the Act on assessment procedure. In situations where items of income need to be included in the progressive calculation, the inclusion concerns all the earned income for which the tax assessment is effected according to the provisions of the Assessment Procedure Act.

Example 9: A recipient of both wages and a pension from Finland is a nonresident, living in Sweden. The wages are subject to tax withholding at source and the pension will be taxed in accordance with the Assessment Procedure Act. . If the nonresident demanded assessment of their wages under the provisions of the Act on assessment procedure, the pension sourced to Finland would have to be included in the progressive calculation of the income tax rate on the wages sourced to Finland.

Taxpayers can submit demands for treatment according to the provisions of the Act on assessment procedure in three different ways: in connection with tax preassessment and prepayment, when completing their income tax return for the past tax year, and by filing a claim for adjustment at a time when the Tax Administration has already finished the tax year’s assessment process. To submit the demand in connection with preassessment and prepayment requires that the nonresident individual either asks for a nonresident’s tax card or asks for income-tax prepayments to become determined in a preassessment calculation according to the provisions of the Act on assessment procedure. Nonresidents can demand progressive taxation of earned income subject to tax at source by filling in the application form for a nonresident’s tax card and adding an application letter for progressive taxation.

Under the provisions of § 13, subsection 4 of the Act on the taxation of nonresidents’ income, when the Tax Administration assesses the nonresident individual’s taxes for the year, and a demand for progressive tax had been taken into account during preassessment or alternatively, the nonresident demands progressive tax treatment, the Tax Administration will apply the progressive treatment. After end of tax assessment, it is still possible to submit the demand in the form of a claim for adjustment. In keeping with the Finnish wording of the provisions of § 13, subsection 4 of the Act on the taxation of nonresidents’ income, the Tax Administration implements the provisions of the Act on assessment procedure on the entire year’s tax assessment if the nonresident taxpayer had applied for a nonresident’s tax card and the payor had withheld tax upon payment. From this, it follows that the nonresident cannot return (through a preassessment change, through processes of tax assessment, through submittal of a claim for adjustment, nor through a Tax Administration’s decision to impose taxation at source) to tax treatment based on the tax-at-source system during the tax year concerned.

A demand for tax treatment under the Act on assessment procedure concerns one tax year at a time. If the taxpayer has demanded treatment according to the provisions of the Act on assessment procedure, then – with the exception of receipts of dividends – the Tax Administration will assess all the earned income sourced to Finland according to the provisions of the Act on assessment procedure. In this connection, it is required of the taxpayer to provide full information of all their income earned in Finland, earned income subjected to tax in the country of residence, and the related deductions. Finland levies tax on the income the nonresident has received from sources in Finland. However, the taxable income sourced to the country of residence will increase the tax on this Finnish-sourced income.

10.4.2 Dividends assessed according to the Act on assessment procedure

Under certain conditions, a nonresident taxpayer may request that dividend income derived from Finland be taxed in accordance with the procedure provided for in the Act on Assessment Procedure (Section 13(1)(3) of the Act on the taxation of nonresidents’ Income). The conditions are described in the Finnish Tax Administration’s guidance Payments of dividends, interest and royalties to nonresidents

Tax assessment according to the provisions of the Act on assessment procedure can concern both listed and nonlisted companies’ dividends. The usual tax rules that concern income in the form of dividends will apply. For individuals, when a listed company has distributed dividends, they are classified as capital income. However, only 85% of the dividends is capital income subject to tax, and 15% is tax-exempt (§ 33 a, subsection 1 of the Act on income taxation). When a nonlisted company has distributed dividends, there will be a division of the received amount between one part to be taxed as capital income and the remaining part to be taxed as earned income, and the base for the division is the mathematical fiscal value of one corporate share (§ 33 b, subsections 1 and 2 of the Act).

10.5 Effect of tax treaties

On the condition of reciprocity, § 135 of the Act on income taxation provides that the Government of Finland can enter into various agreements with other States on the issue of how taxing rights should be divided in respect of a certain category of income. The options are to either agree on how to divide the rights with the other Contracting State, or to agree on giving the taxpayer a full or partial exemption from Finnish taxes.

Some of the tax treaties that concern income taxes may restrict Finland’s taxing rights that would apply based on internal legislation. However, decisions on the tax treatment of income received by a nonresident individual are based on the provisions of Finland’s internal legislation first. If the income is not derived from Finland, or if the income is exempt from tax under domestic legislation, the tax treaty does not apply to that income.

Example 10: A nonresident individual, a resident of Spain, sold an apartment in Finland to a buyer. Under the provisions of § 10, paragraph 10 of the Act on income taxation, the capital gain the nonresident made when selling the apartment at a profit is income sourced to Finland. However, this apartment had served as their permanent home when still living in Finland. As a result, the tax rules on selling one’s home (§ 48, subsection 1, paragraph 1 of the Act) make the income tax-exempt. Because the capital gain is exempt by virtue of Finnish internal legislation, the provisions of the Spain–Finland tax treaty will have no impact on how the income is taxed in Finland.

If internal legislation provides that Finland has the taxing rights with respect to the income in the hands of a nonresident, and the received income is subject to tax in Finland, it is possible that a tax treaty concerning income taxes will restrict these taxation rights. Tax treaties contain provisions on how taxing rights are divided between Finland and the other contracting states.

When someone is a nonresident taxpayer in Finland, they cannot be considered a “treaty” resident of Finland. As a result, the restrictive impact on Finland’s taxation rights will apply when Finland is the source state for the income. For example, it may be that a tax treaty has restrictions, which prevent Finland from imposing a certain amount of tax. Or it may be that the treaty prevents the levying of tax on a certain item of income fully.

Example 11: A nonresident individual is a treaty resident of Estonia, receiving dividends from a Finnish limited-liability company. Under the provisions of § 10, paragraph 6 of the Act on income taxation, dividends are income sourced to Finland. Under provisions of internal legislation, the payor of dividends should withhold 30% when paying to nonresident taxpayers (§ 7, subsection 4 of the Act on the taxation of nonresidents’ income). However, Article 10 of the Estonia–Finland tax treaty restricts Finland’s taxing rights to 15%.

For information on the standard provisions of tax treaties, see Articles of tax treaties.

Page last updated 8/7/2026

Taxation of income received by nonresidents – natural persons Detailed guidance

1 Introduction

2 Wages

2.1 General remarks

2.2 Wages received from payors other than the public sector

2.3 Wages received from a public sector organisation

2.4 Fees connected to membership of a Board of Directors

2.5 Wages paid to leased employees

2.6 Income received by artists or athletes for their personal activity

2.7 Income received for work done on board a vessel or aircraft

2.8 Work contribution dividend

3 Pensions, social benefits, received amounts based on ‘PS’ savings and based on insurance contracts

3.1 Pensions from payors other than the public sector

3.2 Pensions from the public sector

3.3 Pension based on voluntary pension insurance

3.4 Income based on indemnities from accident insurance, traffic insurance

3.5 Social benefits

3.6 Other distributions based on an insurance policy

3.7 Income in the form of long-term savings transactions ‘PS’

4 Income derived from business, trade, agriculture and forestry

4.1 Income derived from a business or trade operated in Finland

4.2 Income derived from agriculture

4.3 Income derived from forestry

5 Income derived from a partnership

5.1 General remarks

5.2 Profit-shares from a limited partnership operating investment activities

5.2.1 Profit-shares distributed by a fund of funds

6 Income from investments, received dividends and other distributions, interest and royalties

6.1 Dividends

6.2 Interest

6.3 Royalties

6.4 Receipts of profit-shares from investment funds

6.5 Receipts of income from an employees’ fund

6.6 Withdrawals from the yield on an equity savings account

7 Income derived from immovable property and housing-company apartments

8 Capital gains

8.1 Capital gains from disposals of real estate or corporate stocks

8.2 Capital gains generated from swap contracts

9 Other items of income from sources in Finland

9.1 Shareholder loans

9.2 Academic grants and scholarships

9.3 Reindeer husbandry income

9.4 Trade income

10 Taxation of income received by nonresident taxpayers

10.1 General remarks

10.2 Taxes withheld at source

10.3 Taxation under the Act on assessment procedure

10.4 To claim tax treatment under the Act on assessment procedure

10.4.1 Earned income subject to assessment under the Act on assessment procedure

10.4.2 Dividends assessed according to the Act on assessment procedure

10.5 Effect of tax treaties