Foreign leased employees and taxation in Finland

This guide explains the tax treatment of foreign leased employees in Finland and includes instructions for leased employees, foreign employee leasing companies and contractors in Finland.

This guide replaces a previous guide of the same name. The guidance has been revised, as the procedure from the perspective of employers changed as of 1 January 2017 when the Self-Assessed Taxes Act and the new Tax Collection Act entered into force and the Tax Account Act was repealed. The definitions given in Chapter 4 of the guide have been updated to match the Tax Administration's guide on the taxation of wages and trade income (Document No A19/200/2016). Information on the right to tax workers' wages on the basis of a tax treaty between Finland and Bulgaria has also been added to the guide. The guidance on applying for a personal identity code and a tax number has also been updated.

This is an unofficial translation. The official guide is available in Finnish and Swedish.

1 Overview

As a rule, workers leased from abroad pay tax on their earnings from work performed in Finland to Finland. The tax status of leased employees in Finland depends, among other things, on the length of their stay in Finland and the provisions of a potential tax treaty between the worker's home country and Finland. Tax treaties contain various kinds of provisions on the tax status of leased employees.

As a rule, workers' home countries also tax the international earnings of their residents according to their own laws. Earnings from work in Finland can therefore usually also be taxed in the worker's home country. Any double taxation is eliminated in the worker's home country according to the tax treaty between that country and Finland, or the national laws of the worker's home country.

2 Tax payable on the earnings of leased employees in Finland

2.1 Tax liability and earnings in Finland

The Finnish income tax system has two different categories of tax liability: general tax liability and limited tax liability. Pursuant to Section 11(1) of the Income Tax Act (1992/1535), general tax liability applies to residents of Finland and to individuals who reside abroad but spend more than six months in Finland. Limited tax liability applies to individuals who reside abroad and to individuals who stay in Finland for less than six months. More information on general and limited tax liability can be found in the Tax Administration's guide on General and limited tax liability.

Individuals with general tax liability pay tax to Finland on anything they earn both in Finland and abroad. Individuals with limited tax liability only pay tax to Finland on what they earn in Finland (Income Tax Act, Section 9(1)).

Pursuant to Section 10(4c) of the Income Tax Act, earnings from Finland include wages paid by a foreign employer for work performed in Finland, if the foreign employer has leased the worker to a contractor in Finland.

2.2 Effect of tax treaties

Wages earned from work performed in Finland by leased employees who reside abroad and have a foreign employer can be taxed in Finland, if there is a tax treaty between Finland and the worker's home country that does not prevent Finland from taxing the worker's wages.

The following tax treaties, among others, allow the wages of leased employees to be taxed in the country where the work is performed:

• Since 2007: Iceland, Norway, Sweden, Denmark, Latvia, Lithuania and Estonia
• Since 2009: Moldova, Georgia, Belarus and the Isle of Man
• Since 2010: Guernsey, Bermuda and Jersey
• Since 2011: Poland, Kazakhstan, Cayman Islands
• Since 2013: Turkey
• Since 2014: Cyprus and Tajikistan

Pursuant to a tax treaty between Finland and Bulgaria, wages earned from work performed in Finland can be taxed in Finland if a resident of Bulgaria works for a non-Bulgarian employer in Finland (Agreement between the Republic of Finland and the Republic of Bulgaria on avoiding double taxation of income, Article 7 (11/1986)). The aforementioned provision of Finland's tax treaty with Bulgaria applies to both leased employees and other workers.

The wages of leased employees are also taxed in Finland if the worker comes from a country with which Finland does not have a tax treaty. In such cases, the worker's wages are taxable income in Finland from the very first day of work, regardless of the length of the stay. The wages of workers from other countries with which Finland has a tax treaty are taxed in Finland if the worker stays in Finland for more than 183 days over a period of 12 months or one calendar year, depending on the treaty.

3 Applying for a personal identity code and a construction industry tax number

3.1 Personal identity codes issued by tax offices

Individuals are given a Finnish personal identity code when their details are added to the Population Information System, which is maintained by the Population Register Centre and local register offices. Foreign nationals can request a Finnish personal identity code by visiting their local register office in person. Individuals who come to Finland to work can also obtain a Finnish personal identity code from their tax office.

The following entries are made in the Population Information System when an individual is given a personal identity code through the Tax Administration: full name, date of birth, gender, address in Finland, nationality, mother tongue and profession.

If a worker stays in Finland for longer than one year, the local register office decides whether the worker should be entered in the Population Information System as a permanent resident (www.maistraatti.fi).

Documents needed for applying for a personal identity code:

• EU/EEA nationals: a valid passport or official proof of identity with a photograph from which they can be easily identified, as well as a certificate of residence rights from the Finnish Immigration Service (after a stay of three months)
• Non-EU/EEA nationals: a valid passport as well as a valid residence permit or visa, where applicable

Applicants also need to bring an employment contract or a document from their employer detailing the most important terms of their work in Finland. Read more: Finnish personal identity codes for workers arriving in Finland

More information on work rights and residence permits can be found on the website of the Finnish Immigration Service at www.migri.fi.

3.2 Construction industry tax number and the Tax Number Register

Individuals working on building sites must wear a photographic ID badge. The ID badges of all workers on building sites must also show the tax number entered in the Tax Number Register. To be given a tax number, workers need a Finnish personal identity code.

The Tax Administration enters each worker's unique tax number and other personal details into the Tax Number Register. Entering a construction worker into the register always requires a specific request. The request can be made by the worker, their employer or the main contractor on the building site. The Tax Administration can also enter individuals in the register on its own initiative.

For more information on tax numbers, see www.vero.fi/en-US/Individuals/Individual_Tax_Numbers.

4 Employee leasing

Employee leasing refers to a contractual arrangement by which a business (leasing company) leases employees to another business (contractor) for a charge. The contract between the leasing company and the Finnish contractor is a business contract governed by the law of obligations. The same applies to natural persons as to contracting parties.

The right to direct and supervise workers primarily belongs to the employer. However, pursuant to Chapter 1, Section 7 of the Employment Contracts Act, if an employer assigns an employee, with their consent, to another employer, the right to direct and supervise the work is transferred to the contractor, together with all employer obligations directly related to the performance of the work and the associated arrangements. These include issues such as obligations relating to working hours and occupational safety.

Workers are considered leased employees if the following criteria are met:

• The right to direct and supervise the work is in the hands of the contractor.
• The work is performed in a workplace over which the contractor has control and for which the contractor is responsible. This means that the leasing company does not operate in the place of work itself, but only leases its employees to the contractor.
• Workers generally get their tools and equipment from the contractor.
• The leasing company cannot unilaterally decide the number of workers on site or their qualifications.
• Responsibility for the work rests with the contractor.

In addition to traditional employee leasing, the concept includes matters such as situations in which a worker is not directly employed by the employee leasing company with which the Finnish contractor has an agreement, but is leased from another business. In such circumstances, the employer's reporting obligations belong to the employer who pays the leased employee's wages and with whom the worker has an employment contract, and the contractor's reporting obligations belong to the Finnish contractor for whom the employee performs the work.

4.1 Differences between employee leasing and subcontracting

In the case of subcontracting, the right to direct and supervise the work belongs to the subcontractor. In the case of employee leasing, responsibility for directing the work belongs to the contractor, i.e. the business for which the leased employees work.

In the case of subcontracting, the workers obtain their tools and equipment from the subcontractor. In the case of employee leasing, the workers obtain their tools from the contractor. In the case of subcontracting, responsibility for the work rests with the subcontractor. With respect to employee leasing, responsibility for the work belongs to the contractor.

4.2 Differences between employee leasing and employment agency services

Employment agency services do not constitute employee leasing. Employment agencies bring workers and employers together so that they can sign an employment contract between them.

If a business that provides foreign labour only acts as an agency and not as the workers' employer, the arrangement does not constitute employee leasing. The workers' employer is the Finnish company for which the work is performed. The Finnish company is therefore responsible for all obligations that belong to the employer.

4.3 Independent contractors

If a company only leases the services of its sole shareholder, such an arrangement does not constitute employee leasing. These so-called one-man businesses cannot lease their sole shareholder's services; instead, the shareholder is always considered to be employed by the contractor. In addition, self-employed individuals cannot lease their own services.

For more information on the distinction between wages and trade income, see Tax treatment of wages and trade income.

4.4 Working on board a Finnish ship or aircraft

Individuals who reside abroad but work as leased employees on board a Finnish ship or aircraft are liable to pay tax on their wages to Finland, pursuant to Section 13 of the Income Tax Act. Tax treaties do not usually prevent Finland from taxing the wages of leased employees who live abroad, if the wages are earned from work on board a Finnish ship or aircraft. There are exceptions, however, such as the Nordic tax treaty, according to Chapter 15, Article 4 of which tax on wages earned from work on board an aircraft is only payable to the worker's country of residence.

Work in international transport often occurs completely or mainly outside Finland. The reporting obligations of foreign employee leasing companies and Finnish contractors discussed below apply only to work performed in Finland. That is why reporting obligations do not apply, for example, to employees leased to work in international transport.

Read more: Taxation of employees from other countries – International traffic (Section 3.7)".

5 Instructions for foreign leased employees

5.1 Leased employees with limited tax liability

5.1.1 Special tax treatment of leased employees with limited tax liability

Individuals with limited tax liability are taxed according to the so-called Tax at Source Act (627/1978). This means that the employer withholds the tax due at source when paying the workers' wages. Tax at source discharges the wage-earner's tax liability, and the tax rate is 35% (Tax at Source Act, Section 7(1)(1)).

However, leased employees with limited tax liability are taxed according to a special procedure. Leased employees with limited tax liability are taxed procedurally in the same way and at the same time as individuals with general tax liability. The procedure does not, however, constitute taxation under the Tax Procedure Act (1558/1995) as referred to in Section 13 of the Tax at Source Act, which is why the tax is levied at the fixed tax-at-source rate of 35%. EUR 510 per month or EUR 17 per day for the duration of employment is deducted from the wages earned. No other deductions are made.

Individuals with limited tax liability who reside in a Member State of the European Economic Area or in a country or region that is governed by the Convention on Mutual Administrative Assistance in Tax Matters or a Tax Information Exchange Agreement, or who hold a residence permit pursuant to the Researcher Directive, may nevertheless ask for their income (with the exception of dividends) to be taxed progressively in accordance with the Tax Procedure Act (Tax at Source Act, Section 13(1)(6)).

5.1.2 Applying for pre-assessment

The wages of individuals with limited tax liability as referred to in Section 10(4c) of the Income Tax Act are subject to pre-assessment, if their employer is not obligated to withhold tax on their wages at source and there is no international convention preventing the wages from being taxed. Workers need to apply for pre-assessment by the end of the calendar month following the beginning of their employment in Finland (Tax at Source Act, Section 16a).

Failure to apply for pre-assessment by the deadline may result in a punitive tax increase of up to EUR 2,000, which is payable to the State. The amount of the punitive tax increase depends on the degree of culpability, previous failures and other similar factors.

Workers need to apply for pre-assessment from their tax office as soon as they begin working in Finland and in any case by the end of the month following the beginning of their employment.

EUR 510 per month is deducted from the worker's wages for the purposes of pre-assessment for the duration of his or her employment. The deduction is EUR 17 per day for any incomplete months during the period of employment.

Workers can apply for pre-assessment by filling in a Pre-assessment application form (5057). In addition to personal details, applicants need to fill in the following information to enable the calculation of their tax liability:

• Address in Finland and abroad
• Date of arrival and departure from Finland
• Amount of wages earned in Finland
• Length of employment in Finland
• Bank account number (BIC/IBAN)

Pre-assessed taxes are payable monthly for the duration of employment.

In addition, employees who work in Finland for at least four months are liable to pay social insurance contributions from their wages. The amount of the contribution is calculated from the wages before the aforementioned EUR 510/month or EUR 17/day deduction. No social insurance contributions are deducted from the wages of workers who are able to present Certificate A1 or other proof of being insured in another country.

Workers who want to be taxed in accordance with the Tax Procedure Act need to accompany their pre-assessment application with an Application for progressive taxation.

5.1.3 Proof of tax payments for the authorities of the worker's country of residence

As a rule, workers also pay tax on earnings in Finland to their country of residence. Double taxation is eliminated in the worker's country of residence according to the applicable tax treaty. Any tax paid to Finland by a worker on his or her earnings is taken into account in the calculation of tax payable to the worker's country of residence. The elimination of double taxation is governed by international tax treaties.

The Finnish tax authorities provide statements of taxes paid to Finland through pre-assessment to workers who apply for pre-assessment. Workers can use these statements as proof of tax payments for the tax authorities of their country of residence. This allows the worker's country of residence to take account of any tax paid on the worker's wages to Finland in their pre-assessment procedure, in order to avoid double taxation.

5.1.4 Tax assessment in Finland

In Finland, wages are taxed the year after they are earned. Tax liability is calculated on the basis of the actual income earned. If tax paid in advance is not enough to satisfy the final tax liability, back taxes are levied. If more than the required amount of tax has been paid in advance, the excess is refunded.

The Finnish Tax Administration sends workers a pre-completed tax return relating to the previous tax year each spring. The pre-completed tax return, which is sent to the worker's address in his or her country of residence, shows the wages reported by the employer and the length of employment in Finland. Workers who are not sent a pre-completed tax return are responsible for completing their tax return for Finland.

The pre-completed tax return must be checked and any mistakes or omissions corrected. Workers who make corrections or additions to their pre-completed tax return must send their tax return back to the Finnish Tax Administration.

Even workers who have not applied for progressive taxation at the pre-assessment stage can apply for this retroactively, by sending back their tax return. In such circumstances, the tax return must be accompanied by an Application for progressive taxation.

Employers report not just the wages paid to leased employees, but also the exact dates, during which an employee worked in Finland, to the Tax Administration each year. The reported information is recorded in the worker's tax return. However, if a worker's pre-completed tax return does not contain information about their wages or the length of their employment, or if the information is incorrect, they must enter the exact dates during which they worked in Finland in their tax return themselves, in order to be eligible for tax-at-source deductions.

The Finnish Tax Administration uses the corrected tax return to calculate the worker's final tax liability and sends a statement to the worker's address in the country of residence by the end of October the following year. This is why it is important for workers to notify the Population Information System if they move. Notifications can also be made online. Instructions for reporting a change of address can be found at posti.fi.

Foreign employees working in Finland can sometimes arrange for their employer to pay their taxes in Finland ("net-of-tax contract"). In such cases, the worker can give their employer authorisation to receive any tax refunds owed to them. However, any arrangements by which workers transfer their right to tax refunds to another person are not binding on the Tax Administration. Tax refunds are paid in euros into the bank account given by the taxpayer. Bank account details can be given through the Tax Administration's MyTax service. Taxpayers can also supply their bank account details by filling in and signing a written notice (7208, Individuals' Bank Account Notice). Read more: Change of bank account details.

5.2 Leased employees with general tax liability

The wages of leased employees with general tax liability are taxed at the progressive tax rate, similarly to permanent residents of Finland.

Workers whose employer is a foreign business that does not have a permanent establishment in Finland, or that has not asked to be entered into the Employer Register in Finland, need to take care of their pre-assessment themselves. It is important for workers to contact their tax office to arrange pre-assessment. Without pre-assessment, the resulting back taxes will bear interest. Moreover, workers who are not sent a pre-completed tax return are responsible for completing their tax return for Finland themselves.

6 Instructions for foreign employee leasing companies

6.1 Reporting obligations of foreign employers

6.1.1 Employee leasing notifications

Foreign employers who lease foreign employees to contractors in Finland need to notify the tax authorities of any employees of theirs who work in Finland pursuant to Section 15a(1) of the Tax Procedure Act. Notification of each employee must be given by the end of the month following the beginning of their work.

Employee leasing notifications are given by filling in an employee leasing notification form (6147a or 6147e) and submitting it to the Helsinki Area Tax Office. The tax authorities must be notified of all foreign leased employees who work in Finland, regardless of the length of their employment.

Notification is required if there is no tax treaty preventing Finland from taxing the worker's wages. This is the case with leased employees arriving from, for example, Iceland, Norway, Sweden, Denmark, Latvia, Lithuania and Estonia as well as Moldova, Georgia, Belarus, the Isle of Man, Guernsey, Bermuda, Jersey, Poland, Kazakhstan, the Cayman Islands, Turkey, Cyprus and Tajikistan. Leased employees who reside in Bulgaria but work in Finland as leased employees of non-Bulgarian employers must also be reported.

Notification is also required of leased employees arriving from countries with which Finland does not have a tax treaty. Finland's current tax treaties are listed on the vero.fi website (Tax treaties).

Notifications are required from all foreign employers who are included in the Prepayment Register. If a worker's employer is not included in the Prepayment Register, responsibility for notification rests with the employer's representative as per Section 4a of the Act on Posting Workers. If the employer has not appointed a representative, however, responsibility for notification always ultimately rests with the foreign employer.

Notifications must include details of the contractor for whom the employees actually perform work. Even employers who provide workers to an agency must give the details of the Finnish end client and not the employment agency.

Foreign employers who have a permanent establishment in Finland have a responsibility to apply tax at source or pre-assessment to their workers' wages, and do not therefore need to report their leased employees' work in Finland (6147a or 6147e).

6.1.2 Annual declaration

Workers who stay in Finland for up to six months

Foreign employers who are included in the Prepayment Register, or the representative of an unregistered employer, must report the details of their leased employees and the wages paid to them annually, unless there is an international treaty that prevents the taxation of their wages (Tax Procedure Act, Section 15a(2)). Annual declarations must be submitted by the January of the year following the tax year in question, using the Annual notification of payments to recipients with limited tax liability form (7809). Even employers who have not appointed a representative have a responsibility to submit a declaration, regardless of whether or not they are included in the Prepayment Register.

Wages paid to leased employees are reported using the payment code A9 "Wages earned by employees leased from abroad". Employers, or their representatives, also need to specify the exact dates when their employees worked in Finland. Workers' Finnish personal identity codes must also be provided.

No annual declaration is needed if there is a tax treaty that prevents the taxation of leased employees' wages. Annual declarations are therefore required for leased employees arriving from Iceland, Norway, Sweden, Denmark, Latvia, Lithuania and Estonia as well as Moldova, Georgia, Belarus, the Isle of Man, Guernsey, Bermuda, Jersey, Poland, Kazakhstan, the Cayman Islands, Turkey, Cyprus and Tajikistan.

Leased employees who reside in Bulgaria but work in Finland as leased employees of non-Bulgarian employers must also be declared. Declarations are also required for leased employees arriving from countries with which Finland does not have a tax treaty. Finland's current tax treaties are listed on the vero.fi website (Tax treaties).

Workers who stay in Finland for more than six months

Foreign employers, or their representatives, need to submit annual declarations (7801, Annual declaration itemisation and summary) of all employees of theirs who stay in Finland for more than six months (Tax Procedure Act, Section 15a(2)). The worker's country of residence or the employer's line of business is irrelevant.

If an employer has made advance tax payments on behalf of its workers, the amount paid should not be reported as a pre-assessment in annual declarations. Employers who are registered as regular wage-paying employers in the Tax Administration's register and who have deducted tax from their employees' wages report the taxes paid as a pre-assessment in their annual declarations (for more information on the Employer Register, see Section 6.2. Inclusion of foreign employers in the Employer Register).

The payment categories to be used in annual declarations are listed in the table below:

The payment categories to be used in annual declarations

Payment category code and name	Is the worker covered by the Finnish social security system?	Does the employer have a permanent establishment (PE) in Finland?
7M Wages paid by a foreign employer (with no PE in Finland) to a worker who is covered by the Finnish social security system	Yes	No
7L Wages paid by a foreign employer (with no PE in Finland) to a worker who is not covered by the Finnish social security system	No	No
7Q Wages paid by a foreign employer (with no PE in Finland) to a worker who has stayed in Finland for no more than 183 days during the period specified in the relevant tax treaty	Yes/No	No
7N Wages paid by a foreign employer (with no PE in Finland) to a worker, where the employer has assumed responsibility for paying taxes on its employees' behalf ("net-of-tax contract")	Yes/No	No

 

6.1.3 Consequences of failure to declare

Employers, or their representatives, who fail to report a leased employee or submit an annual declaration, or who report their workers or submit their declaration late, may be fined up to EUR 15,000 (Tax Procedure Act, Section 22a).

6.2 Inclusion of foreign employers in the Employer Register

Foreign employee leasing companies that have a permanent establishment in Finland must register with the Finnish Employer Register before their first wage payment.

Employers can register as regular wage-paying employers in Finland even without a permanent establishment in Finland. Foreign employers who are included in the Employer Register have the same obligations in Finland as Finnish employers. This means that they need to deduct taxes from their employees' wages automatically, and their employees do not need to apply for pre-assessment. However, foreign employers who do not have a permanent establishment in Finland are not employers in Finland as defined in the Income Tax Act, even if they are included in the Employer Register.

Businesses that have been entered into the Employer Register must deduct pre-assessment tax and tax at source from their employees' wages and pay the related amount to the Tax Administration. Pre-assessment tax and tax at source are deducted according to the tax card of each worker. Foreign workers who stay in Finland for up to six months are given a tax-at-source card or a tax card for limited tax liability by their tax office. Workers who stay for more than six months are given a tax card for general tax liability.

Employee leasing companies that are included in the Employer Register must pay pre-assessment tax and tax at source as well as any social insurance contributions to the Tax Administration, and submit a tax return showing their contributions (formerly "periodic tax return"). Tax returns showing employer contributions must be submitted by the 12th day of the month following each wage payment. Tax returns showing employer contributions can be submitted electronically via the Tax Administration's MyTax service, for example.

Foreign employee leasing companies must submit leased employee notifications (form 6147 or 6247a), even if they have joined the Employer Register voluntarily.

Read more: Being an employer.

6.3 Inclusion of foreign employee leasing companies in the Prepayment Register

It is recommended that foreign businesses that lease employees to Finland register with the Prepayment Register in Finland. Finnish contractors do not need to withhold tax at source for the trade income they pay to foreign businesses that are included in the Prepayment Register. Tax at source on trade income is charged at a rate of 13% if the recipient is a business comparable to a limited company or partnership. The tax-at-source rate is 35% if the recipient is a sole trader (Tax at Source Act, Section 7).

Whether a business is or is not included in the Prepayment Register has no effect on income tax liability in Finland. Income tax liability depends on whether a business has a permanent establishment in Finland. Businesses that have a permanent establishment in Finland must apply to their tax office for pre-assessment in order to pay income tax to Finland.

Only businesses that are established in a country with which Finland has a double taxation
agreement can be entered into the Prepayment Register. Read more: Starting up business in Finland.

7 Instructions for contractors in Finland

Contractors can also have other obligations in addition to their tax-related ones. For example, contractors must ask their contractual partners to provide the documents specified in the Act on the Contractor's Obligations and Liability when Work Is Contracted before they agree on using leased employees. Read more: www.tyosuojelu.fi.

7.1 Contractors' reporting obligations

Contractors based in Finland need to notify the Tax Administration of any foreign businesses from which they lease foreign employees for work performed in Finland (Tax Procedure Act, Section 17(7)). A separate notification is required for each foreign business. The Tax Administration must be provided with details of the business, as well as its contact information and line of business.

Contractors also need to provide the details of any representative of the business as per Section 4a of the Act on Posting Workers (1146/1999), as well as the related contact information. The Tax Administration also needs to be notified of any changes in the information. The reporting obligations of contractors apply to both businesses and natural persons.

Contractors must provide the details of the foreign employer who actually employs the workers. Even if the workers are leased through an employment agency, the notification must include information about the foreign employer with whom the workers have an employment contract and not the employment agency.

Contractors must provide the information to the Tax Administration as soon as the first employee of the posting company in question begins working for the contractor. The notification must be submitted by the end of the calendar month following the beginning of the work.

Notification of any changes to the information must also be provided by the end of the following month. This refers to issues such as changes in the contact details of the foreign business.

Contractors must also notify the Tax Administration when a contract ends or an employee leased by a foreign business stops working for the contractor altogether. Temporary breaks in contracts or the work of employees leased from a foreign business do not need to be reported, however. A contract or the work of an employee leased from a foreign business is considered to have ended altogether when no employees of the business in question have been working for the employer for six months.

Notification of changes must be submitted by the end of the following calendar month. This information is provided by filling in a contractor's notification for taxation purposes (6146a) and submitting it to the Helsinki Area Tax Office.

Notification is required if there is no tax treaty preventing Finland from taxing the worker's wages. This is the case with leased employees arriving from, say, Iceland, Norway, Sweden, Denmark, Latvia, Lithuania and Estonia as well as Moldova, Georgia, Belarus, the Isle of Man, Guernsey, Bermuda, Jersey, Poland, Kazakhstan, the Cayman Islands, Turkey, Cyprus and Tajikistan. Leased employees who reside in Bulgaria but work in Finland as leased employees of non-Bulgarian employers must also be reported.

Notification is also required of leased employees arriving from countries with which Finland does not have a tax treaty. Contractors must report all leased employees working in Finland, regardless of the length of their employment.

7.2 Consequences of failure to declare

Contractors who fail to submit notifications or who submit their notification late can be fined up to EUR 15,000. Fines are not imposed on natural persons, unless the failure relates to reporting obligations associated with running a business or agriculture or forestry operation (Tax Procedure Act, Section 22a).

7.3 Contractors' obligation to withhold tax at source for trade income

Contractors have an obligation to withhold tax at source for any trade income paid to a foreign business, if the work was performed in Finland. Tax at source on trade income is charged at a rate of 13% if the recipient is a business comparable to a limited company or a partnership. The tax-at-source rate is 35% if the recipient is a sole trader (Tax at Source Act, Section 7).

The payer of trade income does not need to withhold tax at source if

• The foreign business is included in the Prepayment Register, or
• The foreign business is able to present the contractor with a 0% tax-at-source card, or
• The foreign business is able to provide other documentation that prevents taxation. Other documentation in this context refers to proof of the business not having a permanent establishment in Finland.

If the recipient of trade income has limited tax liability, the payer must file an annual declaration of any tax withheld at source for the trade income paid. The payment code is A4. The inclusion of foreign businesses in the Prepayment Register can be checked free of charge from the Business Information System at ytj.fi.

Read more about withholding tax at source for trade income: Starting up a business in Finland.

The same instructions in Estonian and Russian:

• Välismaised renditöötajad ja nende maksustamine Soomes (Ulkomaiset vuokratyöntekijät ja Suomen verotus)
• Финское налогообложение в случае аренды иностранного персонала (Ulkomaiset vuokratyöntekijät ja Suomen verotus)

Senior Tax Specialist Tero Määttä

Senior Adviser Iisa Väänänen