Taxation of income earned abroad

This is an unofficial translation. The original guidance is in Finnish and Swedish languages.

This web article contains information about the tax treatment of the income earned by people who leave Finland to start working in other countries. Individual income tax, prepayments and withholding are discussed, along with the impact of various international treaties on taxes.

1 Introduction

If a Finnish-resident individual works in foreign country, their income is normally taxable in Finland. However, in some cases, the provisions of our national legislation treat such income as exemptible. Similarly, the provisions of international conventions may restrict Finland's taxing rights.

Both national legislation and tax treaties are discussed in this guidance from the perspective of Finnish income taxes on an individual's employment income from foreign sources. Normally, income is not only taxable in Finland but also in the country of work. This guidance does not contain further information on the taxes to be paid in the country of work. It focuses on the question of whether that country has the taxing rights under the provisions of the applicable tax treaty. Relief for double taxation is provided in the country of tax residence. If Finland is the country of tax residence, double taxation is eliminated in accordance with the provisions of tax treaties or Finland's national legislation.

The individual's health insurance coverage is an essential element relating to working in a foreign country. This guidance discusses health insurance from the perspective of the contribution payments that must be paid to the Tax Administration.

We also give instructions to employers and workers on the nature of the mandatory reporting to the Finnish Tax Administration in a situation where a worker has started working in a foreign country. However, this guidance only addresses the reporting to the authorities of the country of work in the case that the individual works in another Nordic country. For this reason, the employer and the worker must take action independently in order to ascertain what facts and information the country of work will require and what the deadlines for reporting are.

2 Tax residency and nonresidency

2.1 General liability to tax i.e. residency

Under § 9, Income Tax Act (1535/1992, TVL), individuals who live in Finland are Finnish tax residents. Separate provisions of Income Tax Act define 'living in Finland'. If an individual has his or her permanent home in Finland, they are treated as Finnish tax residents under § 11, Income Tax Act. Similarly, people who stay in Finland for more than six months are treated as Finnish tax residents. For more information on the concept of residency, see the official guidance 'General and limited liability to tax' / Yleinen ja rajoitettu verovelvollisuus. That guidance also describes the treatment of a number of special groups (individuals who are employed by a Finnish diplomatic mission abroad, Finpro employees, others in the service of the State of Finland, employees of international organizations, the European Union; and seafarers and crew on board Finnish aircraft or vessels).

Residents are under the obligation to pay Finnish tax on income sourced in Finland and other countries (§ 9.1.1, Income Tax Act). This means that in principle, all employment income from foreign sources is subject to Finnish tax regardless of whether it is subject to tax in the country of work, or subject to tax in a third country. The income may be exempted from Finnish taxes if the six-month rule is applicable (for more information, see section 4 below). The nature of the income may be, as provided in § 76, Income Tax Act, an exempted compensation, an exempted wage or fee (for more information, see section 6 below). In addition, the tax treaty between the country of work and Finland may restrict Finland's taxing rights on foreign income.

2.2 Non-residency

People who have not lived in Finland during the tax year are treated as having a limited liability to tax (§ 9.1.2, Income Tax Act). Reference is made to § 11, Income Tax Act, that defines 'living in Finland'. Finnish citizens are normally treated as nonresidents only after three years have elapsed since the calendar year when they left Finland (this is known as the three-year rule; see section 2.3 below).

Citizens of other countries are normally treated as nonresidents as soon as they have left Finland and started living elsewhere on a permanent basis. However, if a foreign citizen's absence from Finland is temporary and he or she continues to have a permanent home in Finland, he or she can still be treated as a Finnish tax resident, generally liable to Finnish tax.

Nonresidents pay Finnish taxes on their Finnish-sourced income only. § 10 of Income Tax Act contains a list of income categories to be treated as Finnish-sourced. It is not an exhaustive list; however, the categories that are included in it have been regarded as being part of a complete list under standard tax-assessment practices. Separate provisions apply to the wage income and pensions of the employees who work on board a Finnish ship or aircraft; § 13, Income Tax Act.

Examples of Finnish-sourced income include wages received from a Finnish public organization or body. Similarly, other wages received for work which is mainly done in Finland, for a Finnish employer, is income from a Finnish source. What is meant by 'Finnish employer' is a business enterprise in Finland or a Finnish permanent establishment of a foreign business enterprise. What is meant by 'work mainly done in Finland' is that more than half of the work is carried out in Finland. The appraisal of whether work is mainly done in Finland or abroad should be made specifically for each payday.

The wages received by a nonresident is not subject to Finnish tax if he or she mainly works in a foreign country, for an employer that is not a Finnish public body. However, when they mainly work in Finland for an employer that is not a Finnish public body, wages are fully subject to Finnish tax. However, if part of the wages was earned working in a foreign country, the applicable tax treaty may prevent Finland from collecting tax on that part.

If the employer is a Finnish public body (for definitions, see section 4.1 below), wages paid to a nonresident are subject to Finnish tax under Income Tax Act even though the work were done in a foreign country. Nevertheless, the provisions of a tax treaty may restrict Finland's taxing rights. Tax treaties often contain a provision to the effect that the wage earner's country of residence, as defined by the tax treaty, is the country that has the taxing rights. This requires that

• The work is done in the country where the worker is resident; and
• The worker is a citizen of that country or has not become its resident merely for the purpose of doing the work.

Various tax treaties have provisions that differ from one another. Consequently, each case must be looked into separately when determining which one of the two countries gets the taxing rights, and on what grounds.

2.3 The three-year rule

When a citizen of Finland moves to another country, he or she is normally regarded as a Finnish tax resident during the year when they move away and during the three following years. However, if they present evidence that they no longer have strong ties with Finland (within the meaning of §11.1, Income Tax Act), they may already prior to the end of the third year be treated as a nonresident. For more information on the three-year rule and the tie-break, see the official guidance 'General and limited liability to tax' / Yleinen ja rajoitettu verovelvollisuus.

3 Being a tax resident of a country for purposes of a tax treaty

It may be that an individual taxpayer is fully liable to tax (i.e. a resident, for tax purposes) in many countries at the same time. In this case, the question of taxing rights is resolved by determining where he or she is resident under the provisions of the relevant tax treaties.

Finland has signed either bilateral tax treaties or multilateral tax treaties with more than seventy countries (Tax treaties in force). The treaties not only address the ways to avoid double taxation but also the criteria that must be fulfilled by one of the contracting states for becoming the country treated as the country of residence. That country has normally the taxing rights with respect to the individual's income from worldwide sources. The other contracting state will then only have the taxing rights on the income sourced there.

If a citizen of Finland has moved to a foreign country, his or her country of residence under the tax treaty may be the country where he or she works. That country will then have the taxing rights on the income sourced there and in other countries. This only gives Finland the taxing rights of a country of source, which means the right to collect tax only on Finnish-source income, and taking account of the restrictions imposed by the provisions of the treaty. If he or she works in a foreign country for an employer that is not a Finnish public body, Finland does not have the taxing rights on the income. If part of the work is done in Finland, it may be that Finland has the taxing rights for that specific income.

If he or she works in the service of a Finnish public body, the wages are usually subject to Finnish tax. This is because the majority of tax treaties give Finland the taxing rights with respect to wage income from a Finnish public body although the wage earner were, for treaty purposes, a resident of the other country. An exception from this rule are the workers with local contracts, i.e. people who have already lived in the country of work before signing an employment contract with the Finnish public body. They must normally pay tax to that country.

Tax treaties have provisions that vary, both on the subject of residency and on the subject of how taxing rights are divided. For this reason, we recommend that you re-check the content of the provisions of each relevant tax treaty carefully. For more information on residency for treaty purposes, see the official guidance 'General and limited liability to tax' / Yleinen ja rajoitettu verovelvollisuus.

4 The six-month rule on exemption of wage income

4.1 Introduction

Section 77 of Income Tax Act provides for an exemption period of six months that applies to receipts of wages for work done abroad if the following conditions are fulfilled: The work to be done abroad is the reason for the individual's stay abroad; and

The duration of the work is at least six months, and the worker does not stay in Finland for more than six days per each month of work; and

The country of work has the taxing rights on the income, under the tax treaty, if Finland has entered into a tax treaty on income taxes with that country.

The six-month rule only applies to wage income. Consequently, other income such as social benefits, royalties or nonwage compensation (=trade income) are not exemptible. Similarly, the six-month rule is not applied on wages received from a Finnish public body, from Finpro, and from work done on board a Finnish ship or aircraft.

List of 'public bodies': State of Finland, municipalities, communal associations of municipalities, the Evangelical-Lutheran churches, the Orthodox churches, their associations, Bank of Finland, the Social Insurance Institution (Kela), etc. As of 1 January 2010, for purposes of income taxes, Finnish universities no longer have the status of 'public body'.

For the six-month rule to be applicable, the reason for the individual's presence in the foreign country must be related to the work being done. So, if the presence is connected with family reasons or with academic studies, the rule cannot be applied. It is possible that circumstances change, and the reason for an individual's presence in a foreign country is no longer the same as at the beginning. For example, someone may have left Finland and started living abroad because their spouse started working there. Later, if they sign an employment contract with a local employer and begin work, the reason for their presence in the foreign country is considered as having changed: when they begin working, the reason is deemed as being the work they do.

4.2 To work on a continuous basis

4.2.1 Presence due to work, duration at least six months

The six-month period within the meaning of § 77 of Income Tax Act is not related to the start and end of calendar years. This means that, for example, the period from 15 November 2014 to 14 May 2015 is acceptable from the perspective of the six-month rule. The counting of time is based on actual work time. If the individual spends the final days of the employment contract on vacation (or has a vacation at the beginning), it does not make the work-related period longer.

However, the date of arrival in the country of work just before they start working, and the date of departure after the work is over, are treated as being related to the work done in the foreign country. The end date of a worker's work in the foreign country is deemed as being the date when he or she could have left the country i.e. the date when the work no longer required their presence.

It may be that a worker first works in one foreign country and then another.

4.2.2 Staying in Finland for a few days

The work-related presence abroad is regarded as continuous although the worker spends max. six days in Finland per each month worked.

The reasons for visiting Finland or to the number of such visits are not important for purposes of this rule. This way, the visits made back to Finland strictly because of work are also included in the counting of the average 6 days per month. The six-month rule is applicable to the wages on the conditions that it is for work done in Finland, the wages are received from the same employer and the work is directly connected with the worker's foreign work; and the work in Finland should only last for a few days.

Nevertheless, staying only for an hour or two in Finland does not increase the count of the days spent in Finland.

Weekends and other days off are not included in the count of the days. Similarly, under a number of rulings of the Supreme Administrative Court, annual vacations spent in the country of work or in a third country are not included (rulings 5 June 1981 Court record no 2620; 31 May 1988, Court record no 2288; and 2001:22).

If the worker's work in a foreign country has consisted of several different periods but the waiting times in between and any other stays in Finland are not longer (on average) than six days per month, the work periods may be added up and treated as one continuous period.

During a longer employment contract in a foreign country, the days spent in Finland may go over the threshold if the total number of such days is counted for the entire employment contract. However, if there is a period inside the length of the employment in the foreign country when all the requirements for exemption are fulfilled, as listed in § 77 of Income Tax Act, the pay for that period is exempted from taxes.

It is customary to treat the day of arrival in Finland as a day spent in Finland, and similarly, the day of departure is also a day spent in Finland.

4.2.3 Unexpected interruption of the work abroad

For purposes of counting the length of the period worked abroad, it is not seen as an interruption if the worker must return to Finland for a reason which is unexpected, serious, and unrelated to the employer or worker. In addition, if such a reason causes the worker to stop working, the wages paid will not be subject to tax although the six-month threshold would not be reached. Nevertheless, the requirement for exemption continues to be that the country of work has the taxing rights under the relevant tax treaty or that the country of work has no tax treaty (see section 4.3).

Examples of an unexpected reason for the above purposes:

• Unexpected serious illness of the worker, a family member or a next-of-kin.
  • Family members include the worker's wife or husband or co-habitant if they live in the same household, the worker's spouse in a registered partnership, the worker's or the spouse's children, adopted children and foster children.
• Attending the funeral of a next-of-kin.
• Changes in the circumstances that prevail in the country of work if life or health is at risk due to the new circumstances.
  • For example: war, political unrest, an accident at a nuclear power plant, an epidemic illness
• Exceptional difficulties in obtaining a visa for the worker.

If the Finnish worker has been a draftee in the military and is summoned to a reserve-service assignment afterwards, the days spent there do not entitle the worker for extra days to be spent in Finland because anyone who is summoned is normally always given leave if they ask for it on grounds of their work abroad.

4.3 Taxing rights of the country of work

One of the requirements of the six-month rule is that if the tax treaty signed with Finland covers income taxes, the country of work must be in possession of the taxing rights under the tax treaty with respect to the wage income received there. However, it is not a requirement for the exemption that the country of work would actually impose tax on the income.

Normally, the treaties grant taxing rights to the country of work with respect to wage income received for work done in that country. However, an exception to this rule is "the mechanic's exception", which prevents the country of work from imposing tax if:

• The employer is not domiciled in the country of work; and
• The pay does not cause an increase of payroll expenses in a permanent establishment located in the country of work; and
• The worker does not stay longer than max. 183 days in the country of work during a definite period of time.

Such a period may be, depending on the applicable tax treaty, the calendar year, the customary taxable year in the country of work, or a consecutive 12-month period.

Tax treaties with calendar-year periods applied on the "Mechanic's exception":

Belgium, Egypt, Germany (up to 31 Dec 2017), Spain, Philippines, Italy, Japan, Republic of Korea, Kosovo, Greece, Croatia, Luxembourg, Malaysia, Portugal, France, Zambia, Switzerland, Tanzania, Hungary, Serbia and Montenegro.

Tax treaties with consecutive 12 months:

Armenia, Australia, USA, United Arab Emirates, Argentina, Azerbaidzhan, Barbados, Bermuda, Brazil, Bulgaria, South Africa, Georgia, Germany (from 1 January 2018), Guernsey, Indonesia, Ireland, Iceland, India, United Kingdom, Israel, Austria, Jersey, Canada, Kazakhstan, China, Kyrgyzstan, Cyprus (from 1 Jan 2014), Latvia, Lithuania, Makedonia, Malta, Morocco, Mexico, Moldova, The Netherlands, Norway, Pakistan, Poland, Romania, Sweden, Singapore, Slovakia, Slovenia, Sri Lanka, Tajikistan (from 1 Jan 2014), Denmark, Thailand, Czech Republic, Turkey, Turkmenistan, Ukraine, Uruguay (from 1 Jan 2014), Uzbekistan, Belarus, Russian Federation, Vietnam and Estonia.

The treaty with New Zealand provides that the length of the mechanic's stay must be counted in relation to the 1 April-to-31 March taxable year of New Zealand.

Some of the treaty countries include any short absences from the country of work in the length of stay: this means that days of absence must be included when counting the 183 days. In above circumstances, not only the foreign tax assessment but also the tax assessment in Finland can be based on the view that the country of work has received the taxing rights.

No importance is attached to the purpose of the stay in the country of work. 'Stay' refers to actual physical presence. It may consist of a longer single period or several shorter periods. All the days when the mechanic is present in the country of work are counted. This means that if they are in the country, any days off are counted that have been spent there prior to working, during the work period, or after it. In addition, even a few hours within a calendar day are included in the count: for example, if an airplane arrives Sunday night at 23:30, the entire Sunday is included in the length of stay.

When wages are earned for construction and building work in the Russian Federation, the length of the worker's presence does not give rise to the taxing rights being transferred. Russia would only get the taxing rights if the employer has a permanent establishment in Russia. Circumstances that give rise to a permanent establishment include a situation where the employer pursues a construction, installation or assembly activity in one Russian location – or supervises such activity – for at least 12 months; or 18 months if the building to be constructed is an industrial building.

Other factors that affect the taxing rights include the various relief clauses contained by tax treaties. These clauses usually concern students, teachers and academic researchers who arrive to a contracting state to work there.

If an individual is treated as residing in the country of work for treaty purposes, that contracting state is always in possession of the taxing rights with respect to the individual's income sourced there. In this case, the count of days of presence is not important.

The link below is for a table that summarizes the requirements of the six-month rule:

Six-month test (pdf) (in Finnish and Swedish only)

4.4 Special situations

4.4.1 Employee leasing contracts

Employee leasing is an arrangement by which one company provides employees to another (the hirer) under a leasing contract. Between the leasing company and the hirer, there is a contractual relationship under contract law.

The actual employer continues to have the tax obligations of an employer. This is so even though the normal employer obligations relating to the performance of work are transferred to the hirer. Examples of the latter include the employer obligations relating to occupational safety and to maximum regular hours of work. Work is usually done in the hirer's premises, under the hirer's control and direction, using the tools, materials and supplies provided by the hirer. However, as the workers are 'leased', their employment contracts are with the leasing company, which also is the company that pays them.

The tax treaties concluded with a number of countries include special provisions on employee leasing (including the Nordic tax treaty and the treaties signed with Estonia, Latvia and Lithuania). The provisions allow for the taxing rights always being granted to the country of work regardless of the leased worker's days of presence if the conclusion is made that the worker who works at a Finnish company is a leased employee. If a leased employee needs to prove the existence of a leasing contract, he or she must present the Finnish Tax Administration sufficient proof in order to show that the country of work, based on the provisions referred to above, actually collects tax on the income.

4.4.2 The economic employer

Some countries interpret the provisions of tax treaties under the 'economic employer' principle. It means that if a worker is formally employed with a "sending" company, but does his work for the "receiving" company to which his wage is recharged by the sending company, the receiving company is qualified as the worker's "economic employer". This is so even if the real payor of the wages is the foreign sending company (e.g. a Finnish employer). If a worker presents proof that the country of work applies the 'economic employer' principle and that his or her wages have been taxed there, the country of work can be treated as having the taxing rights.

4.4.3 Work in a third country; work in Finland

Working in the territory of a third country can be treated as work abroad for purposes of § 77, Income Tax Act. However, it must be taken into account is that the worker's presence in a country that is not the primary country of work may lead to a situation where the primary country does not receive the taxing rights under the tax treaty. Under the circumstances, the worker may stay less than 183 days in the primary country and also in the secondary country; then the six-month rule stops being applicable to the wage income received from either country.

Wages paid for work done in Finland are usually subject to taxes in Finland. If an individual works in a foreign country as a worker of a Finnish company, he or she may be required to work in Finland during the assignment and this accumulates some days of presence in Finland. Such days are known as 'reportable days'. They are included in the count of days spent in Finland. However, the six-month rule can be applicable to the pay if the following conditions are fulfilled: it is for work done in Finland, it is received from the same employer and the work is directly connected with the worker's foreign work; and the work must not last longer than a few days. This way, the wages received for the 'reportable' days can be exempt from Finnish tax if the customary requirements of the six-month rule are fulfilled.

4.4.4 Pay from a second job; other receipts to be equated with wage income

If an individual receives wages for secondary employment, it is exempted from taxes if presence in a foreign country is required for work-related reasons and if the country of work has the treaty-based taxing rights. For example, the fees received for writing columns for a Finnish newspaper by a worker who works abroad can be exempted if the writing work requires that some facts are collected in the foreign country. However, another treatment of such newspaper fees is that they are seen as royalties; in this case, the taxing rights depend on what is provided in the treaty article on royalty income (Art. 12 of the OECD Model Tax Treaty). In this case, the six-month rule does not apply.

Other payments to be equated with wages, making the 6-month rule applicable:

• The wages paid to an individual who participates in a traineeship program or a work-introduction program abroad, if such a program is directly connected to their work in a foreign country. The start date of work abroad would in this case be the start date of the traineeship.
• Wages for work in a foreign country even if payment were made after the worker has stopped working there
• Vacation pay that has the same period of accrual as the wages for work in a foreign country even if payment were made later
• Bonus payments inasmuch as they relate to the worker's work in a foreign country <0}
• Various expense coverage payments going to the worker even if they were taxable reimbursements because if reimbursement for an expense is taxable, it is treated as wages
• Payment for general relocation expenses, received by the worker when starting their work in a foreign country<0}
• Employer-paid sick leave
• The payment known as "palkkaturva" financed by Finnish Ministry of Labour, if related to the worker's work in a foreign country

The six-month rule is not applicable to the following types of reimbursement paid to the worker – examples:

• Kela-paid sick leave,
• Reimbursement based on accident insurance and motor vehicle insurance, and
• Wages and allowance for maternity leave (also in cases where payment is made retroactively)

4.4.5 Reimbursement upon returning to Finland

When a worker moves back, the employer may pay them an amount intended to cover some general expenses. If such an amount is paid on condition that the worker must continue to work for the same employer that sent them abroad, it is treated as wages for work done in Finland. The six-month rule does not apply.

4.4.6 Leaving Finland to work abroad, working from home

The six-month rule is normally not applicable to work-from-home because the worker's presence in the foreign country is not due to the work he or she does. For example, their presence may be due to studies or due to their spouse's foreign assignment in the country. If the work done from home does not require the worker's presence abroad, there are no grounds for applying the six-month rule. The country of work may be given the taxing rights by virtue of the relevant tax treaty. In this case, the country that will relieve double taxation is the worker's country of tax residence.

4.4.7 Severance pay upon termination

It may be that a severance amount is received by a worker. Payment sizes and reasons vary. The six-month rule may sometimes apply. Severance payments connected with an employment contract that terminates may be a lump sum, wages for a period of notice etc.

The OECD Commentary to Art. 15 of the Model Tax Treaty presents a number of recommendations for the tax treatment of such pay. However, the national legislation of the country of taxation provides the rules for the final decision on how the income should be characterized, on whether it is subject to tax, and on how the period is determined when the income had accrued. If the country of work had collected tax on the income, following the recommendations of the OECD, but differently from what is generally accepted under Finnish case-law, Finland, because it is the country of tax residence, will relieve the resulting double taxation.

Frequently, the length of the worker's career with the employer is a factor that affects the severance pay. However, this does not mean that the principle of accumulation of earnings during work abroad would necessarily apply to a lump-sum payment. This is an amount paid to the worker upon termination, with direct effects and grounds that relate to the time when it is paid and also to the worker's circumstances after receiving it; it is a way to compensate for the loss of earnings. Due to the above reasons, the six-month rule is normally not applicable to such income.

The wages paid to a worker during their period of notice can be treated as tax-exempt wages for work in a foreign country, on the condition that a connection is established between the payment and the foreign-based work.

However, a lump-sum payment received upon termination may not necessarily be treated as wages on which the six-month rule can be applied even though it may be connected with the worker's work period in a foreign country.

5 Certain types of additional reimbursement and allowance

5.1 Allowance received from the State of Finland and Finpro

Legal provisions on exemptions from tax are found in § 76 of Income Tax Act regarding certain allowances. If the State of Finland pays a local allowance or comparable amounts designed to cover the worker's additional expenses when stationed abroad, and the worker has a direct employment contract with the State while working abroad, it is not subject to tax (under § 76.1.1, Income Tax Act).

People who are hired locally are not regarded as 'stationed'. For this reason, their receipts of reimbursement are not exempted under this rule. For more information on 'locally hired' and 'posted' (stationed) employees, see section 7.4 below.

Similarly as in the case of the State of Finland, if Finpro pays a local allowance or comparable amounts designed to cover the worker's additional expenses when stationed abroad, and the worker has a direct employment contract, it is not subject to tax. However, if the size of the payments goes above that of the similar payments paid to the staff of a Finnish mission abroad, the part going over this threshold is taxable (§ 76.1.2).

5.4 Wages received by a nonresident worker of a diplomatic or other mission abroad

Wages or fees paid by the State of Finland to nonresidents who work for a Finnish diplomatic/other mission abroad are not taxable in Finland. This requires that the pay is received by someone who is not a citizen of Finland (§ 76.1.4, Income Tax Act).

5.6 Employer-paid reimbursement in specific circumstances

Employers cannot usually pay coverage for living expenses so that it would be exempted from taxes. However, some forms of payments are exempted under the law (§ 76.1.5, Income Tax Act), including moving expenses for the worker and their family members, including travel, children's training expenses if they can be regarded as not higher than usual, and the expenses for hiring private service staff for the worker who works abroad if this is usual practice. In addition, it is also exemptible to provide accommodation in the foreign country that exceeds the usual norms set out by the Official Decision of the Tax Administration on the valuation of fringe benefits.

If a worker has a special travel insurance contract during the period when they work abroad, having the employer pay for it may also be regarded as exempted because it may be seen as being part of moving and travel expenses. For more information (in Finnish and in Swedish), see the Tax Administration's guidance on "Employer-provided risk insurance" – Työnantajan ottamien vapaaehtoisten riskihenkilövakuutusten verotus; and the chapter on "travel insurance" – 4.6 Matkavakuutus.

It is treated as normal school education for children if they attend a school that is similar to Finnish schools of the primary, secondary and upper secondary levels (– peruskoulu and lukio). Employers are able to pay tax-exempt coverage for the tuition charges of an international school in the country of work.

The private service staff referred to above means servants and other similar personnel who are regarded as part of the normal practice in the prevailing circumstances of the country. Examples of such personnel include nannies, housemaids, cooks, gardeners, private drivers and bodyguards.

The reimbursements listed above are exempted from tax although the wage payments by the employer would be subject to Finnish tax in Finland and if the worker were to work at their permanent place of work.

Living expenses are not deductible. The provision of § 76.1.5 is not to be understood as an extension of the scope of deductibility of living expenses. From this follows that the types of expenses listed in that legal provision are not deductible when the worker pays them as their employer is not paying them.

6 Elimination of double taxation

When a Finnish resident works in a foreign country, the income from such work is subject to tax in Finland under domestic legislation unless it has specifically been declared exempted by definition of law. Similarly, the country of work may impose tax on the income under the provisions of its own national legislation.

If the individual works in a country that has signed a tax treaty, it is Finland's responsibility to provide relief for any double taxation if Finland is, for treaty purposes, the country of residence, and if, for treaty purposes, the country of work has the taxing rights. Double taxation may also be relieved in situations where people work in a country with no tax treaty with Finland.

If a treaty is in force between Finland and the country of work, double taxation is eliminated either by credit or by exemption, depending on the provisions of the treaty. Treaties do not contain definitions of calculation formulas for the credit method and the exemption method. Instead, further provisions governing this are found in national legislations.

Finland has a legal act on how double taxes must be eliminated – the act on the methods to be used when granting relief (1552/95, menetelmälaki). This act is also applied when the country where work is performed is not a tax-treaty country. In this case, only the credit method is in use.

The calculations provided by the act apply to income taxes going to the State of Finland, corporate income tax, municipal income tax, and church tax. Treaties contain provisions that list the taxes that must be included in the eliminations. For example, under the provisions of the convention between the United States of America and Finland for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income and on capital, American taxes paid to U.S. states are not creditable in Finland. If there is no treaty, only the taxes paid to the foreign central government can be included in eliminations, under the Finnish act on the methods of relief. Neither the act nor the tax treaties are applicable to health insurance contributions.

Under the act on relief, double taxation is removed by subtracting the foreign-paid tax from the tax payable in Finland on the same income; this is the 'credit method'. If a tax treaty is in force, double taxation is removed either by credit or by exemption, depending on the provisions of the treaty. The exemption method means that no tax is collected in Finland on the foreign income. However, the foreign income affects the tax percentage rates of the taxpayer's other income if they are taxable here.

The taxpayer must lodge a claim for relief for double taxation and provide an account detailing the taxes paid to the foreign country including their tax bases. It is possible for taxpayers to lodge such claims when they ask for their prepayment calculation for the current year. Another possibility is to fill in the claim on the year's tax return.

If wage income is treated as exempt by virtue of the six-month rule, no double taxes are paid.

Further information on double taxation (in Finnish and Swedish): Kansainvälisen verotuksen käsikirja, luku 4.4 – Kaksinkertaisen verotuksen poistaminen.

7 Exceptions to the six-month rule

7.1 Students, teachers, researchers

The pay received for work done abroad by students may be covered by the six-month rule; the income is then exempted from Finnish taxes. This requires that the student's presence in the foreign country is necessary because of the work.

The six-month rule also requires that the country of work has the taxing rights; several tax treaties contain provisions that restrict that country's taxing rights when the income is earned by a student, teacher or academic researcher. In the case of graduate students it is also worth noting that the definitions of 'researcher' and 'student' may vary from country to country. For example, the country of work may treat a Finnish academic researcher as a student; in these circumstances, the rules will be interpreted by the country of work.

7.2 Working on board a foreign ship

The six-month rule cannot be applied on receipts of income from work on a Finnish ship. What is regarded as a 'Finnish ship' also includes a rented foreign ship if the Finnish employer is renting it, and there is but a limited foreign crew or no such crew.

However, receipts of income from work on foreign ships can be exempted by virtue of the six-month rule. Under tax-treaty provisions, the pay received on board a ship sailing international maritime routes, which is commissioned by an enterprise resident in a contracting state, is normally taxable either in the country of residence of that enterprise or in the country where its management is. Under the multilateral tax treaty between the Nordic countries, seafarer's income is taxable in the ship's country of residence, and Finland must relieve double taxation by giving credit for the taxes paid to the country concerned.

If Finland and the country of work have not signed a tax treaty, the exemption for the receipts of such income requires that the individual works abroad for at least six consecutive months and that his or her stays in Finland are not longer than six days per month (for example: 6 months × 6 days = 36 days), on average.

If the country of work has treated the pay as seafarer's income, it is also treated so for Finnish tax purposes unless facts and circumstances arise that give rise to the conclusion that it cannot be regarded as seafarer's income. If the conditions set out by § 97 of Income Tax Act are fulfilled, the income earned on foreign ships may entitle the seafarer-employee to the deduction granted to seafarers.

7.3 Airline employees on board the aircraft

Depending on tax-treaty provisions, the pay received on board an aircraft flying international routes is usually taxed in the employer company's country of residence or in the country where its management is. Under the multilateral tax treaty between the Nordic countries, the only country that taxes your income from airline work is the country where you live.

We recommend that you check the specific provisions in each applicable tax treaty in order to ascertain the definitions of 'international traffic', especially from the perspective of airline routes flown inside the contracting state. There are several airline companies that fly in foreign countries; the routes can be within the territory of the other country entirely.

If you are a tax resident, you are generally liable to tax on your worldwide income. If for purposes of the relevant tax treaty, you are a resident of the other contracting state, the treaty will restrict the assessment of Finnish taxes on your wages. Finland is then only able to tax the wages from the work you do in Finland. Only the flights flown on domestic routes are treated as work done in Finland. Working on board an aircraft flying international routes is not treated as working in Finland although the pre-flight work is performed in Finland and although the aircraft flies in Finnish airspace for some time.

7.4 Diplomatic and other foreign missions

If you are a Finnish tax resident and you receive wages from a Finnish mission located aboard, it is taxable income in Finland. Similarly, it is taxable income paid to a nonresident from a Finnish source within the meaning of § 10.3, Income Tax Act if you are a Finnish tax nonresident. However, if you are a nonresident who is not a citizen of Finland, the income is not taxed in Finland under the provisions of § 76.1.4. In addition, provisions of tax treaties may restrict Finland's taxing rights.

People in the service of Finland's diplomatic and other missions abroad may be either be posted there or hired locally. The Ministry of Foreign Affairs has defined who of those working must be treated as posted, and who must be treated as locally hired.

Finnish citizens treated as posted are Finnish tax residents for the entire length of their service contracts (under § 11.2.1, Income Tax Act). If someone is not treated as posted, they are treated as locally hired, i.e. employed by the State of Finland for other full-time service abroad (§ 11.3). People treated as locally hired are Finnish tax residents for the entire length of their service contracts if they had been that immediately before they started work. Under the circumstances, the three-year rule is not applied.

However, a locally hired worker may be treated as a nonresident if they demand such treatment and present evidence that during the tax year, they have not had substantial ties with Finland. When three years have elapsed since the end of the year when they left Finland, they may be treated as a nonresident if they demand that even though they continue to maintain substantial ties with Finland.

The provisions of the treaty article on public service are applied on the wages received for the work (Art. 19, OECD Model Tax Treaty). Under the general rule contained by the majority of treaties, the pay from a public body is primarily taxable in the payor's country. However, such pay can be taxed in the country of work only if the worker is a resident of that country; and

(a) He or she also is a citizen of the country; or

(b) He or she has not become a resident of the country merely because of the work to be done.

See section 5.1 above for information on the treatment of the special reimbursement and allowances paid to people employed by Finnish diplomatic and other foreign missions.

7.7 Employee stock options

During the period when stock options are offered to workers it may be that they work in Finland and in foreign countries. However, receipts of wages for work in foreign countries can be exempted by virtue of the six-month rule, under § 77, Income Tax Act. Under such circumstances, the six-month rule may also be applied on the employee stock options as they constitute a benefit.

The six-month rule can be applied on the benefit arising from stock options only if:

1. There is a tax treaty between the country of work and Finland;
2. The income from stock options is taxed in the country of work as wage income (or in a similar way, i.e. as 'earned income'); and
3. The taxpayer presents sufficient proof of having reported the stock-option benefits to the tax authorities of the country of work

A factor that may prevent Finland from collecting tax on foreign-sourced wages is that a Finnish-resident individual becomes, for purposes of the relevant tax treaty, a resident of the other contracting state, or that he or she becomes a Finnish nonresident. Under the circumstances, it is normally no longer possible to impose Finnish tax on a stock option benefit received for the corresponding period of time. Usually, the country of work is in possession of the sole taxing rights for the wage income if a Finnish-resident individual is to be treated, for purposes of the tax treaty as a resident of the other contracting state.

Exceptions from this rule are the treaties made with some countries (including Germany) where the question of double residency is covered by a specific provision that grants Finland the taxing rights for Finnish-resident citizens for their worldwide income also in a situation where the applicable tax treaty would make them treatable as residents of the other contracting state. Correspondingly, wages received from work abroad during a period of nonresidency are not treatable as income from a Finnish source (§ 10.4, Income Tax Act). Nevertheless, the compensation paid to someone for membership of a Finnish company's board of directors or similar is treated as Finnish-sourced although the work may be done outside of Finland (§ 10.4a, Income Tax Act).

More information on the treatment of employee stock options.

8 Social security contributions

8.1 Introduction

The Act on health insurance (sairausvakuutuslaki 1224/2004, SVL) contains provisions on the required premiums and contributions. The premium collected from the insured party consists of two elements: a healthcare contribution (sairaanhoitomaksu) and an earned-income contribution (päivärahamaksu). The act on employers' health insurance contributions (Laki työnantajan sairausvakuutusmaksusta 771/2016) requires employers to pay their contributions.

In addition, both workers and employers must pay other charges relating to social insurance. The rules of calculation for pension insurance and unemployment insurance may be different from those for health insurance.

The legal rules affecting payment sizes include the provisions of Finland's legislations, the Regulation (EC) No 883/2004 — on the coordination of social security systems, including its Implementation Regulation No 987/2009, and international conventions.

From the perspective of payments, it is significant whether an individual's country of work is located in EU territory, in EU/EEA territory, whether it is a signatory country of the international convention on Social Security, or other country.

• When the country of work is in EU/EEA, all premiums are paid to a single country only.
• When the country of work is a signatory country of the Social Security convention, the beneficiary country of each insurance (pension, accident, unemployment and health insurance contracts) depends on what kinds of benefits are involved; as a result, pension insurance and health insurance may be payable to different countries.
• When the country of work is none of the above, the internal legal rules of both countries must be followed and payments may therefore have to be made to different countries.

List of EU countries: Belgium, Bulgaria, Spain, Ireland, United Kingdom, Italy, Austria, Greece, Croatia, Cyprus, Latvia, Lithuania, Luxembourg, Malta, The Netherlands, Portugal, Poland, France, Romania, Sweden, Germany, Slovenia, Slovakia, Finland, Denmark, Czech Republic, Hungary and Estonia.

EEA states are Norway, Iceland and Liechtenstein.

A specific treaty is in force with Switzerland on the applicability of the EU Regulation on the coordination of social security systems.

If it is required that workers' social security must be arranged as is customary in the foreign country, premiums and employers' taxes must be paid to that country under local rules. There are differences between internal legislation, the EU Regulation, international conventions, on the one hand, and tax laws and tax treaties on the other hand, which make for situations where tax is collected in Finland, but the income on which it is collected is not subject to the payment of the health insurance premium of the insured, for example. Similarly, it also may be that the health insurance contribution must be paid in Finland but at the same time, the taxing rights for the income are in the other contracting state.

The current rules governing health, pension, unemployment and accident insurance fall in the jurisdiction of the Finnish Centre for Pensions, the Unemployment Insurance Fund and the Social Insurance Institution. For more information on social insurance, see the guidance issued by these public organisations.

8.2 Being covered by the social security system of Finland

Under Finnish law governing health insurance, people from other countries are covered by Finnish insurance if they are treated as living here under the relevant Acts including the rules on implementation (1573/1993, soveltamisalalaki) or if they work in Finland for at least four months and a set of requirements is fulfilled. The foreigners' obligations to pay the premiums may be relieved under the EU Regulation No 883/04 and under the specific conventions on social security that Finland has signed with some countries. However, provisions of tax treaties do not affect the payment of insurance premiums.

Being a person 'who lives/resides in Finland' within the meaning of social-insurance laws may be a different concept than the 'residency' the Income Tax Act and tax treaties refer to.

People who are staying in a foreign country on a temporary basis continue to be covered by Finland's social security and therefore 'living here' if the length of their stay is max. one year. If a Finnish employer sends an individual who lives in Finland to work in a country that is not in the EU/EEA or a signatory country of a convention, for longer than a year, the Social Insurance Institution (Kela) may issue a decision, on request, that he or she will continue to be covered by the Finnish health insurance system. This procedure is available also in cases where workers are sent to foreign countries to work for a parent company or for a subsidiary. Similarly, some multilateral conventions on social security may provide that a worker who is posted to a foreign country continues to be covered by the Finnish health insurance system (and be treated as 'living here' for social-security purposes) although a longer time may elapse.

Under the implementation act (1573/1993), Finnish citizens who are posted to a foreign mission continue to be covered by Finnish insurance. The same rule concerns a citizen of Finland who has lived in Finland before their work abroad begins and who are employed there full-time by the State of Finland or is a private servant of such a worker of the State. If a Finnish public organization pays wages to a foreign citizen who works in a foreign country, he or she may be treated as 'a person living in Finland' e.g. because they have an employment contract with such a Finnish public organization.

For tax purposes, the principle is followed that an individual or a worker should be treated as if the social security system of Finland covers them if they are a Finnish tax resident. This means that the worker will have to pay the health insurance premiums of the insured, and the employer must pay the health insurance contribution collected from employers. The treatment under this principle does not apply if the resident is able to prove that he or she is not covered by the Finnish system, by presenting an 'A1' certificate (formerly 'E101') obtained from Kela or from an EU/EEA country. The A1 certificate may cover the countries of the EU and EEA, and Switzerland.

Other countries that have a convention with Finland on social security can issue certificates with the same effect. However, some of the conventions do not contain provisions on the insured party's health insurance premiums and employer contributions.

Normally, someone who continues to be a tax resident of Finland but has moved to another Nordic country to live there permanently does normally not need the certificate. People in the Nordic countries are expected to file a notification to the authorities in charge of registrations if they move from one country to another. This also takes care of insurance coverage.

The health insurance premium of the insured is also collected from nonresident workers if they are deemed covered by the social security system of Finland under the act on health insurance (sairausvakuutuslaki 1224/2004, SVL).

8.3 The health insurance premium of the insured party

The premium collected from the insured party consists of two elements: a healthcare contribution (sairaanhoitomaksu) and an earned-income contribution (päivärahamaksu). The individual's taxable income, which is the base for municipal tax, is also the base for the healthcare contribution payment. The earned-income contribution depends on the individual's wage income subject to tax, and also on the individual's work income for purposes of insurance. If the six-month rule applies on the wage income of a resident, his or her work income for purposes of insurance will serve as the base for healthcare and earned-income contributions.

We recommend that employers agree with their workers, prior to the start date of the work in a foreign country, on what the amount of work income should be (for purposes of pension insurance act, työntekijän eläkelaki 395/2006). Work income for these purposes refers to an amount of pay that an employer in Finland would pay for similar work.

If the requirements of the six-month rule are fulfilled, the employer will pay a minimum withholding to the Tax Administration based on the work income, reflecting the worker's health insurance premium and the employer's health insurance contribution. In addition, work income is the base for the worker's pension insurance and unemployment insurance payments. For more information on the concept of 'work income', contact the Finnish Centre for Pensions, or contact a pension insurance company.

If no 'work income' has been agreed, the base for healthcare, earned-income, and employer's health insurance contributions will be the worker's pay subject to tax withholding within the meaning of § 77, Income Tax Act, and § 13, Prepayment Act (ennakkoperintälaki 1118/1996, EPL).

If the worker is a nonresident, the applicable Finnish legal statute is the Act on the Taxation of Nonresidents' Income (Laki rajoitetusti verovelvollisen tulon verottamisesta 627/1978) and its provisions on tax to be withheld at source. In this case, the base for healthcare and earned-income contribution payments will be the worker's pay within the meaning of § 4, Act on the Taxation of Nonresidents' Income. If the worker has been posted from Finland to work abroad and has become a Finnish tax nonresident although still covered by Finnish social security, the base for the contributions will (by way of exception) be his or her work income.

If the worker carries an insurance in accordance with YEL or MYEL laws governing pension coverage (e.g. the worker is a shareholder-entrepreneur), the base for healthcare and earned-income contributions will be the agreed annual income for the YEL/MYEL contracts also when he or she works in foreign countries. Workers carrying this type of insurance do not have a work income for purposes of insurance.

8.4 Employer's health insurance contribution

Under § 4, act on employers' health insurance contributions (Laki työnantajan sairausvakuutusmaksusta 771/2016), employers must pay health insurance contributions if their worker is covered by the Finnish social security system within the meaning of Finnish law governing health insurance. If the six-month rule applies on the wages earned by the worker, the base for the employer's health insurance contribution is the work income for purposes of insurance. If the six-month rule is not applicable, the employer contributions are determined in the usual way although other payments, including pension insurance contribution, depend on work income for purposes of insurance. If the worker receives other wages which are exempted from taxes under Finnish national legislation, such wages do not serve as a base for employer's health insurance contributions.

If the worker is a nonresident, the base will be his or her pay within the meaning of Act on the Taxation of Nonresidents' Income. If the worker has been posted from Finland to work abroad and has become a Finnish tax nonresident although still covered by Finnish social security, the base for the contributions will (by way of exception) be his or her work income.

If the worker carries an insurance in accordance with YEL or MYEL laws governing pension coverage (e.g. the worker is a shareholder-entrepreneur), the employer's health insurance contribution will be based on an amount that would equal his or her pay subject to withholding. This is due to the fact that workers carrying this type of insurance do not have a work income for purposes of insurance.

8.5 Regulations of the EU on social security

If a controversy exists between national legislation and the provisions of EU Regulations, the latter will prevail. If a worker starts working abroad and is, under EU rules, covered by Finnish social security, it is required that all the social insurance contributions are paid to Finland for the period when he or she works abroad. Similarly, if the worker is covered by the social security system of the country of work, the contributions must go to that country (if contributions are collected there) and they must not be paid to Finland.

The EU Council Regulation 88/04 on social security came into force 1 May 2010. It also covers the countries of the European Economic Area and Switzerland. If an individual is deemed as being covered by another country under the new rules than under the old rules on international coordination of social security, the European regulation that was in force previously (1408/71) will continue to be applied on this individual for as long as the circumstances stay the same; however, not for longer than 10 years. It is possible for an individual to submit a request for having the new Regulations and legislation apply on the case.

The Social Security Regulation contains definitions of what EU countries are regarded as the ones where workers moving from one EU country to another are covered, with specific provisions on employees, civil servants, and the self-employed. The Regulation also provides specific rules on the EU country whose laws are applicable on people who are outside of the working life but have moved from country to country.

8.5.1 Country of work serving as the general rule

The country of work has been given central importance in the EU Regulation on social security. The reliance on the country of work is the reason why a Finnish resident who starts working in a foreign country for an employer that is not his or her original Finnish employer (who would have sent them there as a 'posted employee') is normally covered by the social security system of the country of work and does not have to pay Finnish health insurance contributions on the basis of the wages earned for the work.

However, if the worker has been posted from Finland to work abroad, he or she will continue to be covered by the social security system of Finland. 'Posted employee' means someone who is sent to a foreign country by their employer on a temporary basis, for max. 24 months, to perform work for the benefit of the same employer. The work is deemed as being done for the employer who sent them on the condition that it is performed for this employer, and that a connection is maintained between the worker and the employer for the entire period when they work abroad. Similarly, the worker is considered 'posted' when he or she has become hired for the purpose of working in a foreign country. If a worker has been hired locally in the country of work, he or she cannot be regarded as 'posted'.

The authorities of the sending country and the country of work may enter into various mutual agreements on exceptions from the rules governing insurance. It may be that a posted employee remains covered e.g. for five years by the social security system of the sending country. The employer and their workers should submit a request together for obtaining a document proving that they are treated as posted employees (an A1 or ETK2132 Certificate).

8.5.2 Work in two or more countries

People who work in two or more countries or who work for different employers are workers who change from one country to another. Examples of these workers include drivers, installation mechanics, artistes. In the same way as other workers, when they move from one country to the next, they also are covered by the social security system of only one country at a time. The country where the individual worker is actually covered is determined by whether or not they carry out a considerable part of their activity in their country of tax residence.

People who work in two or more EU countries are covered by the social security system of their country of residence if a considerable part of their work is done there. This means that an important quantity (at least 25%) of all work is done there. When the authorities determine the proportions of the work done in various countries, they look into working hours and/or pay.

If a considerable part of an individual's work is not done in the country of residence, either the legislation of their country, or that of the employer's country, must be applied, depending on the nationality of the employer or employers. In practice, the 'A1' Certificate is used for purposes of verifying the country that covers the social security system.

8.5.3 Seafarer work

The principle based on the nationality of the ship's registration is applied on seafarers, i.e. they are covered by the social security system of that country. If someone is a seaman on board a ship registered in another EU/EEA country, he is usually covered by that country's social security even though he may be a permanent resident of Finland. All seafarers who begin working on board a ship sailing under the flag of another EU/EEA country must inform Kela of their circumstances.

If the seafarer's country of residence and the domicile country of the company paying him wages is one country (within EU/EEA), but the ship where he works sails under the flag of another country, the principle based on the nationality of the ship's registration is not applicable. In such circumstances, the seafarer is covered by the social security system of his country of residence. The seafarer is in this case expected to ask the Finnish Centre for Pensions for the 'A1' Certificate proving that Finnish social security is covering him during the period when he works on board the foreign ship.

If a seafarer is regularly working on board ships sailing under two different flags or if a seafarer, besides his seafaring work, also has an employment contract or self-employed operations in Finland or elsewhere, he must contact the Finnish Centre for Pensions.

Under the rules in force at present, the EU/EEA country that covers the social security of crew members of aircraft is the one where their 'home base' is located.

8.5.4 Airline employees on board the aircraft

The flight crew and cabin crew members have a 'home base', defined under the provisions of EEC Regulation 3922/91, as the location nominated by the operator to the crew member from where they normally begin and end a duty period, or a series of duty periods, and where, under normal conditions, the operator is not responsible for the accommodation of the crew member concerned.

It is necessary to obtain an 'A1' Certificate for a crew member in circumstances where the home base is located in a country that is not the country where he or she lives.

8.5.5 Civil servants

People employed by the State of Finland or by public organisations and posted to another EU/EEA country continue to be covered by the Finnish social security system regardless of the length of their employment in the country.

8.6 International conventions on social security

Finland has concluded bilateral conventions with the following non-EU, non-EEA countries: Australia, Canada (plus a separate convention with Quebec), Chile, India, Israel, the United States. With China and South Korea, the signed conventions on social security will come into force 1 February 2017. However, not all conventions contain agreements on sickness insurance. For this reason, pension insurance contributions and health insurance contributions may have to be paid to two distinct countries.

The insured party's health insurance and the employer's health insurance are only included in the conventions made with Israel, Quebec and the United States. As for conventions signed with other countries than Israel, Quebec and the United States, the treatment of these payments is the same as with countries that have no convention with Finland.

Similarly as in the EU, the international conventions on social security also follow the principle that a worker should be covered by the social security system of the country of work. Posted employees may be covered by their sending countries for a certain period. However, the length of such coverage varies among the conventions signed with the countries involved. The conventions also contain specific provisions on civil servants and crew members who travel in their work. For more information on health insurance premiums, contact Kela; for more information on pension insurance, contact the Finnish Centre for Pensions.

9 Guidance on procedures

9.1 Workers (employees)

9.1.1 Reporting obligation

Those who are generally liable to tax i.e. are residents must submit a tax return on all their income including their earnings from work abroad (under Section 4 of the Tax Administration's official decision on the obligations to file tax returns and to file a correction report to real-estate tax summaries (no A153/200/2017), and under Section 1 of the Tax Administration's official decision on the information to be included in submitted returns (A155/200/2017)).

The income earned abroad and the taxes paid to countries outside Finland must be reported. The information on how much tax was paid to foreign countries is needed for providing relief for double taxation. If the income is exempted in Finland, foreign-paid taxes are not important and the worker does not have to detail them.

Workers must also inform the Tax Administration of how long they have worked abroad; this must be specified by country, by names of employers and by the number of days spent in Finland. Finnish employers that have applied the six-month rule must submit information to the Tax Administration on the "monitoring form" (Form 5053a). In this case, the individual worker only needs to give the information if specifically requested by the Tax Administration. If the employer is from outside Finland, the worker must submit the information on their tax return.

It is also required that the worker updates their address information during the period when they work abroad unless they have informed the Finnish authorities on it by submitting a Notification of Move (muuttoilmoitus; flyttningsanmälan). Tax Administration does not receive temporary address changes from the Population Register Centre automatically.

9.1.2 Payroll withholding; prepayments

Unless the wage income is tax-exempt in Finland, Finnish employers must withhold tax on the wages they pay to their worker who works abroad. If the six-month rule applies, the employer will act upon it independently, on the employer's initiative; there is no need to ask the Tax Administration to prepare a revised tax card for the worker.

It is the employer's responsibility to apply the six-month rule correctly. Before they can apply the rule and refrain from withholding, they are expected to ascertain that all the requirements are likely to be fulfilled. In addition, they must follow up the workers' work in the foreign countries in order to make sure that the requirements continue to be fulfilled. The worker, in turn, must give the employer enough information (including details on the visits made to Finland).

If the country of work has taxing rights, we recommend that employers find out whether withholding must be carried out in the foreign country involving payments to the foreign tax authority – or whether the worker must pay prepayments. Similarly, workers also have to familiarize themselves with the tax obligations they may have by contacting the foreign tax authority at the country where they work.

If the six-month rule is not applicable on the wage income and the country of work has taxing rights also, relief for double taxation may be given already at the stage when tax is being withheld (or prepayments are being paid). In this case, the worker must ask for a revised tax card based on a calculation of relief, which may either be based on the credit method or the exemption method. Alternatively, the employer may reduce the amount withheld in Finland. For more information on this process, see section 9.2.2 of this guidance.

When work is started it may still be unclear whether the six-month rule can be applied and whether the pay would be treated as exempted in Finland. In this case, the employer must withhold taxes as usual up to the time when it becomes known that the requirements for the exemption will be met. The employer may then, already during the income year, adjust the size of the withholding i.e. effect refund of the excess amounts withheld. An exception from the above process is a situation where work is done in a Nordic country: in these circumstances, it is prohibited for employers to pay out refunds.

If no withholding on the pay has been carried out because of the six-month rule but the worker stops working in the foreign country unexpectedly, the employer must resume the withholding as soon as it becomes obvious that the pay will be subject to Finnish tax. If wage income becomes subject to tax due to changed circumstances, we recommend that the worker ask the Tax Administration to revise their tax-card calculations and obtain a changed rate of withholding, which makes an allowance for the earlier amounts on which nothing was withheld. Otherwise, they may have to pay back taxes later.

9.1.3 Excessive withholding as a factor of a tax-card calculation; refunds of withheld amounts

If the employer does not make an adjustment in order to change an excess withholding, the Tax Administration may include the too high amounts that had been withheld when revising the worker's tax card for any other income. This approach can be used e.g. in situations where he or she has already stopped working abroad and has returned to Finland, earning wages that are subject to Finnish tax as usual. The exempted pay for the first months of the year will have an impact on the progression of income tax. When they ask the Tax Administration to give them a new tax card, they must give details on whether or not the requirements of the six-month rule were fulfilled and on the fact that their employer will not pay a refund for the excess withholding.

Withheld amounts cannot be refunded during the withholding year i.e. the income year. However, the year after that (the assessment year), if the worker requests it, the Tax Administration may pay back the excess withholding already before the stage is reached when tax assessment is officially closed (under § 22, Prepayment Act). If the worker does not request such refunding specifically, any excesses are refunded to them in due course, as a normal refund payment.

If the worker had worked in a Nordic country, the amounts that had been withheld are usually not refunded. Instead, the Nordic tax authorities are expected to transfer them to the other Nordic country where the work was done. This way, they will be included in their tax assessment for the worker's benefit.

9.2 Employers

9.2.1 Introduction

If you are an employer sending a worker abroad, we recommend that you contact the Finnish Centre for Pensions or the Social Insurance Institution (Kela) before your worker starts working. They will look into your situation and give an opinion on whether the worker is covered by the Finnish social security system during the foreign assignment. In case they are covered, you must continue to pay Finnish employer contributions for them.

Concerning taxes in Finland, you must determine whether the six-month rule can be applicable on their pay (see section 4 of this guidance). If the rule is applicable, pay is exempted from Finnish tax and, apart from the minimum withholding in some cases (see '8.3' above); you do not have to withhold tax in Finland.

If the worker is covered by Finnish social security and the payor of their wages is a foreign subsidiary or a similar company with which you as the Finnish sending company have an associated relationship, you do not have to withhold tax in Finland. In this case, it is not even necessary to carry out the minimum withholding in connection with health insurance.

However, you as the Finnish sending company must pay the employer's health insurance contribution based on the worker's "work income for purposes of insurance" (vakuutuspalkka; försäkringslön). You make this payment on behalf of the foreign company. You will also have to file an Employer Payroll Report to Finland. If no calculation has been made in order to determine the "work income for purposes of insurance", the base for employer contributions will be the actual pay, up to the amount that it would be subject to withholding if the work were performed in Finland.

9.2.2 Workers sent abroad for less than six months

If a worker from Finland works abroad for a Finnish employer and does not stay longer than six months, their pay is taxed in Finland. You must withhold tax at the rate printed on their tax card in the usual way, pay social security and file the usual Employer Payroll Report in Finland after the end of the calendar year. Usually, the country of work has no taxing rights in this case. If Nordic work is in question, you must complete Form NT1 (Veroh 6134a) and submit to the Tax Administration when work in the other Nordic country begins. This form is used when ensuring that the Nordic country in question will not demand prepayments of income taxes from your worker.

Even if the work in a foreign country is only for a short period, it is normally required that a certificate be obtained from the Finnish Centre for Pensions proving that the worker is treated as a 'posted employee'.

If your company is treated as having a permanent establishment in the country of work or if you conduct an employee-leasing activity, that country can usually impose tax on your worker's pay; under the usual provisions of tax treaties. The country of work do so in circumstances where no tax treaty between Finland and the country exists. In such circumstances, we recommend that you, the employer, contact the local authorities to learn more about your employer obligations.

If withholding were to be carried out both to Finland and to the country of work, you may wish to advise your worker to ask the Tax Administration for a revised tax card, on which the withholding rate would be lowered so as to prepare for the elimination of double taxation.

Alternatively, you as the employer may independently lower the withholding in Finland in order to make the necessary adjustment because tax was withheld in a foreign country, too. This requires that the elimination of double taxation – with the credit method – is carried out in Finland. In this case, the worker must ask for a revised tax card to be prepared for the withholding on the pay for the foreign work; the text on the card must indicate that the employer is entitled to subtract the foreign-withheld amounts from what the employer withholds in Finland.

When submitting his or her application for the revised card, your worker must provide proof for the tax office that under the relevant treaty, the country where he or she works has the taxing rights. In addition, foreign-paid amounts cannot be subtracted at all unless the employer really paid them in the country concerned. The maximum amount to be subtracted is the amount equal to the withholding in Finland. However, if he or she is insured in Finland, at least enough must be withheld and paid to Finland that the health insurance contribution is covered.

9.2.3 Workers sent abroad for six months or more

If you are a Finnish company that sends a Finnish resident individual to work in another country, the six-month rule may affect tax treatment as it provides for exemption (under § 77, Income Tax Act).

Before you start applying the rule and can refrain from withholding, you must make sure that all the requirements are likely to be fulfilled. In addition, you must follow up the work in the foreign countries for making sure the requirements continue to be fulfilled. The party responsible for correct withholding is the employer. You as the employer may be held responsible for the consequences of neglected withholding if negligence turns out to be the reason.

When the six-month rule applies, the employer's health insurance contribution will depend on the work income, determined for purposes of insurance. To cover the insured party's healthcare premium, you must withhold an amount called the minimum withholding on your worker's pay.

If you do not carry out withholding in Finland because you have made the conclusion that the six-month rule will apply, you must submit a completed Form NT2 (Veroh 5052a) to the Tax Administration. This form must be submitted within a month after the first payday when you don't withhold tax. You are expected to complete a new Form NT2 for each new calendar year. If your worker moves on to work abroad in another foreign country but under the circumstances, the six-month rule will still continue to be applied (by way of exception), you must submit a new Form NT2.

If you assess the circumstances and find that the six-month rule applies on the worker's wage income, you must also look into the tax-treaty in order to make sure that it does not prevent the country of work from collecting tax on the wages earned by your worker there. If the country of work has the taxing rights, tax obligations must be dealt with in that country. In order to learn more about the tax obligations in force, you as the employer, or your worker, must take action or let a representative do so for contacting the foreign tax authorities at the foreign location. This is the recommendable way to ascertain how prepayments must be paid and where; and also to find out how tax returns must be submitted in the country concerned.

In some countries, workers are expected to make prepayments themselves sending money from a post office or bank. Even in these circumstances, it is possible that the party bearing responsibility for fulfilled payments is the Finnish employer. Because the processes vary from country to country, we recommend that you contact the tax authorities of the country of work for exact guidance and instructions.

9.2.4 Tax returns on employer contributions and employer payroll reports

Wages on which no withholding to Finland has been carried out due to the six-month rule must be detailed on tax returns for employer contributions and on Employer Payroll Reports The returns for employer contributions must be filed electronically by the 12th of the month after wage payments. Submit the Employer Payroll Report after the end of the year of payment, by the end of January.

Enter the amount agreed as the work income for insurance purposes in "Wages and other payments subject to withholding" and also in "Wages subject to employer's health insurance contributions". If you withhold the minimum, enter the amount in "Tax withheld". Enter the appropriate amount in "Employer's health insurance contribution payable".

Work income must be itemized as Type of Payment 5 on the itemization section of the Employer Payroll Report. Its amount is entered in line 14 and the minimum withholding on it – line 15. If the work was done in a country that has a tax treaty with Finland, you must also enter the country code in line 5. If you pay any additional amounts next year that are connected to the exempted wages you pay under the six-month rule this year, such as holiday pay etc., you must enter them in the Employer Payroll Report for the year of payment.

If the six-month rule is not applicable on the wages, you must complete an Employer Payroll Report and tax returns for employer contributions in the usual way i.e. the same way as any pay is reported for work done in Finland. Employer's health insurance contributions – the tax return on employer contributions, the Employer Payroll Report 2018

9.2.5 The "monitoring form" (employer-submitted report of wages for work abroad – Työnantajan ilmoitus ulkomaanpalkasta)

Employers are required to submit Form 5053a to the Tax Administration. It is submitted for the purpose of control and due in January; it lists the paid wages for the previous calendar year on which the employer has not withheld tax by virtue of the six-month rule.

The worker's days spent in Finland are also reported on the form. For this reason along with other reasons, employers must follow up the count of days their worker spends in Finland during the entire work period abroad.

9.2.6 Exemption from taxes is not certain until work has begun

Although you as the employer might withhold tax and pay it to Finland at the first stage, it may be known later, i.e. when the worker has already started their work abroad that the six-month rule is applicable and the pay is to be exempted from Finnish tax. When this has become certain, you can change your procedure and start paying the minimum withholding only. This does not require a revision of the worker's tax card. However, you as the employer must file Form NT2 to inform the Tax Administration.

Unless work in a Nordic country is in question, you can pay your worker back the amounts you had withheld, taking into account that the minimum withholding must be carried out for every month. In the case of Nordic work it is not permissible to adjust the withholding this way. This is due to the multilateral Nordic tax treaty that provides for transferring any paid-in withholding to the other Nordic country i.e. the country where your worker's income is taxed.

9.2.7 Employers' procedures when adjusting the withholding

If you establish that the six-month rule applies to your worker's income, you can re-calculate the amounts to be withheld, taking the six-month exemption into account, and pay your worker a refund for the amounts that had been withheld unnecessarily. In these circumstances, you must enter the appropriate corrections to your payroll accounting, too. You must submit a replacement tax return for employer contributions for the tax periods that are concerned by the corrections. You should deduct the refundable amount from the withholding for the later months of the same calendar year.

If there are no longer any paydays and amounts to be withheld during the calendar year, the Tax Administration will refund an amount to you corresponding to the excess withholding. It is not necessary to file a specific request for this because the Tax Administration uses the information on the submitted tax returns for employer contributions.

You are always expected to file an Employer Payroll Report that contains the correct, re-calculated amounts. In addition, you must file Form 5053a, the "monitoring form".

It may be that the circumstances are changed when your worker is in the foreign country. Then the six-month rule may cease to be applicable to the income for which you did not carry out withholding. In this case, you may withhold a higher amount on the paydays that follow; this requires that they are within the same calendar year. However, you are not entitled to raise the withholding by more than 10 percent of the amount to be paid. When you file the Employer Payroll Report, it must contains the correct, re-calculated amounts withheld.

9.2.8 Employer does not adjust the withholding

If it turns out later that withholding was unnecessary but the employer does not make an adjustment, the Employer Payroll Report must be filed in the usual way in order to give details on the wages and the amounts withheld on them. In this case, the worker will not receive refund for the unnecessary withholding until the year when tax assessment is completed. If an employer refrains from adjusting the earlier withholding but applies the six-month rule on more recently paid-out wages, the "monitoring form" must be filed in order to give exact details on start and end dates of work abroad and on the visits made to Finland, covering the entire period when the six-month rule had been applicable.

9.3 Workers sent to Nordic countries

In principle, if you are an employer sending a worker to another Nordic country, your procedure is the same as that required in other circumstances involving work abroad. This section discusses the special characteristics associated with work in Nordic countries.

A multilateral treaty on income tax is in force between all Nordic countries. It provides that tax must be paid either to the worker's country of residence or to the country of work. Employers and workers are not able to select the country that taxes the income. Instead, the selection is made on the basis of treaty provisions. In addition, a multilateral treaty on prepayments and withholding, the TREKK treaty, is also in force between the Nordic countries. TREKK provides that an advance amount must always be paid to one of the Nordic countries.

If you, the Finnish employer, do not carry out withholding in Finland, some type of prepayment must be made in the country where your worker works. TREKK requires that the parties involved must complete Forms NT1 and NT2 as appropriate. This also is a method of ensuring that payment of tax to two countries for the same wage income is prevented.

However, if withholding or final taxes have already been paid to a Nordic country that does not have the taxing rights on the income in question, there is no payment of refund to the taxpayer. Instead, the amounts are transferred to the other Nordic country by the tax administrations. This is normally carried out in connection with the worker's final tax assessment or in connection with a readjusted assessment if appropriate.

Form more information on TREKK (in Finnish and Swedish), see the Tax Administration's guidance "Multilateral convention on transfers of collected tax between Nordic countries" – Pohjoismainen sopimus veron kannosta ja siirrosta.

9.3.1 Form NT1 and Form NT2

When you send a worker from Finland to work in a Nordic country you must either submit Form NT1 (when you will withhold tax in Finland) or Form NT2 (when you will not withhold tax in Finland). It must be submitted within a month after the first payday when you don't withhold tax. You can print out the form on the tax.fi site.

Wages you pay to your worker abroad are not always exemptible under the six-month rule. Alternatively, it may remain unclear whether the rule applies or not. In this case, you must withhold taxes in Finland. If work in a Nordic country is in question, you must complete Form NT1 as soon as work begins and obtain the signature of a tax officer of the Finnish Tax Administration. When the form is complete with the signature, one copy is given to you and one to your worker. The complete form should be shown to the tax authorities in the country of work as necessary. This ensures that they cannot make a demand for tax withholding in the country of work.

Especially in the case of Norway, it is advisable to complete Form NT1 even for work assignments that last for just one day. The authorities in Norway not only require the Form NT1 but also the Norwegian "RF-1198 – Opplysninger om arbeidstakere" form.

The submittal of Forms NT1 and NT2 does not depend on which one of the countries will have the taxing rights of the final tax assessment. This means that in some circumstances, the country of work may demand that money is withheld there even though that country would not get the taxing rights for purposes of final assessment. In these special circumstances, the country of work will refund the withholding later. If the tax authority of the country of work has presented a statement that employee leasing is in question, the protection granted by a completed Form NT1 will not prevail.

9.3.2 The fact of the exemption is established later

Although you, the employer, might withhold tax and pay it to Finland at the beginning, it may, however, later become clear that the six-month rule is applicable. After the date when this is established, you should take necessary action to ensure that prepayments are started in the country of work. In case you are not obligated to carry out withholding to the foreign country, you should give instructions to your worker to ask for a calculation of prepayments to be made by the local tax office, and to start paying them as required.

When the collection of prepayments has begun at the country of work, you may cease the withholding in Finland on your initiative. However, you are required to make the minimum withholding if your worker is covered by the Finnish social security system. This does not require a revision of the worker's tax card. Revised cards are only necessary in circumstances where the exemption in Finland is only based on the provisions of a tax treaty and where the six-month rule is not applicable. However, you must complete Form NT2 in order to inform your tax office of the new circumstances. The bottom part of Form NT2 contains a space reserved for these situations (i.e. amounts have been withheld to Finland at the initial stage). Fill in this space.

Because work in a Nordic country is in question, you cannot pay your worker back the amounts you had withheld. This is due to the multilateral TREKK provisions. It is required by TREKK that the Nordic authorities carry out the transfers of the amounts that had been withheld unnecessarily, sending them to the country of work. The authorities of that country will use the withholding for the benefit of the worker, deducting it from the accrued tax collected there.

9.3.3 Permanent establishment

It is advisable to find out at an early stage whether the tax authorities of the country of work will treat the employer company as having a permanent establishment there. In some circumstances, the existence of a permanent establishment is not established until the worker is working in the country.

If you, the Finnish employer, receive a written notice from the tax authority of a Nordic country stating that you are treated as having a permanent establishment, you must begin carrying out withholding in that country. For further instructions and guidance, contact the tax authority of the country.

When you are required to pay the amounts withheld to another Nordic country, the TREKK provides that your obligations to withhold tax in Finland ceases for the wages you pay to the worker. However, the worker's Finnish tax card must be revised and the Finnish tax office must be given a copy of the written notice from the Nordic country stating that you are treated as having a permanent establishment.

If you had withheld tax on the worker's wages in the beginning, you are not entitled to pay the withholding back to the worker now. This is due to the multilateral TREKK provisions. They require that the Finnish Tax Administration carry out the transfers of the amounts that had been withheld unnecessarily, sending them to the country of work as coverage of your worker's tax liability there.

9.3.4 Employee leasing contracts

It is common especially in the construction sector that Finnish companies doing business in the Nordic countries must deal with the concept of 'employee leasing'. If a Finnish company has sent a worker to work at a company in Norway (including a permanent establishment in Norway of a foreign enterprise) and bears no risk or responsibility for the results of the work, it may often be the standard treatment, especially in Norway, that the worker is deemed a leased employee. Before deciding on the matter, the authorities will also look into the circumstances of which one of the companies has the right to direct and control the work, give the worker the tools, and determine how many workers are necessary.

If the local authorities of the country of work decide that employee leasing is in question, the wages paid to the workers will always be taxed there. Tax is collected there even in cases where the worker's period of employment in the country is very short. If employee leasing is in question, not only the final tax but also the prepayments must be paid to the country of work although a completed Form NT1 may be submitted.

However, if a Finnish worker, for example, has been sent to Norway and they have an A1 or E101 Certificate received from Finnish authorities, it will prevent the payment of Norwegian social insurance contributions also in situations of employee leasing.

9.3.5 Administrative assistance between Nordic countries

There is also an intra-Nordic treaty on giving assistance to the authorities of any Nordic country in order to recover overdue taxes from taxpayers. If delinquency of payments either by employers or workers occurs, the local authorities of the country of work will receive administrative assistance from the Nordic country where the employer or worker is resident.

9.4 Permanent establishment

By virtue of national legislation, foreign countries may have taxing rights with respect to business profits and worker's employment income, if the company conducts operations in the country. However, if a tax treaty exists, the usual way to apply its provisions is that taxing rights are given to the foreign country only if the Finnish company is to be treated as having a permanent establishment. The treaty article that contains the definition of 'permanent establishment' is important.

If the Finnish company is treated as having a permanent establishment in a foreign country, it must pay tax to that country on the business profits attributable to the permanent establishment, and it normally also must face various employer obligations.

Payroll expenses entered in the accounting books of the permanent establishment always result in taxable wage income for the workers: such income can always be taxed in the foreign country and prepayments on the tax may also have to be made. Tax may be collected there even in cases where the worker's period of employment in the country is very short.

9.4.1 What gives rise to a permanent establishment?

A permanent establishment is a fixed place of business through which the company runs some or all of its operations. Examples of such a place include an office or branch of a Finnish company in a foreign country.

A building site or a construction or installation project constitutes a permanent establishment only if it lasts longer than what the applicable tax treaty has defined as the time limit. In the majority of treaties, the limit has been set at 12 months.

The following is a list of tax-treaty countries where a six-month time limit is in force: Argentina, Australia, Barbados, Brazil, Bulgaria, China, Egypt, Estonia, Georgia, Greece, India, Indonesia, Korea, Latvia, Lithuania, Malaysia, Mexico, Morocco, New Zealand, Pakistan, Philippines, Singapore, Sri Lanka, Tanzania, Thailand, Turkey, Ukraine, Vietnam and Zambia.

The treaties with the following countries have nine months: Armenia, United Arab Emirates, and Uzbekistan.

The treaty with the Russian Federation provides that no permanent establishment will exist unless building, construction, assembly, installation and related supervision work – in connection with a project for a factory, power plant or other industrial building – lasts longer than 18 months.

The length of time must include any design work at the beginning and any supervision work at the end. It is not acceptable to circumvent the rules on permanent establishment e.g. by setting up a series of shorter construction jobs if, in reality, the construction work would last for 12 months or more.

For purposes of counting the time, if the Finnish company were to use the services of a subcontractor in the foreign country, the subcontractor's work must also be included in the count. If in turn, the Finnish company is a subcontractor, the counting of whether or not a 12-month threshold is reached will only be based on the work performed by the Finnish company independently.

Operations in connection with oil research and other natural resources may, in some circumstances, give rise to a permanent establishment in 30 days.

The practice is not to treat a company as having a permanent establishment in a country simply because its subsidiary or parent company is located there.

The national legislation of the foreign country, and the provisions of the relevant tax treaty are important when addressing the question of whether the prevailing circumstances give rise to a permanent establishment for a Finnish company operating a business abroad. For this reason, if the foreign country has stated that a permanent establishment exists, Finnish tax authorities will fall in with that statement. However, the authorities in Finland will refrain from making appraisals on whether a company will or will not be treated as having a permanent establishment in a foreign country.

9.4.2 Deciding whether a foreign company should be treated as having a permanent establishment

The tax authorities of the country of work might be contacted, through an agent if not otherwise, in order to learn more about what factors are seen as important according to the local practice when they decide whether a foreigner should be treated as having a permanent establishment. In some circumstances, the existence of a permanent establishment is not established until the worker is working in the country.

If the employer company has a permanent establishment in the country of work, the worker must pay tax on their wage income in that country. If the six-month rule applies, the employer may cease to withhold tax on the worker's pay (only carrying out the minimum withholding where applicable). If the rule does not apply i.e. the income is taxable in Finland, the worker can ask the Tax Administration to prepare a revised tax card on which the double taxation is relieved because foreign tax has been paid by the worker. The worker should enclose a photocopy of the letter from the authorities of the country of work with the tax-card application, including documentation that shows that his or her wage income is entered as a cost in the accounting books of the permanent establishment.

Countries of work often expect foreign permanent establishments to withhold tax on foreign worker's pay. For more information on the procedures, contact the tax authorities of the country.

9.5 Nonwage compensation for work (= trade income)

If the worker receives nonwage compensation, the procedures of the payor are the same as if the work were done in Finland. If the worker does not show the payor a certificate of prepayment registration, 60 percent of the compensation must be withheld in Finland unless other instructions have been received from the tax office. You do not have to pay health insurance contributions on nonwage compensation.