Taxation of employees from other countries

This is an unofficial translation. The official instruction is drafted in Finnish and Swedish.

These instructions concern the income taxation of persons arriving in Finland to work. Sections 2.2.2 (Correcting tax at source) and 7.1.4 (Responsibilities of parties liable to collect tax at source) have been made more specific.

1 General

The general rule is that when you come to work in Finland, you must pay taxes on your earnings in Finland. The way in which your Finnish earnings are taxed depends on the length of your stay in this country, and on whether your employer is regarded as Finnish or as an employer based in another country. The provisions contained in international treaties governing taxation may also restrict Finland’s taxing rights.

An individual who comes to work in Finland is treated as a resident taxpayer (with full liability to pay tax), or as a non-resident taxpayer (with restricted liability to pay tax). Under section 9 of the act on income tax (Tuloverolaki 1535/1992), individuals who reside in Finland and individuals who live in other countries but stay in Finland for more than six months are considered resident taxpayers. Individuals who reside abroad and individuals who stay in Finland for less than six months are considered non-resident taxpayers. (Section 11(1) of the Income Tax Act) For more information on tax residency and non-residency, see the Finnish Tax Administration’s instructions Tax residency, nonresidency and residency in accordance with a tax treaty – natural persons.

These instructions concern taxation on wage income received in Finland by foreign individuals who are resident or non-resident taxpayers in Finland and, to some extent, employer obligations related to the payment of wages. The employee and employer’s health insurance contributions are discussed in the Tax Administration’s instructions ‘Health insurance contributions in international employment situations’. The taxation of key employees arriving in Finland is discussed in the instructions ‘Taxation of key employees’. In addition, the taxation of au pair employees arriving in Finland is discussed in the Tax Administration’s instructions ‘Au pairs from abroad arriving in Finland’. The taxation of expenses reimbursements for employees on an international assignment (incl. from other countries to Finland) is discussed in the Finnish Tax Administration’s statement ‘Tax treatment of employer-provided relocation services for workers sent to other countries’. The employer’s reporting procedure is described in more detail in the instructions ‘Reporting data to the Incomes Register: international situations’.

2 Taxation on non-resident taxpayers’ wage income

2.1 Tax liability in accordance with the Finnish law

In Finland, non-resident taxpayers are only liable for pay tax on income earned in Finland. 

According to section 10, subsection 4 of the act on income tax (Tuloverolaki 1535/1992), income earned in Finland includes income other than wage income earned in the service of a public organisation if the work, task or service is solely or mainly carried out in Finland in the name of an employer or principal based in Finland. Work is mainly carried out in Finland if more than half of the work performed during the pay period has been carried out in Finland (Supreme Administrative Court 1994-B-556). The actual working hours during the pay period determine whether more than half of the work is considered to have been carried out in Finland. If the length of working days varies, the actual working hours determine whether the work has been mainly carried out in Finland.

Supreme Administrative Court’s ruling no. 1994-B-556

A Finnish company X, which provided road transport services by operating lorries from Finland to Germany via Sweden, Norway and Denmark, employed drivers who resided in Sweden and were non-resident taxpayers in Finland. Each trip from Finland to Germany took approximately one week, with driving in Finland taking one day a week on average. Wages were paid every two weeks. Based on wages paid to the aforementioned drivers, the company only had to pay tax at source and the employer’s social security contribution when the drivers had carried out work for the company solely or mainly in Finland during each two-week pay period. Pay years 1984–1989 Voting 3–2.

Holiday pay and holiday compensation are income earned in Finland insofar as the holiday entitlement has been accumulated over a period during which the wages paid have been earned in Finland. Sick pay is income earned in Finland insofar as the individual would have worked in Finland if they had not been on sick leave. As a rule, the full amount of sick pay is considered to be earned in Finland. Income is not earned in Finland, however, if an individual can indicate, by means of an employment contract or shift list, that their purpose was to work (or they most likely would have worked) more than half of the pay period outside Finland.

An employer based in Finland includes a company registered in Finland and a foreign company that has a permanent establishment in Finland, as well as a foreign organisation whose actual headquarters are located in Finland. According to the act on income tax, wages received from such a company is income earned in Finland if the work is solely or mainly carried out in Finland. In this case, the wage income of an employee who is a non-resident taxpayer is also taxable in Finland.

A foreign employer means an employer who is not considered to be Finnish or residing in Finland as defined above. If a non-resident taxpayer works in Finland in the name of a foreign employer, their wages are not subject to taxation in Finland. Wage income received by leased employees arriving from certain countries who are non-resident taxpayers is an exception (act on income tax, section 10, paragraph 4c). More information on the taxation of foreign leased employees is available in the Finnish Tax Administration’s instructions ‘Foreign leased employees and taxation in Finland’.

Non-resident taxpayers are taxed pursuant to the act on the taxation of non-residents’ income (Laki rajoitetusti verovelvollisen tulon verottamisesta 627/1978). Tax at source is withheld on the income of non-resident taxpayers at a flat rate, which does not depend on the size of income. Alternatively, the taxation of non-resident taxpayers can, upon application, be carried out based on the amount of total income, as in the case of resident taxpayers in Finland, in accordance with the act on assessment procedure (Verotusmenettelylaki 1558/1995).

2.2 Tax at source on wage income

2.2.1 General

An employer based in Finland collects tax at source on wages in conjunction with their payment. Tax at source is final tax, and the tax rate is 35% (act on the taxation of non-residents’ income, section 7, subsection 1(1)). Income subject to tax at source also includes fringe benefits measured in accordance with the Finnish Tax Administration’s decision.

Before collecting tax, the employer can deduct tax at source from the total amount of monetary wages and fringe benefits. When tax at source is collected, a deduction of EUR 510 per month is made from the total amount of income from which a 35% tax at source is collected. When the income has been accrued during a period of less than a month, EUR 17 per day is deducted from the total amount. However, the maximum amount of deduction equals the amount of income. The deduction requires that the deduction be indicated in the tax at source card (act on the taxation of non-residents’ income, section 6).

The tax at source deduction is not granted for fund units paid or any surplus funds distributed by a personnel fund, or fees of board members or members of other administrative bodies.

If an employee who is a non-resident taxpayer is insured in Finland, the employer’s health insurance contribution and the insured party’s health insurance contribution are paid based on the amount from which no tax at source has been deducted.

The tax at source card is the tax authority’s guidance for the payer for collecting tax at source. An income earner arriving in Finland from abroad must apply for the tax at source card using form 5057 (Non-resident’s application for tax at source card, tax card, tax prepayment or tax number). The tax at source deduction and, for example, any relief granted for teachers or students under certain conditions require an indication in the tax at source card.

If an income earner does not present their tax at source card, the payer must otherwise ensure that they obtain information on the employee’s date of birth and foreign address, as well as the personal identity code or tax identifier given in the employee’s home country for reporting to the Incomes Register.

The employer must submit data on payments made to the Incomes Register and provide the income earner with a certificate. Information on reporting data to the Incomes Register in international situations is available in the instructions Reporting data to the Incomes Register: international situations.

2.2.2 Correcting tax at source

In certain situations, the tax at source card that includes an indication of a tax at source relief is only presented after wages or non-wage compensation for work have already been paid. In this case, the payer can correct the collection in conjunction with a payment made later during the same year. If the payer does not correct the amount of tax at source, the employee can apply for the excess amount of tax at source collected to be refunded from the Finnish Tax Administration (act on the taxation of non-residents’ income, section 11, subsection 2). The tax at source refund must be applied for using form 6166 (Application for refunding Finnish tax at source from income other than dividend, interest and royalty income).

An employer may withhold tax from an employee’s wages following the rate of 60% if the employee fails to present their tax card to the employer. If the employee only presents their tax at source card to the employer after the payment of wages, the employer can correct the amount of collected tax. The employer must also correct the data submitted to the Incomes Register. If the payer does not correct the amount of tax, the employee can apply for the groundlessly collected tax to be refunded from the Finnish Tax Administration.

2.3 Progressive taxation of non-resident taxpayers

A non-resident taxpayer can request their income to be taxed progressively in place of tax at source. In such a case, a non-resident taxpayer is taxed in the same way as permanent residents of Finland. Non-resident taxpayers who reside in a Member State of the European Economic Area or in a country or region that is governed by the convention on mutual administrative assistance in tax matters or a tax information exchange agreement, or who hold a residence permit pursuant to the directive on scientific researchers, can request their earned income (with the exception of dividends) to be taxed progressively in place of tax at source (act on the taxation of non-residents’ income, section  13, subsection 1(6)).

For progressive taxation, a non-resident taxpayer must apply for a non-resident taxpayer’s tax card from a tax office and hand it over to the payer. The tax card must be applied for using form 5057. The request for progressive taxation on earned income (form 6148) must be attached with the form. All income earned in Finland, earned income taxed in the country of residence, and the related deductions must be reported on the application.

While Finland only taxes income earned in Finland, the assessment of tax on earned income also takes into account wages, pension and social security contributions that would be taxed as earned income in Finland and that have been received:

1. in a country other than Finland and that are taxable income in the taxpayer’s country of residence, or
2. in Finland and the taxation on which is prevented by a tax treaty (act on the taxation of non-residents’ income, section 14).

The aforementioned income earned in a country other than Finland includes income received in the country of residence or a third country, for which the individual is liable to pay tax in their country of residence.

If an individual lives in an EEA state or holds a residence permit pursuant to the directive on scientific researchers, the aforementioned income will not be taken into account when calculating the amount of tax on income earned in Finland if the net taxable income earned in Finland is at least 75% of the total amount of all income earned in Finland and abroad. To apply this provision, an individual must present a certificate granted by the tax authority in their country of residence regarding the tax year’s income and related deductions to the Finnish Tax Administration (act on the taxation of non-residents’ income, section, section 14, subsection 5).

Based on a non-resident taxpayer’s tax card, tax is withheld from payments in accordance with the tax rate indicated in the tax card. Progressive tax on earned income is calculated according to the income tax scale and the average municipal tax rate. For example, commuting expenses and expenses for the production of income can be taken into account as deductions. Therefore, the tax rate is determined based on the amounts of income and expenses.

In addition to tax, an employer must collect social security and insurance contributions from wages if an individual does not have a certificate to prove that they are insured in a country other than Finland or another exception to the insurance obligation applies. More information on health insurance contributions is available in the Finnish Tax Administration’s instructions ‘Health insurance contribution in international employment situations’.

If a non-resident taxpayer is taxed under the progressive scheme, they will receive a pre-completed tax return next year, similarly to resident taxpayers, indicating the income and deductions on which the tax assessment is based and the outcome of the tax assessment (back taxes or a refund). The individual must check the pre-completed information and correct the tax return if the pre-completed information is incomplete or incorrect.

If a non-resident taxpayer has not applied for progressive taxation for a pre-assessment and tax at source has been collected from their wages, the individual can also apply for progressive taxation by submitting a tax return afterwards. The tax return must include information on income earned in Finland and earned income taxed in the same year in their country of residence, as well as the related deductions.

2.4 Compensation for travel expenses

Tax-exempt compensation for travel expenses can be paid to wage earners who are non-resident taxpayers under the same conditions laid down in the act on income tax as to wage earners who are resident taxpayers (act on the taxation of non-residents’ income, section 4).

The tax exemption of compensation for travel expenses paid to non-resident wage earners is conditional on the wage earner working in Finland in a specific place of work. Therefore, compensation for travel expenses can be paid to an employee invited to work for a short period of time in Finland, such as a lecturer, specialist or construction worker, without collecting tax at source based on a travel expense claim or other similar itemisation similarly to resident taxpayers.

However, the share of non-compensated expenses cannot be deducted before collecting tax at source as permitted by section 15 of the act on tax prepayments (Ennakkoperintälaki 1118/1996). If a wage earner has requested the non-resident taxpayer’s progressive tax card, the employer can apply the provisions of the act on tax prepayments.

However, if a non-resident taxpayer works full-time in Finland in the actual place of work, such as a shop, agency or production plant located in Finland, the prerequisites for the tax-exempt reimbursement of expenses do not exist. This also applies to students and trainees who do not have an actual place of work elsewhere. In these situations as well, expenses from commuting from the actual place of work to a specific place of work can be compensated for exempt from tax.

More information on compensation for work-related travel expenses is available in the instructions ‘Reimbursement of work-related travel expenses for tax purposes’, (instruction available in Finnish and Swedish, link to Finnish).

2.5 Tax at source on non-wage compensation for work

As a rule, non-wage compensation for work received by a natural person who is a non-resident taxpayer arrived in Finland from abroad is subject to tax at source at the rate of 35% (act on the taxation of non-residents’ income, section 7, subsection 1(1)). If required, a tax at source card can be requested for non-wage compensation for work. Based on the tax at source card, a tax at source deduction can also be made from income.

The payer of non-wage compensation for work must always collect tax at source if the recipient of non-wage compensation for work is not in the prepayment register. Tax at source must also be collected if the recipient of non-wage compensation for work does not present a tax at source card or non-wage compensation for work is paid for construction work, installation or assembly work, transport work, or cleaning, care or treatment work carried out solely or mainly in Finland (act on the taxation of non-residents’ income, section 10e, subsection 2).

If Finland has signed a tax treaty with the income earner’s country of residence, the tax treaty normally prevents non-wage compensation for work from being taxed in Finland, unless activities are pursued in a permanent establishment located in Finland. The payer must always submit reports on non-wage compensation for work paid to natural persons to the Incomes Register, regardless of whether tax at source was collected from the non-wage compensation for work.

If a natural person who is a non-resident taxpayer pursues their activities in a permanent establishment located in Finland, the payer must collect tax at source from non-wage compensation for work if the recipient is not in the prepayment register. More information on the taxation of natural persons who are non-resident taxpayers and who pursue activities in Finland is available in the following instructions of the Finnish Tax Administration: ‘Paying non-wage compensation for work to a foreign company’ and ‘Income taxation of foreign self-employed individuals'.

2.6 Taxation on lecture fees

As a rule, compensation for giving a lecture at an event organised by another party is regarded as wage income in Finland, not as non-wage compensation for work (act on tax prepayments, section 13). A lecture or presentation fee is the lecturer’s taxable wage income, regardless of whether the individual has an employment or public service relationship with the payer. Therefore, tax at source must usually be collected, even if the income earner had a trade name abroad. However, lecturers may, in certain situations, be entitled to a relief in Finland based on an article on teachers in a tax treaty.

If a lecture is given by a well-known representative of a company with widespread operations in the provision of education and lectures, the fees paid to such an enterprise by theevent organiser are non-wage compensation for work for the company concerned.

More information on taxation of lecture fees is available in the Finnish Tax Administration’s instructions ‘Taxation of people working for higher education institutions – international situations’ and ‘Pay and non-wage compensation for work for tax purposes’ (instruction available in Finnish and Swedish, link to Finnish).

3 Taxation on resident taxpayers’ wage income

A person arriving in Finland for an uninterrupted period of more than six months is subject to progressive tax on earned income similarly to people residing permanently in Finland. The same procedure applies if an individual has their permanent residence and home in Finland (act on income tax, section 11, subsection 1). The payer must withhold tax in accordance with the tax card obtained from a tax office. If no tax card is presented, the withholding rate is 60%. The payer must submit an earnings payment report to the Incomes Register in the same way as for permanent residents in Finland.

If it is uncertain whether the six-month limit will be exceeded, a tax at source card or a non-resident taxpayer’s tax card will first be granted. The regular tax card will be granted when it is certain that the time limit will be exceeded. The six-month period is not dependent on the beginning and end of the calendar year. For example, an individual residing Finland from 15 August to 15 February is a resident taxpayer. The residency will be considered continuous despite any temporary absence.

4 Effect of tax treaties

Tax treaties signed by Finland with different countries may restrict Finland’s aforementioned right to tax in accordance with Finland’s internal legislation.

4.1 Tax treaties’ provisions on taxation on wage income

According to tax treaties, wage income is taxed in the employee’s country of residence pursuant to the tax treaty. However, if work is carried out in another country, wage income can be taxed in the country of work. This means that Finland can tax the wage income of an individual working in Finland insofar as it is earned from work carried out in Finland, even if the individual’s country of residence pursuant to the tax treaty is a contracting country.

However, tax treaties include the 183-day rule. If its requirements are met, the right to tax wage income lies solely with the employee’s country of residence. Finland does not tax wages received from a foreign employer during a year in which all of the conditions below are met:

1. the employee resides in Finland in one or more periods for at most 183 days during 12 successive months, a calendar year or a tax year,
2. the employer who pays the remuneration, or on whose behalf it is paid, does not reside in Finland, and
3. the remuneration does not, as an expense, cause an increase of payroll expenses in a permanent establishment or location in Finland.

When calculating whether the limit of 183 days is exceeded in Finland, the calculation of the period of stay includes all days during which the employee has stayed in Finland, regardless of the reason for the stay. However, the employee’s stay in Finland due to an illness will not be included in the period of stay in Finland if the employee is unable to leave Finland due to their illness and their work would have otherwise met the conditions for the application of the 183-day rule (OECD model tax treaty commentary, Article 15).

Different tax treaties include slightly different definitions of the 183-day rule, which is why the content of the applicable tax treaty must be verified separately. For example, different tax treaties specify different periods, within which the exceeding of the 183-day limit is monitored.

4.2 Other provisions of tax treaties

The Nordic tax treaty includes special provisions on the taxation of cross-border commuters. These provisions can be applied to wage income when an individual resides in a municipality limited to the land border between Finland and Sweden or Finland and Norway, and the individual works in a municipality limited to the same land border in the other country. More information on the taxation of cross-border commuters is available in the Finnish Tax Administration’s instructions ‘Taxation of cross-border commuters’.

According to the act on income tax, income of leased employees arriving in Finland from abroad is income earned in Finland. Due to tax treaty provisions, Finland cannot, however, tax the income of leased employees who are non-resident taxpayers, unless the tax treaty specifically permits it. More information is available in the Finnish Tax Administration’s instructions ‘Foreign leased employees and taxation in Finland’.

Certain tax treaties include provisions that limit the country of work’s right to tax when work is carried out by a student, trainee, teacher or researcher. More information is available in the Finnish Tax Administration’s instructions ‘Taxation of students and trainees in international situations’ and ‘Taxation of people working for higher education institutions in international situations’.

Fees received for being a member of the Board of Directors of a Finnish company or organisation or a similar administrative body are income earned in Finland. Whether work is carried out in Finland or abroad is irrelevant (act on income tax, section 20, paragraph 4a). Often, tax treaties do not restrict Finland’s right to tax, but there are also exceptions. More information on taxation on fees of members of administrative bodies and managing directors, also in international situations, is available in the instructions ‘Taxation on fees of members of administrative bodies and managing directors’ (Section 12), (instruction available in Finnish and Swedish, link to Finnish).

5 Moving and travel expenses

As a rule, an employee’s moving expenses and moving-related travel expenses are living expenses for which an employer cannot pay tax-exempt compensation. According to section 69c of the act on income tax, 50% of moving expenses and moving-related travel expenses incurred by an employee and their family members and paid by an employer are, however, tax-exempt. This partial tax exemption requires that the move takes place due to the location of the employee’s place of work. According to Government proposal 24/2019, a move is always considered to take place due to the location of an employee’s place of work when an employee coming to work in Finland from abroad moves into Finland.

Expenses related directly to moving are deemed to be moving expenses as laid down in the provision. These include expenses incurred from packing, unpacking and transporting property. Trips between the old and new apartment during the move are deemed to be trips related directly to the move.

As a rule, an employer must pay for expenses directly to the service provider. If an employer pays funds to an employee for moving, the payment is wages for the employee. However, an employer can pay partially tax-exempt compensation to an employee for direct moving expenses paid for in full or in part by the employee based on an invoice or payment receipt. The receipts must be included in the employer’s accounting material.

Section 69c of the act on income tax only applies to situations where an employer pays compensation for expenses. The right to deduct moving expenses and related travel expenses paid for by an employee has not been expanded. These expenses paid for by an employee are non-deductible living expenses when the employee moves to live in another location or country at the beginning of their employment relationship. Moving and travel expenses are also non-deductible living expenses when an employee moves to another location or country during their employment relationship at their own initiative.

According to the tax policy and case law, an employer can pay tax-exempt compensation for moving expenses if an employee has been forced to move to another location due to the location of their place of work during their employment relationship as ordered by their employer or to maintain their job. In addition, in the decision of the Central Tax Board (10/2006), the reimbursement of expenses due to a change in the employer’s interests was not regarded as taxable earned income. The aforementioned legal amendment does not apply to these situations. In these situations, an employee can still deduct moving expenses as expenses for the production of income if their employer does not pay compensation for them.

6 Special groups

6.1 Performing artists

Performing artists who are non-resident taxpayers are only taxed in Finland for income they have earned in Finland. This income includes not only income earned in Finland, but also reimbursements received by performing artists for personal activities carried out in Finland or on board a Finnish vessel (act on income tax, section 10, paragraph 4b). Personal activities mean that a performing artist performs personally in Finland. 

Payments received by performing artists are subject to tax at source of 15% (act on the taxation of non-residents’ income, section 7, paragraph 5). An individual residing in a Member State of the EEA can demand any expenses that have a direct financial link to the reimbursement to be deducted from the reimbursement. In this case, a progressive tax at source card will be calculated for the individual. The tax at source calculator can be used to see whether this option is lower than tax at source of 15% (act on the taxation of non-residents’ income, section 7a).

A non-resident taxpayer can also request their income to be taxed progressively in place of tax at source. In this case, the non-resident taxpayer will be taxed in the same way as permanent residents of Finland (for more information, read Section 2.3 (Progressive taxation of non-resident taxpayers) above).

More details on the taxation of performing artists are available in the Finnish Tax Administration’s instructions ‘A performing artist’s tax treatment in international situations’.

6.2 International traffic

6.2.1 General

According to section 13 of the act on income tax, non-resident taxpayers who work on board a Finnish vessel or aircraft must only pay tax in Finland on their wage income earned on board or in another location if the employer has given them orders to work in another location for a temporary period. The rules laid down in section 13 apply to all work done on board a vessel or aircraft, and to all work carried out elsewhere when that work is closely related to the work done on board the vessel or aircraft. A Finnish vessel or aircraft also includes a leased foreign vessel or aircraft if the Finnish employer is leasing it and there is a limited foreign crew or no such crew.

When a person residing abroad works on board a Finnish vessel operating in international traffic (as a seafarer, flight attendant or pilot), tax treaties may, however, restrict Finland’s right to tax. According to tax treaties, the primary right to tax lies with the employer company’s country of residence or the country in which the company’s actual management is located. According to certain tax treaties, the country where the ship is registered (bearing the flag of the country) may also have the right to tax.

6.2.2 Seafarers

A seafarer may have to pay tax in Finland if they earn income in Finland or on board a Finnish vessel, even if they resided abroad. Such an individual must pay tax in Finland on wages earned from work carried out on board a vessel or in another location if the employer has given them orders to work in another location for a temporary period.

If work is carried out on board a Finnish vessel, tax at source of 35% must be paid on wages in Finland. The Finnish employer must collect tax at source in conjunction with the payment of wages. Before collecting the tax, the employer will deduct EUR 510 a month or EUR 17 a day from the wages if such a deduction is indicated in the tax at source card.

A seafarer who is a non-resident taxpayer can request their earned income to be taxed progressively in place of tax at source. In this case, they will also be entitled to a deduction granted for seafarers (read more on progressive taxation requirements and procedures in Section 2.3 (Progressive taxation of non-resident taxpayers) above).

When applying for a tax at source card or a non-resident taxpayer’s tax card, the tax office will verify the impact of any tax treaty on taxation and add an indication of a relief to the tax card. For example, tax on wages paid to seafarers from the Netherlands or Russia will only be paid in their country of residence.

Tax treaties usually assign the primary right to tax wages earned from work carried out on board a vessel or aircraft operated in international traffic to the employer company’s country of residence or the country in which the company’s actual management is located. According to the Nordic tax treaty, the right to tax income earned on board a vessel belongs to the country under whose flag the vessel sails. For example, if a person residing in Sweden works as a seafarer on board a vessel sailing under the Finnish flag, income earned on board the vessel will be taxed in Finland. However, the right to tax income earned from work carried out on board a fishing, sealing or whaling vessel belongs exclusively to the employee’s country of residence.

A stay period on board a vessel is not regarded as a stay in Finland so that the person would be considered to reside in Finland.

6.2.3 Airline employees

If an individual works for a Finnish airline, their wages will be taxed in Finland. If an employee does not reside in Finland, their Finnish employer will collect tax at source of 35% from their wages.

Exceptions include aircraft employees who live in other Nordic countries. According to the Nordic tax treaty, their wages are only taxed in their country of residence. For example, if an individual residing in Denmark works as a flight attendant for a Finnish airline, tax on the income will only be paid in Denmark.

In all cases, a Finnish tax card or tax at source card should be requested for the employer. For airline employees residing in the Nordic countries, a tax relief will be indicated in the tax card. For other airline employees, a tax at source deduction, being EUR 510 a month or EUR 17 a day, will be indicated in the tax card.

A non-resident taxpayer can also request their earned income to be taxed progressively in place of tax at source. In this case, they will also be entitled to certain deductions (read more on progressive taxation requirements and procedures in Section 2.3 (Progressive taxation of non-resident taxpayers) above).

6.2.4 Drivers of motor vehicles

When a non-resident taxpayer in Finland works as a driver of a motor vehicle for a Finnish transport company on routes spanning several countries, their wage income will only be taxed in Finland if the work has solely and mainly been carried out in Finland during the pay period. Work is mainly carried out in Finland if more than half of all routes driven during the pay period are in Finland (Supreme Administrative Court 1994-B-556).

The employer collects tax at source of 35% from wages. In all cases, employees should apply for a tax at source card from a tax office. A tax at source deduction (EUR 510 a month or EUR 17 a day) can be indicated in the tax card. Employers can also apply for a tax at source card.

An employee has the right to apply for progressive taxation pursuant to the act on assessment procedure on the same grounds as other employees who are non-resident taxpayers (read more on progressive taxation requirements and procedures in Section 2.3 (Progressive taxation of non-resident taxpayers) above).

A foreign driver of motor vehicles who works for a Finnish transport company and who does not have a place of residence in Finland is not regarded as a resident taxpayer in Finland only on the grounds that they regularly drive a lorry in Finland.

If the driver stayed the night in Finland, they could become a resident taxpayer in Finland based on the duration of their stay. In these situations, Finland is not, however, regarded as the driver’s country of residence pursuant to the tax treaty if they do not have a permanent residence in Finland.

6.3 Diplomats and people working for certain international organisations

Foreigners working in Finland in the service of international organisations and foreign diplomats working in Finland are only regarded as taxpayers in Finland with respect to their wages received in Finland other than wages earned based on their position in diplomatic or international service (act on income tax, section 12, subsection 1). The application of section 12 of the act on income tax requires that an individual working in a foreign country’s embassy is not a Finnish citizen. Therefore, this provision also applies when an individual working in an embassy is a citizen of a country other than the country whose embassy the situation concerns.

The specific scope of tax liability applies to foreign citizens working for a diplomatic mission or a comparable representation or for an office of a career consul in Finland. This also applies foreign citizens in Finland working for the United Nations, its special organisations or for the International Atomic Energy Association. According to the Ministry of Finance’s regulation, a number of other significant international organisations and bodies proposed by the Ministry for Foreign Affairs are also considered similar to these organisations.

Furthermore, specific restrictions of taxpayer status applies to the family members and private servants of the aforementioned individuals if they are not Finnish citizens.

More details on the taxation of diplomats and employees of international organisations are available in the Finnish Tax Administration’s instructions ‘Taxation of income from international organisations, the EU and diplomatic missions’ (to be published in 2023).

7 Obligations and procedures of Finnish employers

7.1 Non-resident employees

7.1.1 Obligation to keep accounting records and notes

According to section 8 of the Government decree on assessment procedure for self-assessed taxes (Asetus oma-aloitteisten verojen verotusmenettelystä 1355/2016), a party with an obligation to keep accounting records and liability to collect tax at source must keep payroll accounts of payments subject to tax at source. A payer other than one with an obligation to keep accounting records and liability to collect tax at source must keep notes of payments subject to tax at source (section 6 of the Government decision on the obligation of employers and payers to keep notes, 16 August 2017/564).

Accounting records and notes must present a sufficient itemisation of wages paid and other payments made. The payer must maintain a harmonised list of each wage earner for each calendar year, indicating the following information:

• the payment recipient’s full name, profession or position, any official identifier in the country of residence, date of birth, and address in the country of residence and Finland;
• the tax at source rate per payment (e.g. wages, non-wage compensation for work, royalty);
• the period over which wages have been paid or other payments have been made;
• the amount of wages paid or another payment made in cash;
• the monetary value of fringe benefits;
• the tax at source deduction made from wages based on section 6 of the act on the taxation of non-residents’ income or deductions made based on a tax treaty before collecting tax at source;
• the amount from which tax at source has been collected;
• the amount of tax at source;
• the amount of the insured party’s earnings-related pension contributions, unemployment insurance contributions and the health care and daily allowance contributions of health insurance collected from the employee; and
• daily allowances and the amounts of reimbursements paid based on receipts.

7.1.2 Paying collected tax at source

A party liable to collect tax at source must pay the tax collected by the 12th day of the calendar month following the collection. Instructions for the payment of self-assessed taxes apply to the payment of tax at source.

Tax at source must be collected in full cents. If the amount of tax collected from income subject to tax at source received by an income earner from a single payer during a calendar month is at most EUR 10, no tax will be collected (act on the taxation of non-residents’ income, section 9, subsection 3). If the amount of tax remains this low, a casual employer will not pay the employer’s health insurance contribution either.

The employer must report data on the wages paid to a non-resident taxpayer and the tax at source collected to the Incomes Register on an earnings payment report. More information on submitting the employer’s reports is available in the instructions ‘Reporting data to the Incomes Register: international situations’.

According to section 9, subsection 3 of the act on tax prepayments, households are not obligated to withhold taxes from payments made to a single recipient during a calendar year if their amount does not exceed the limit defined in the decree or if they are not related to the payer’s business activities or other activities for acquiring income. This provision does not apply to wages paid to non-resident taxpayers, from which tax at source pursuant to section 3 of the act on the taxation of non-residents’ income must be collected, even if the amount of wages was lower than the amount laid down in the decree on tax prepayments.

7.1.3 Certificates provided for income earners

Payers must provide income earners with a certificate (decree on the taxation of non-residents’ income, section 5). The certificate must indicate at least the income earner, the amount, type and payment year of income, the amount of tax, the insurance contributions collected, and the payer’s name. It is recommended that the certificate be provided in English so that it is more useful in the income earner’s country of residence when eliminating double taxation, for example. At the same time, the income earner should be told that the certificate should be retained for any tax return in their country of residence. A template is available through the link below.

Certificate on final tax in Finland (Remuneration for work 6171)

7.1.4 Responsibilities of parties liable to collect tax at source

Any uncollected tax at source is imposed on the party liable to collect it (act on the taxation of non-residents’ income, section 8, subsection1, and act on assessment procedure for self-assessed taxes (Laki oma-aloitteisten verojen verotusmenettelystä (OVML) 768/2016), section 40, subsection 1). If no tax at source has been collected from income subject to tax at source but tax has been withheld from it, this will be taken into account as a tax reduction (act on assessment procedure for self-assessed taxes, section 51, subsection 4). Tax increases are calculated for the difference between uncollected tax at source and withheld tax.

A party liable to collect tax at source will also be responsible tax at source if they have not collected taxes due to an incorrect interpretation of a tax treaty provision. The tax at source card protects sincere payers.

The payer is not liable to collect tax at source if the payer has withheld tax according to the tax card provided to them and the payer was not aware that the recipient is a non-resident taxpayer (Tax at Source Act, section 17, subsection 3).

7.1.5 Fringe benefits instead of monetary wages

In certain situations, tax at source cannot be collected because an employee only receives fringe benefits instead of monetary wages. The benefit payer must submit data on taxable benefits on the earnings payment report and pay the employer’s health insurance contribution from the fringe benefits.

The employee must report the income on the tax return in May next year if the income is not shown on the pre-completed tax return (the Finnish Tax Administration’s decision on information reported on a tax return, section 1). After this, the Finnish Tax Administration will impose tax at source on the employee.

The aforementioned obligations do not exist if work carried out in Finland does not benefit the fringe benefit payer and the expenses accrued from the provision of the benefits do not cause an increase of payroll expenses in the benefit payer’s accounting, as they are invoiced from the employee’s simultaneous foreign employer.

7.1.6 Too small amount of tax at source collected

If a too small amount of tax at source is collected, the party liable to collect tax at source can increase an amount collected later during the same calendar year. The collection of tax at source cannot be increased by more than 10% of the amount paid at the time without the income earner’s consent (act on tax prepayments, section 19).

7.1.7 Tax at source collected from income not subject to tax

A payer can have collected tax at source groundlessly from income not subject to tax or collected a larger amount of tax at source than what is required in an international treaty, or tax can have otherwise been collected incorrectly. Such a situation may exist if a tax at source card indicating a tax at source relief is not presented until wages or non-wage compensation for work have already been paid.

If the payer has collected tax at source groundlessly, the payer can correct the amount of tax at source collected by deducting the excess amount from tax at source to be collected later, provided that a payment is made later to the same recipient during the same calendar year. If no payments are made later to the same recipient during the same calendar year, the payer can return the tax at source collected to the recipient during the same calendar year. The payer cannot correct any tax at source collected incorrectly after the calendar year.

If the payer does not correct the amount of tax at source collected, the recipient can apply for the excess amount of tax at source collected to be refunded from the Finnish Tax Administration using form 6166 (act on the taxation of non-residents’ income, section 11, subsection 2).

7.1.8 Non-resident taxpayers working abroad

When a non-resident taxpayer works solely or mainly outside Finland, the ground rule is that the non-resident taxpayer is not liable to pay tax on their income in Finland. In this case, the Finnish employer does not need to collect tax at source from wages. If the employer can ascertain that the employee is a non-resident taxpayer, no tax at source card is required. In this case as well, the employer must report the data to the Incomes Register, which means that the employer needs the data required for reporting.

As an exception, wages paid by a Finnish public organisation are income earned in Finland, regardless of where the work is carried out. A non-resident taxpayer is liable to pay tax on such wages in Finland. The wage earner must present a tax at source card to the payer so that the payer can take the tax at source relief into account in the amount of tax at source.

According to the act on income tax, a non-resident taxpayer is similarly liable to pay tax on fees received by being a member of the Board of Directors of a Finnish company or organisation or another comparable administrative body. Tax at source of 35% must be collected from the fees.

However, tax treaties may limit Finland’s right to tax this type of income. According to a tax treaty, the payer may leave tax at source uncollected or collect less than 35% if the income earner presents a clarification of their country of residence and other requirements for the application of the treaty before the payment is made. As a clarification, the income earner may present a tax at source card or indicate their name, date of birth and any other official identifier, and their address in their country of residence (act on the taxation of non-residents’ income, section 10, subsection 1).

7.2 Resident employees

If an individual coming to work in Finland from abroad is a resident taxpayer in Finland, the employer must apply the same reporting and payment procedure as to other employees residing in Finland.

Read more: Being an employer.

7.2.1 Fringe benefits instead of monetary wages

In certain situations, tax cannot be withheld because an employee only receives fringe benefits instead of monetary wages. The provider of a fringe benefit must report the benefit by submitting an earnings payment report and pay the employer’s health insurance contribution.

In this case as well, the fringe benefit is income subject to tax for their recipient. The provider of the benefit or the employee should contact the Finnish Tax Administration so that a prepayment can be imposed on the employee to avoid any back taxes and interest. At the same time, it will be identified whether a prepayment also needs to be imposed on any wages received from abroad. Alternatively, the employee can also be tax on the fringe benefit as back taxes.

In exceptional circumstances, it is possible that the employee only works for their foreign employer, not at all for the provider of the fringe benefit. In this case, if the provider of the benefit charges the expenses accrued from the provision of the benefit from the foreign employer, the benefit will be considered to have been received from the foreign employer. As a result, the Finnish company does not have the obligation to pay the employer’s health insurance contribution. However, the company is obligated, as a substitute payer, to submit an earnings payment report in Finland.

More information on reporting is available in the instructions ‘Reporting data to the Incomes Register: payments made by substitute payer’.

7.2.2 Monetary wages and substitute payers

If a Finnish individual working for a foreign employer receives their monetary wages from a Finnish company acting as a substitute payer, the substitute payer is obligated to withhold taxes and submit an earnings payment report. However, the substitute payer is not obligated to pay the employer’s health insurance contribution. For withholding tax, the employee must apply for a tax card from the Finnish Tax Administration, which will also investigate the impact of the relevant tax treaty.

If the wages decrease the Finnish company’s results, it will be regarded as the employer, with all tax-related employer obligations belonging to it.

7.2.3 Tax at source collected during the first months

If an individual has stayed in Finland for more than six months, they are regarded as a resident taxpayer starting from their arrival in Finland. If the payer has reported that the income earner is a non-resident taxpayer on the earnings payment reports submitted to the Incomes Register, the information must be corrected in the Incomes Register by submitting replacement reports for the previous months.

If the duration of an individual’s stay is unclear, tax at source may have been collected from their wages during the first months of the year. If an individual’s stay has been longer than six months and they have become a resident taxpayer, their full-year wages and the tax collected from them must be reported as amounts withheld, even if tax at source was collected during the first months.

More information on submitting replacement data to the Incomes Register is available in the instructions ‘Reporting data to the Incomes Register: International situations’.

8 Obligations and procedures of foreign employers

8.1 The employer has no permanent establishment and is not registered with the employer register

Provisions on foreign employers’ reporting obligation are laid down in section 15 of the act on assessment procedure (18 December 1995/1558). Section 10, subsection 2(10) of the act on the income information system (Laki tulotietojärjestelmästä 12 January 2018/53) sets obligations for foreign employers to report data to the Incomes Register.

If a foreign employer has no permanent establishment in Finland and it has not voluntarily registered with the employer register, it is not obligated to withhold tax from an employee’s wages. Furthermore, the employer is not obligated to pay the employer’s health insurance contribution. However, such an employer is obligated to submit reports to the Incomes Register regarding individuals whose uninterrupted stay in Finland takes more than six months. In practice, reports must be submitted for individuals who are resident taxpayers in Finland. Employers must submit data on work carried out in Finland.

Foreign employers are also obligated to submit data on wages paid if the income earner works in Finland as a leased employee for a Finnish employer. The data must be submitted when the tax treaty between the employee’s country of residence and Finland allows the taxation of a leased employee’s wages in Finland, or when there is no tax treaty.

Furthermore, foreign employers must always submit reports to the Incomes Register for employees who are insured in Finland.

If an employee works partially in Finland and partially abroad during the same pay period, the foreign employer must submit data on the full income, i.e. also the share of the work performed abroad.

More information on reporting data to the Incomes Register is available in the instructions ‘Reporting data to the Incomes Register: international situations.

8.2 The employer has a permanent establishment or actual headquarters in Finland or is registered with the employer register’

A foreign employer that has a permanent establishment in Finland in accordance with section 13a of the act on income tax is comparable to a Finnish employer and must be registered with the employer register. Similarly, an organisation that has actual headquarters in Finland is comparable to a Finnish employer.

Even if an employer has no permanent establishment or actual headquarters in Finland, it can voluntarily register with the employer register. A foreign employer registered voluntarily with the employer register is not regarded as a Finnish employer as laid down in section 10, paragraph 4 of the act on income tax if it has no permanent establishment or actual headquarters in Finland. As a rule, a foreign employer that has a permanent establishment in Finland or is voluntarily registered with the Finnish employer register has the same obligation to collect tax as a Finnish employer.

Foreign employers must report data on wages paid to the Incomes Register. Reports must also be submitted for contributions paid for work carried out in Finland. A non-Finnish employer that has voluntarily registered with the employer register or has a permanent establishment in Finland does not need to report wages paid to a non-resident taxpayer for work carried out outside Finland or other income not deemed to be earned in Finland according to section 10 of the act on income tax act to the Incomes Register. The aforementioned notwithstanding, a report must, however, be submitted if the employee is insured in Finland.  Instead, an organisation that has actual headquarters in Finland must also submit data to the Incomes Register on wages paid to a non-resident taxpayer for work carried out abroad.

Employers must also withhold tax from wages paid to an employee who is a resident taxpayer and pay the tax to the Finnish Tax Administration.

Employers must collect tax at source from wages paid to a non-resident taxpayer if the wages were earned in Finland. A foreign employer that has a permanent establishment or its organisation’s actual headquarters in Finland must, therefore, collect tax at source from wages paid to non-resident taxpayers when work is carried out in Finland. Instead, an employer that is voluntarily registered with the employer register is only obligated to collect tax at source from wages paid to leased employees.

More information on reporting data to the Incomes Register is available in the instructions ‘Reporting data to the Incomes Register: international situations’.