Au pairs from abroad arriving in Finland
A Finnish household may employ a foreign au pair to take care of children and to assist in household duties. Typically, an au pair is given free room and board and paid some pocket money.
The pocket money paid by a Finnish family to a foreign individual working as an au pair is taxable wage income. The room and board and other maintenance provided by the household are a fringe benefit and therefore also taxable income. The tax assessment of the income depends on how long the au pair stays in Finland.
Is the au pair staying in Finland 6 months or longer?
If the au pair stays in Finland for longer than six months, they will be taxed according to the same rules as other Finnish tax residents. This means that their wages and other earned income are subject to progressive taxation in Finland.
If the au pair stays in Finland for six months or less, their employer withholds a 35% tax at source on their income. Alternatively, if the au pair resides in a country within the European Economic Area or a country that has a tax treaty with Finland, they may request that they should be taxed progressively instead. If the employee requests progressive taxation instead of paying tax at source, they must apply for a non-resident taxpayer's tax card. Read more: Work in Finland
Au pairs need a tax card
For purposes of wage payment, au pairs must get a Finnish tax card as soon as they start working in Finland. If the work lasts longer than six months, they must also apply for a Finnish personal identity code. The Tax Administration will send a pre-completed tax return to all employees who have either stayed longer than six months in Finland or requested progressive taxation. The taxpayer is expected to check the pre-completed tax return. If the pre-completed tax return is inaccurate, additional data can be submitted or errors corrected in the MyTax e-service or on a paper form.
Employee's and employer's health insurance contributions
All wages are usually subject to the employee’s health insurance contribution withheld from the employee’s wages and a health insurance contribution paid by the employer. If the au pair’s earnings from work in Finland are less than €696.60 a month (in 2019), the health insurance contributions do not need to be paid. This means that the employee is not covered by Finnish health insurance.
If the au pair’s wage income in 2019 is less than €14,282, the health insurance contribution is 0% even if they are covered by the Finnish health insurance scheme. If the wage income is €14,282 or more, the contribution is 1.54% of the wages.
If the au pair moves to Finland permanently, the health insurance contributions must be paid, unless the employee has a certificate issued by Kela showing that the employee is not entitled to residence-based social security benefits in Finland.
Example: An au pair comes to Finland to work for the calendar year 2019. The host family provides free accommodation and meals and pays €300 pocket money per month. The accommodation and meals give rise to a taxable benefit valued at €517 per month. The au pair’s net pay totals approximately €817 per month.
The au pair is covered by the Finnish health insurance scheme, but the health insurance contribution is 0% in 2019 if the wage income is less than €14,282 a year.
Based on the amount of wages, the host family pays the employer's health insurance contribution but does not withhold the employee’s health insurance contribution from the wages. It is also possible that other insurance contributions have to be withheld from the wages. For more information about insurance contributions, visit the websites of Finnish Centre for Pensions and Employment Fund or contact pension institutions.
A household employing an au pair must follow the instructions given on the employee's tax card on withholding or tax at source. The household must also always report all wages and other earned income to the Incomes Register regardless of the amount paid. There is no monetary minimum threshold. In addition, paid employer's health insurance contributions must be reported by submitting the employer's separate report.
The household must also file an annual information return (Employer Payroll Report) by the end of January following the wage payment year. The last annual information return that must be filed is on wages paid in 2018. File wages on the form Annual Information Return – Employer Payroll Report (7801e). You can file the form electronically or on paper.
Read more: Household employers
Tax credit for household expenses
Wages paid to an au pair can entitle the household to a tax credit for household expenses. The tax credit for household expenses is 20% of the employee's gross wages (wages paid + fringe benefits) and the indirect wage expenses payable by the employer, such as the employer's health insurance contribution.
Read more: Tax credit for household expenses