Higher living expenses: what deductions can foreign employees claim?
If you live in a foreign country and your employer sends you to work in Finland for a period of max. 3 years, normally the place where you exercise employment in Finland is deemed a ‘special place of work’. If your main place of work has not changed, i.e. you continue to be employed by your employer of the foreign country where you come from, you can claim deductions because of having had to pay living expenses that are higher. Under the tax rules, increased living expenses means the additional outlays of money you must make because of exercising your employment elsewhere, not at your main place of work.
The following living expenses may grow:
- Accommodation
- Commuting and other travel related to your employment
- Lunches, groceries, food, keeping in touch with family members in your home country, etc.
More information about commuting and the ‘special’ place where work is performed
If you are an employee of the construction industry or the earthmoving or forestry sectors, see further instructions for special sectors of work: Special sectors – claiming deductions for higher living expenses (available in Finnish and Swedish) .
What can you deduct?
Claiming deductions for travel expenses: You can claim deductions for the travel from your home country to Finland only if no reimbursement or coverage was paid to you by your employer. When claiming deductions, you must claim the actual expense amounts you paid yourself. Travel and commuting also includes the expenses you pay in Finland for your trips between your accommodation and your ‘special place of work’.
Claiming deductions for accommodation: If no employer-paid accommodation in Finland was organised for you, you can claim the expenses related to your place to live; the rental costs of an apartment or hotel costs, as the case may be. However, if you arrived in Finland bringing family members with you, the part of accommodation expenses connected to your family’s stay in this country is not tax-deductible for you.
Claiming deductions for lunches and for other living expenses: If you received no per diem money from your employer and you had to pay expenses higher than usual for food or lunches, you are entitled to claim them on the grounds that your cost of living grew due to your working in Finland.
You can refer to a standard fixed amount. Under the tax rules, the standard deduction is €30 per day. This covers the total of your increased living expenses, except commuting/travel, and except accommodation. It may be that the Tax Administration will send you a request letter to ask for more information about your travel expenses relating to your employment, about itemisations of the expenses claimed, or about the actual difference between your previous and current living expenses.
Instead of the standard fixed amount, you can choose to claim the actual amounts paid.
Example: Tara works in Delhi. She is an employee of a company in India. The employer company sends her to work in Finland, to participate in a project of the multinational enterprise’s Finnish subsidiary. Tara's posting is agreed for 18 months. The party that pays Tara’s wages is the Finnish subsidiary. Under the circumstances, her main place of work is still in Delhi, and after the Finnish project is over, her plan is to resume work in Delhi. The subsidiary located in Finland is deemed Tara’s ‘special place of work’.
The employer paid for Tara’s airline tickets from Delhi to Finland. Tara made arrangements for renting an apartment for herself, paying rent from her personal funds. The employer pays no per diems to Tara.
The fact that she works in Finland has caused a number of extra living expenses. Tara has not saved all her receipts – instead, she completes her tax return filling in the fixed deduction of 30 euros per day. Additionally, Tara claims the apartment’s rental cost for the year. She calculated her standard, fixed deduction with the full number of days included when present in Finland, thus leaving out the days she spent in India during her summer vacation.
The Tax Administration sent her a request letter for further information, asking for more details about the claimed expenses. She answered by referring to her job assignment in Finland, stating that she exercises her employment at a ‘special place of work’. She also points out that the company paid no reimbursement for the year’s rental cost nor a per diem allowance. Among the reasons for Tara’s increased cost of living is the fact that food is more expensive in Finland than in Delhi. Tara also had to purchase a winter wardrobe that she would never have to use working in Delhi. In conclusion, she is granted a tax deduction consisting of the rent and the fixed amounts.
Claim the deductions on your tax return (if you have not done so before)
You can enter data for upcoming tax deductions when you ask for a tax card, or alternatively, you can fill in the deductible costs afterwards when you make corrections to your pre-completed tax return.
The springtime is when your pre-completed tax return arrives: you will receive it in the spring of the year following the year when you have worked in Finland.
If you are a user of MyTax, go to the Pre-completed return’s section ‘Expenses for the production of wage income’. Go to MyTax
If you cannot log in to MyTax, complete your tax return on paper. Read the instructions and complete Form 50A (Earned income and deductions).
Further information about increased living expenses:
Read chapter 4 of the Tax Administration’s in-depth guide concerning “Tax deductions for travel expenses in the tax assessment of individuals who earn income from employment” – “Claiming deductions for increased living expenses” – Lisääntyneiden elantomenojen vähentäminen (chapter 4) (available in Finnish and Swedish)