Tax-at-source on trade income

These instructions are for nonresident foreign corporate entities. A foreign corporate entity is considered a resident taxpayer in Finland if its place of effective management is in Finland. Read more about the place of effective management and a tax resident corporate entity’s tax obligations.

Foreign companies must pay tax on their trade income received from Finland. The payer is obligated to withhold tax-at-source. If too much tax has been withheld at source, the foreign company can apply for a refund of tax-at-source from the payer during the payment year, and from the Finnish Tax Administration after the payment year.

When is trade income subject to tax-at-source?

When foreign companies receive trade income from Finland, the income normally falls outside the Finnish taxing rights, unless the foreign company has a permanent establishment in Finland. The payer must withhold tax-at-source on  trade income if the foreign company is not entered in the prepayment register or has not presented a tax-at-source card for zero-rate withholding.

If tax has been withheld although the foreign company is not treated as having a permanent establishment in Finland, the company can apply for a refund of tax-at-source from the payer during the payment year, and from the Finnish Tax Administration after the payment year.

If the foreign company has a permanent establishment in Finland, it must withhold tax-at-source on any trade income it pays to another foreign company if the work is done in Finland. The same applies to Finnish companies that pay trade income to a foreign company for work done in Finland.

How to get a tax-at-source card

A tax-at-source card is issued for a fixed time period and for a specific assignment. A foreign company can be issued a tax-at-source card with a withholding rate of 0% if the company’s activities in Finland do not give rise to a permanent establishment and the tax treaty between Finland and the company’s country of tax residence is applied to the foreign company. A foreign company applies for a tax-at-source card by filing Form 6202, Application for a tax-at-source card for trade income received by a foreign corporation (6202e). Make sure to include the enclosures specified in the instructions.

Multiple assignments

Tax-at-source cards must be applied separately for each assignment. If the company has multiple assignments, the company is advised to request entry into the prepayment register. The company should request entry for the prepayment register or apply for a tax-at-source card before the assignment begins or at the latest before the invoicing starts in Finland. If trade income is paid before the company has been entered into the prepayment register or has been issued a tax-at-source card, the payer is obligated to withhold tax-at-source on the paid trade income. 

Read more about requesting entry to the prepayment register.

Two methods of refunding tax-at-source withheld in excess

1. A Finnish payer refunds the excess tax-at-source to the foreign company

The foreign company may present a zero-rate tax-at-source card to the payer after the payment. In this case, the payer can refund the previously withheld tax-at-source to the foreign company. The refund must be made in the same year as the trade income was paid. After paying the refund, the payer must correct the previously given information on the payment and tax-at-source withheld to the Incomes Register.

If the excess tax-at-source cannot be refunded during the payment year, the foreign company can apply for a refund from the Finnish Tax Administration.

It is not possible to get a refund of the withheld tax-at-source on the grounds that the foreign company has been entered in the prepayment register later.

2. The foreign company applies for a refund from the Finnish Tax Administration

The foreign company can apply for a tax-at-source refund from the Tax Administration during the three calendar years that follow the year when the excess tax-at-source was withheld. The application for a refund is made by filing Form 6165, Application for Refund of Finnish Withholding Tax - Foreign Corporations and Organisations (6163e, 6167e and 6165e). Read the instructions for filling in the form beforehand.

Withheld tax cannot always be refunded

Tax-at-source cannot be refunded if Finland has a right to tax the foreign company's income, for example if the company has a permanent establishment in Finland. In this case, the company must file an income tax return and the paid tax-at-source is taken into account as a prepayment.