Six-month rule for wage income earned abroad

This is an unofficial translation. The official instruction is drafted in Finnish (Ulkomaantyöskentelystä saatua palkkaa koskeva kuuden kuukauden sääntö, record number VH/5709/00.01.00/2022) and Swedish (Sexmånadersregeln för lön för utlandsarbete, record number VH/5709/00.01.00/2022) languages.

These instructions concern the six-month rule for the taxation of wages for working abroad in income taxation. Procedures applied to employers and employees relating to the six-month rule are described in the Finnish Tax Administration’s instructions Taxation of income earned abroad (VH/5708/00.01.00/2022). The instructions also discuss the taxation of wages for working abroad in situations where the six-month rule does not apply.

More information about insurance taken out for working abroad is available in the Finnish Tax Administration’s instructions Health insurance contributions in international employment situations (VH/6037/00.01.00/2022).

Section 3.1.3 on the accrual of days of stay in Finland and stays in Finland for an unexpected and compelling reason has been clarified. In addition, the section on payments to which the six-month rule does not apply has been clarified (Section 4.3).

1 Introduction

If a resident taxpayer in Finland works in a foreign country, their income is normally taxable in Finland. However, in some cases, the provisions of our national legislation treat such wages as exempted from taxes. In addition, tax treaties may restrict Finland’s right to tax.

These instructions concern the six-month rule laid down in section 77 of the act on income tax (Tuloverolaki 1535/1992) and the requirements for its application that, if fulfilled, make wages tax-exempt in Finland. Furthermore, these instructions discuss the right to tax of the country of work and the definition of wages subject to the six-month rule.

International employment situations other than whose within the scope of application of the six-month rule are described in more detail in the instructions Taxation of income earned abroad.

The Finnish Tax Administration has also issued a separate statement on the impact of the coronavirus pandemic on the application of the six-month rule: Effects of the Coronavirus pandemic on taxes on income received under an employment contract in a foreign country (the six-month rule and forces majeures).

2 Six-month rule pursuant to section 77 of act on income tax

Section 77 of the act on income tax lays down provisions on a six-month rule, according to which wages earned for working abroad are tax-exempt income in Finland. The section applies if:

• an individual’s stay abroad is caused by this work (section 77, subsection 1 of the act on income tax);
• the stay period is at least six months without interruptions (section 77, subsection 1 of the act on income tax) and the employee does not stay in Finland for more than six days per each month of work (section 77, subsection 3 of the act on income tax); and
• the country of work has the right to tax the income in question under a tax treaty (section 77, subsection 1 of the act on income tax), if there is an agreement on income taxation between Finland and the country of work.

Section 77 of the act on income tax does not apply to wages received from a Finnish public body, from Business Finland Oy or from work done on board a Finnish ship or aircraft (section 77, subsection 1 of the act on income tax).

Finnish public bodies include the State of Finland, municipalities, federations of municipalities, wellbeing services counties (from 1 January 2023), the Evangelical-Lutheran Church and related parish, the Orthodox Church and related parish, their federation of parishes or other federations of parishes, the Bank of Finland, Kela, the Academy of Finland, the Arts Promotion Centre Finland, and the Natural Resources Institute Finland. As of 1 January 2010, for purposes of income taxes, Finnish universities no longer have the status of ‘public body’.

Subsections 3–5 of the section also lay down provisions on the number of days an employee can stay in Finland before and during their work period abroad, as well as situations where working abroad is interrupted or ended for a compelling or weighty reason independent of the employee or employer. Subsection 2 of the section includes special requirements that, if fulfilled, the six-month tax exemption rule can also apply to the benefit laid down in section 66 of the act on income tax.

The requirements for applying the six-month rule are discussed in more detail in Section 3 of these instructions. The section also discusses situations where the rule can exceptionally apply, even if the number of days stayed in Finland, for example, exceeded the number laid down in subsection 3 or the duration of the work period abroad was shorter than six months (section 77, subsection 5 of the act on income tax).

Because section 77 of the act on income tax only applies to wage income, other income, such as social benefits, royalties or non-wage compensation for work, are not tax-exempt income based on this provision. Wages and other payments considered similar to wages pursuant to the six-month rule are discussed in more detail in Section 4 of these instructions. The same section also discusses payments to which the six-month rule cannot apply.

3 Requirements for applying the six-month rule

3.1 Uninterrupted work period abroad

3.1.1 A stay period of at least six months abroad due to work

For the six-month rule to be applicable, the reason for a stay abroad must be related to work. In other words, if the stay is caused by family reasons or studies, the rule cannot apply. However, the reason for a stay abroad may change during the stay. For example, if an individual who originally moved abroad due to their spouse’s work later starts to work abroad for a local employer, the stay abroad will be considered to be caused by work from the start of the work in question.

The six-month period laid down in section 77 of the act on income tax is not tied to the calendar year. Therefore, the six-month period can consist of work carried out during two calendar years, e.g. 15 November – 14 May. The period is calculated based on the actual time spent on working. Any holiday taken at the beginning or end of a work period does not extend the work-related stay period abroad.

However, the date of arrival in the country of work before the start of work and the date of departure after the work period are considered to be caused by working abroad. A work period abroad is considered to end on the day on which the taxpayer could have left the country of work after the end of their work (section 77, subsection 4 of the act on income tax). The Supreme Administrative Court’s ruling 1541 issued on 27 August 1998 deemed that a stay abroad due to work lasted at least six months:

Supreme Administrative Court ruling 1541 issued on 27 August 1998

A plumber had arrived in Sweden on 2 April 1995 to work there between 3 April and 30 September 1995. The plumber’s work on 30 September 1995 had ended at 5 pm. The plumber had packed their belongings and returned the keys to their rental apartment on 1 October 1995, whereupon the plumber headed back to Finland. The plumber’s stay in Sweden due to work had lasted from 2 April to 1 October 1995, i.e. at least six months without interruptions. The plumber’s wage income earned in Sweden was not income subject to tax in Finland. Tax year 1995.

Act on income tax, section 77, subsection 1

It may be that an employee first works in one foreign country and then another. The Supreme Administrative Court’s ruling 2015:120 applies to a situation like this:

Supreme Administrative Court ruling no. 2015:120

The taxpayer had worked consecutively in three different countries in such a manner that the work abroad had lasted for more than six consecutive months. Finland did not have a tax treaty with any of the countries in question. Between changing the country of work, the taxpayer had resided in Finland, among other countries. The Supreme Administrative Court deemed that when assessing the consecutiveness of the work period abroad in accordance with section 77 of the act on income tax, it was irrelevant that the taxpayer, after residing in Finland, had not returned to the same country of work where the taxpayer had resided before coming to Finland. Tax years 2009 and 2010.

Act on income tax, sections 77, subsections 1 and 3

3.1.2 The number of stays in Finland during a work period abroad

A stay abroad due to work is regarded as continuous if the person stays for at most six days in Finland during the work period per each full month of working abroad, i.e. one month (i.e. days stayed in Finland).

For the six-month rule to apply, the individual cannot however stay for more than 60 days in Finland beforehand, and the individual must return to the country of work after each stay in Finland to resume their work abroad.

The reasons for visiting Finland or the number of such visits are irrelevant for the purposes of this rule. As a result, the visits to Finland related to working abroad are included in the number of days stayed in Finland. However, wages received for work carried out in Finland are tax-exempt based on the six-month rule if the wages are received for work that is carried out in Finland for the same employer over at most a few days a year and is significantly related to working abroad (i.e. reporting trips).

Supreme Administrative Court ruling no. 1987-B-565

For a seafarer working on a foreign ship, residence in Finland included the time during which the ship stayed in Finland for loading or unloading.

Tax year 1987, advance information

Act on income tax, section 22 b, subsection 2

Supreme Administrative Court ruling 5030 issued on 31 December 1992

A seafarer working on board a foreign ship registered abroad was not deemed to be residing in Finland during the time the ship was travelling in the Finnish waters between ports.

Tax year 1988.

Act on income tax, section 22 b

Nevertheless, staying only for an hour or two in Finland does not increase the total number of days stayed in Finland.

Supreme Administrative Court ruling no. 1986-B-II-554

For a paramedic working in an ambulance in the Soviet Union, the days spent in Finland by the paramedic as the ambulance visited Finland in connection with an accident were not deemed to constitute days spent in Finland, when the visits lasted for approximately one hour at a time.

Tax year 1986, advance information.

Act on income tax, section 22 b

Weekends and other days off are not regarded as days stayed in Finland. Similarly, under a number of rulings of the Supreme Administrative Court, annual holidays 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).

Supreme Administrative Court ruling no. 2001:22

Person A was working in the United Kingdom. During that time, they also took holidays in Sweden and Denmark. The Supreme Administrative Court deemed that a stay in third countries that constitutes spending days of leave directly linked to the work abroad is not comparable to residence in Finland pursuant to the act on income tax, section 77, subsection 2 (1535/1992). The Supreme Administrative Court also referred to the grounds of the verdict given by the Central Tax Board regarding the same case, according to which section 77(2) of the act on income tax only limits the number of days during work abroad with regard to stays in Finland. Government proposal 229/1985 also states that the number of days pertaining to the limit shall only apply to stays in Finland, and that days of leave spent abroad are not comparable to days stayed in Finland.

Tax year 2000. Preliminary ruling. Voting 4–1.

Act on income tax, section 77, subsection 2

If an employee’s work in a foreign country has consisted of several separate periods, but the waiting times between the periods 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.

Even part of a calendar day is regarded as a day stayed in Finland, i.e. the day of arrival in Finland and similarly the day of departure.

During a long period of working abroad, the number of days stayed in Finland may be exceeded when the days stayed in Finland are examined considering the entire period of working abroad. However, if there is a period during the period of working abroad when all the requirements for exemption listed in section 77 of the act on income tax are fulfilled, the wages received during that period will be exempt from tax.

3.1.3 Unexpected interruption or end of a period of working abroad

For the purposes of counting the length of the period worked abroad, it is not seen as an interruption if the employee must return to Finland for a reason which is unexpected, compelling and independent of the employer or employee (section 77, subsection 3 of the act on income tax). If the period of working abroad ends for a significant and unexpected reason independent of the taxpayer or their employer, the wages received for the employment will not be taxable, even if the duration of the work period was not six months (section 77, subsection 5 of the act on income tax). Nevertheless, the requirement for exemption continues to be that the country of work has the right to tax under the relevant tax treaty or that the country of work has no tax treaty (see section 3.2).

Examples of an unexpected reason for the above purposes:

• Unexpected serious illness of the employee, a family member or next-of-kin.
  • Family members include the employee’s wife or husband or co-habitant if they live in the same household, the employee’s spouse in a registered partnership, the employee’s or the spouse’s children, adopted children and foster children.
• Attending the funeral of 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, epidemic
• Exceptional difficulties in obtaining a visa for the employee.

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

However, the interruption or end of the period of working abroad must always result from a compelling reason concerning the taxpayer, such as war or political unrest. In addition, the reason must be unexpected for the taxpayer. For example, the Ministry for Foreign Affairs of Finland’s request to leave a country or avoid all travel to a certain country or area does not automatically mean that all days spent in Finland during the period in question would be excluded from the number of days stayed in Finland.

The Finnish Tax Administration has issued a separate statement (in Finnish) on the impact of the coronavirus pandemic on the application of the six-month rule (Effects of the Coronavirus pandemic on taxes on income received under an employment contract in a foreign country (the six-month rule and forces majeures).

If a period of working abroad is not considered to be interrupted as laid down in section 77, subsection 3 of the act on income tax, the time spent in Finland will increase the number of days stayed in Finland similarly to the time spent abroad. The reason for staying in Finland may change during the stay in Finland, or the reason cannot otherwise be regarded as compelling or unexpected. In this case, the period of working abroad will be interrupted. If the taxpayer later returns to the foreign country to resume their work, a new period of working abroad will start.

The existence of a compelling and unexpected reason as laid down in section 77, subsection 3 of the act on income tax must be assessed separately in each case. The act does not set any boundaries for how long the reason for a stay in Finland can be considered compelling and unexpected, and similar boundaries cannot be set otherwise. For example, receiving treatment for a serious illness may require regular monthly visits to Finland if the treatment cannot be arranged otherwise. In this case, the visits can be considered to be caused by a compelling and unexpected reason, as a result of which the period of working abroad is not interrupted.

3.2 Taxing rights of the country of work

3.2.1 The country of work must have the right to tax wage income

One of the absolute requirements for applying the six-month rule is that, if the tax treaty signed with Finland covers income taxes, the country of work must have the right to tax the wage income received there in accordance with the tax treaty. If there is no tax treaty with the country of work, the country of work will always have the right to tax the income received for work carried out there. However, it is not a requirement for the exemption, in neither case, that the country of work would actually impose tax on the income.

3.2.2 Provisions on wage income pursuant to tax treaties

Normally, tax treaties provide the country of work with the right to tax wage income received for work carried out in that country. However, an exception to this rule is the “183-day rule”, which prevents the country of work from imposing tax if:

• the employer is not domiciled in the country of work;
• the wages do not cause an increase of payroll expenses in a permanent establishment located in the country of work; and
• the employee does not stay for longer than at most 183 days in the country of work during a certain 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.

The taxation right of the country of work is described in more detail in the Finnish Tax Administration’s instructions Taxation of income earned abroad.The instructions also include a list of the tax treaties in which the stay period is tied to the calendar year, and the tax treaties in which the stay period is calculated over consecutive 12 months.

The requirements for applying the six-month rule are also listed in the following table: Six-month rule application test (PDF) (in Finnish).

Tax treaties may include provisions on employee leasing, or certain countries may apply the concept of an economic employer (for more information, see the Finnish Tax Administration’s instructions As the aforementioned 183-day rule does not prevent wages from being taxed in the country of work in these situations, the six-month rule may apply if the other requirements are met.

If an individual is considered to reside in the country of work in accordance with the applicable tax treaty, the country of work will always have the right to tax the income earned there. In this case, the total number of days of stay is not important. Furthermore, Finland does not have the right to tax the income, and the six-month rule does not apply.

3.2.3 Working in a third country or Finland

Working in the territory of a third country can be treated as working abroad in accordance with section 77 of the act on income tax. However, it must be taken into account that the employee’s stay 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 employee may stay fewer than 183 days in the primary country and the secondary country, in which case the six-month rule stops being applicable to the wage income received from either country.

If a person regularly works in several countries, it is possible that one country of work has the right to collect tax on income earned within its territory under a tax treaty while the other countries of work do not. In this case, the wage income will be divided into tax-exempt and taxable parts.

When submitting reports to the Incomes Register, the employer must also divide the income into tax-exempt and taxable parts relative to the number of days worked in different countries.

Wages paid for work carried out in Finland are usually subject to taxes in Finland. If an individual works in a foreign country as an employee of a Finnish company, they may be required to work in Finland during the assignment, and this accumulates some days of stay in Finland. Such days are known as “reportable days”. However, the six-month rule can be applicable to the wages if the following conditions are fulfilled: they are earned for work done in Finland, they are received from the same employer, the work is directly connected with the employee’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. Reportable days are regarded as days stayed in Finland (see section 3.1.2).

More information about the taxation of remote work carried out in Finland is available in the Finnish Tax Administration’s instructions Taxation of income earned abroad (section 6.6.2).

4 Wages subject to the six-month rule and other payments regarded as wages

4.1 Wages received from the employer for working abroad

The six-month rule for tax exemption only applies to wage income paid by the employer for working abroad. In addition to regular wages earned for working abroad, the six-month rule may apply to other payments regarded as wages:

• Wages paid to an individual who participates in a traineeship programme or an induction period abroad, if such a programme or period is directly connected to their work in a foreign country. Working abroad is considered to start from the beginning of the traineeship programme.
• Wages for work in a foreign country even if the wages were paid after working abroad.
• Holiday pay that has the same period of accrual as the wages for work in a foreign country even if it was paid later.
• Regular, performance-based and profit-sharing bonuses insofar as they are paid for working abroad.
• Employee stock options (section 66 of the act on income tax) insofar as they are accrued while working abroad (for more information, see the Finnish Tax Administration’s instructions Taxation of employee stock options and employee offerings in cross-border circumstances).
• Various reimbursements of expenses paid to an employee even if they were taxable reimbursements, because taxable reimbursements of expenses are treated as wages.
• Payments for general relocation expenses received by an employee when starting their work in a foreign country.
• Sick pay paid by the employer.
• Payments made by the Ministry of Economic Affairs and Employment under the Pay Security Act if they are related to an employee’s work in a foreign country.
• Signing bonuses when the six-month rule is applicable to the work carried out under a contract.

Expenses accrued from the production of tax-exempt income are not deductible in taxation. Expenses accrued from wage income earned for such work carried out abroad that is tax-exempt under the six-month rule are therefore not deductible from other earned income. However, earnings-related pension and unemployment insurance contributions collected from wages under the six-month rule are deductible, and they can be deducted from other taxable earned income (section 96, subsection 1 of the act on income tax).

4.2 Wage income received from other work carried out while working abroad

In addition to wages subject to the six-month rule for tax exemption, a taxpayer may receive wage income for other work carried out while working abroad. Wages received for other work are exempt from taxes if the work requires a stay abroad and if the country of work has the right to tax the wages in question in accordance with a tax treaty. For example, fees received for writing columns for a Finnish newspaper by an employee who works abroad can be exempted if the writing work requires some facts to be gathered abroad.

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 (Article 12 of the OECD model tax treaty). In this case, the six-month rule does not apply.

Supreme Administrative Court ruling no. 1996-B-518

During the tax year, X worked as a UN peacekeeper in the Golan Heights. At the same time, X held a secondary occupation as a claim adjuster for A in Israel and Syria. The employment lasted from 12 December 1990 to 19 December 1991. In order to gain the extra income, X had to stay in the country of work. The wages received from the secondary occupation by the person working abroad for more than six months were subject to the six-month rule, even though the wages received for the primary occupation from a Finnish public body did not. Tax year 1991

Act on income tax, section 54

4.3 Payments to which the six-month rule does not apply

While working abroad, an employee may also receive other payments that are not wages earned for working abroad. Such a situation may exist when an employee is on sick or family leave or in an accident while working abroad, and receives compensation from Kela or an insurance company in place of wages.

The six-month rule does not apply to the following types of reimbursements paid to an employee and regarded as social benefits in taxation:

• sickness allowances paid by Kela;
• reimbursements based on accident insurance and motor vehicle insurance; and
• pregnancy and parental allowances paid by Kela (also when paid retroactively).

Furthermore, the six-month rule does not apply to wages paid by the employer during pregnancy or parental leave, because such wage income is not regarded as income received for work carried out abroad.

When returning to Finland after working abroad, an employee may receive return or relocation compensation. If such compensation is paid on the condition that the employee must continue to work for the same employer that sent them abroad, it will be treated as wages for work carried out in Finland. In this case, the six-month rule does not apply.

An individual may also receive various payments on different grounds at the end of employment. For example, severance pay, wages for the period of notice and other one-off remunerations may be paid based on the end of employment. In certain situations, the six-month rule may apply to such payments. More information about compensation related to the end of employment is available (in Finnish) in the Finnish Tax Administration’s instructions Taxation of payments related to the end of employment.