Taxation of income from international organisations, the EU and diplomatic missions

This is an unofficial translation. The official instruction is drafted in Finnish (Kansainväliseltä järjestöltä, EU:lta ja valtioiden edustustoilta saadun palkkatulon verotus, record number VH/4260/00.01.00/2022) and Swedish (Beskattning av löneinkomst från internationella organisationer, EU eller staters beskickningar, record number VH/4260/00.01.00/2022) languages.

This guide deals with income tax on salary/wages and other employment-related benefits received from certain international organisations and institutions, the EU and diplomatic and consular missions, as well as the health insurance contribution of persons insured in Finland. Most foreign-language names or abbreviations for international organisations used in the original Finnish guide are in English.

Chapter 7 contains an update relating to Finland becoming a state party to the North Atlantic Treaty Organization (Nato). Section 7.3 addresses the status of the national representatives of Nato, the international staff members and the Nato forces, including information on the Defense Cooperation Agreement's (DCA) effects on taxes.

1 Introduction

Finnish tax law contains provisions on the scope of the tax liability and taxability of the income of employees working for foreign missions and certain international organisations. Finland is party to several treaties concerning international organisations that restrict Finland’s right to levy taxes. There are similar provisions in “host country/seat agreements” concluded by Finland with certain international organisations and institutions established in Finland.

For the purposes of this guide, the term “convention on privileges and immunities” refers to a treaty concerning or containing such privileges and immunities. For the purposes of this guide, the term “international organisation” refers to international organisations in general. The term “specialised agency” refers specifically to the specialised agencies of the United Nations.

2 Scope of tax liability and taxability of income

2.1 Scope of tax liability for individuals and international organisations

2.1.1 Resident and non-resident tax liability of individuals

According to section 9 of the Income Tax Act (Tuloverolaki 1535/1992), a person resident in Finland (a resident taxpayer) is liable to pay tax on their worldwide income. A person who does not reside in Finland (a non-resident taxpayer) is liable to pay tax on their income from Finland. Section 10 of the Income Tax Act contains provisions on what constitutes income received from Finland. For more information on tax residency and non-residency, see the Finnish Tax Administration’s guide Tax residency, nonresidency and residency in accordance with a tax treaty – natural persons.

Section 11 of the Income Tax Act defines when an individual is resident in Finland. The section also contains provisions on when persons employed abroad by certain international organisations are resident taxpayers in Finland. A Finnish citizen working abroad in the United Nations, one of its specialised agencies, the International Atomic Energy Agency or in international development cooperation is considered to be resident in Finland during the period of employment if they have resided in Finland immediately before the signing of the employment agreement. They have the option of requesting tax non-residency, however. In such a case, they must be able to prove that they have had no substantial ties with Finland during the tax year. (Section 11, subsection 3 of the Income Tax Act.) 

Individuals who are resident taxpayers in Finland are also liable to pay tax in Finland on wages, salaries and other payments received from abroad, such as from a foreign state or an international organisation, unless otherwise provided by the six-month rule in section 77 of the Income Tax Act, section 12 of the Income Tax Act or other provisions of the Income Tax Act concerning the taxability of income, or the provisions of a tax treaty or another international treaty. 

2.1.2 International organisation or institution established in Finland as an employer

International organisations or institutions established in Finland are in principle neither public sector entities within the meaning of section 10, subsection 3 of the Income Tax Act nor payers of salaries or emoluments resident or located in Finland within the meaning of section 10, subsection 4 of the Income Tax Act. In decision KHO 2021:54, the Supreme Administrative Court holds that wages/salaries paid by the above-mentioned organisations cannot be regarded as income received from Finland under section 10 of the Income Tax Act. Thus, the income must be considered as received from a foreign country. Non-resident taxpayers are thus not liable to pay tax in Finland on wages, salaries or other payments received from such an organisation or institution.

An international organisation is usually exempt from tax under a memorandum of association or a memorandum of understanding. Due to their specific nature, international organisations are not considered resident employers in a contracting state within the meaning of the article on earned income in tax treaties (Article 15 of the OECD Model Tax Convention).  An organisation does not normally carry out any business activities and therefore does not normally have a permanent establishment in the country of work (usually Article 5 of tax treaties). For more information on the impact of tax treaties on the taxation of income, see Chapter 3.3 of this guide.

As an international organisation is not in principle considered an employer in Finland, it has no employer obligations for tax purposes in Finland. However, if the international organisation has voluntarily registered in the employer and prepayment register, it has the normal employer obligations in this respect. For more information on reporting wages/salaries paid by an international organisation to the Incomes Register, see Section 5.5 of the Finnish Tax Administration’s guide Reporting data to the Incomes Register: international situations.

2.1.3 Foreign diplomatic mission in Finland as an employer

Foreign diplomatic missions established in Finland are neither public sector entities within the meaning of section 10, subsection 3 of the Income Tax Act nor payers of salaries or emoluments resident or located in Finland within the meaning of section 10, subsection 4 of the Income Tax Act. A foreign diplomatic mission is considered to be part of the foreign state.

However, a foreign diplomatic mission in Finland must report information on the wages/salaries it pays to the Incomes Register if it is liable to report the information to an Incomes Register data user. For more information on reporting, see Section 5.6 of the Finnish Tax Administration’s guide Reporting data to the Incomes Register: international situations.

According to section 16 of the Prepayment Act (Ennakkoperintälaki 1118/1996), a diplomatic mission or other comparable representative office or the office of a career consul in Finland is not obliged to withhold tax on wages/salaries paid.

2.1.4 Employer’s health insurance contribution

International organisations have been established based on specific international treaties, which means that they do not have any actual tax residency. An organisation is therefore not an employer resident in Finland for the purposes of the Income Tax Act or tax treaties.  Organisations set up under international treaties are considered foreign employers. In tax assessment practice, foreign employers have not been required to pay the employer’s health insurance contribution.

In some cases, compensation payable to the employer under the Health Insurance Act is conditional on the employer having paid the employer’s social security contribution on salary/wages paid to an employee insured in Finland. In such cases, the foreign employer may voluntarily pay the employer’s health insurance contribution to the Finnish Tax Administration.

In similar cases, a foreign diplomatic mission may also voluntarily pay the employer’s health insurance contribution to the Tax Administration.

2.2 Taxation of income

2.2.1 Nature and taxability of payments

The nature and taxability of payments made by an international organisation for Finnish tax purposes are determined in accordance with the provisions of the Income Tax Act. Sometimes an organisation pays, in addition to the actual salary/wages, various benefits based on circumstances such as the number of dependent children, living abroad or a similar reason. In principle, such payments are considered taxable wages for Finnish tax purposes. Various payments made by organisations to cover work-related expenses may differ in basis and amount from the emoluments that are considered tax-exempt in Finland, in which case they are considered taxable wages insofar as they exceed the amount of the tax-exempt benefit in Finland.

An organisation may have its own social security scheme based on which it pays pensions or, for example, compensation for earnings lost due to illness. For Finnish tax purposes, such payments are treated in the same manner as a corresponding pension or benefit income received in Finland.

If a treaty establishing an international organisation, a convention on privileges and immunities or a host country agreement provides for tax exemption of the salary/wages paid by the organisation, the tax exemption provisions of the treaty on wages/salaries, emoluments and allowances will also be applied to benefits, emoluments and allowances paid by the employer during the employment relationship, which are otherwise typically considered taxable. Contributions made by an employer to a collective pension plan to accrue pensions are not considered taxable income in tax assessment practice.

An organisation may also pay emoluments for work performance to a non-staff member. In such a case, it is necessary to decide whether it is a question of salary/wages paid to a trainee or non-wage compensation for work based on a commission relationship. Exemptions under conventions on privileges and immunities do not usually apply to such payments.

The provisions concerning the tax exemption of emoluments paid by certain international organisations in sections 12 and 76 of the Income Tax Act, for example, only apply to payments covered by the Income Tax Act. If the compensation is related to a business activity, the Act on the Taxation of Business Income is applied, and it does not contain similar tax exemption provisions.

2.2.2 Tax liability of diplomats and individuals working for international organisations

The tax liability status of foreign diplomats and individuals employed by international organisations is determined in accordance with the general principles laid down in sections 9 and 11 of the Income Tax Act. Individuals are generally considered resident taxpayers in Finland if they have their main abode and home in Finland or if they reside in Finland for more than six months. However, section 12, subsection 1 of the Income Tax Act contains special provisions on the extent of the tax liability of such individuals who are not Finnish citizens.

According to section 12 of the Income Tax Act, individuals serving in Finland in a diplomatic mission, a comparable representative office or the office of a career consul, or individuals working in Finland in the service of the United Nations, one of its specialised agencies or the International Atomic Energy Agency, or any other major international organisation or body designated by the Ministry of Finance based on a proposal from the Ministry for Foreign Affairs of Finland as being for a limited period of time equivalent to the above-mentioned organisations, are only liable to pay tax in Finland for:

1. income from a property located in Finland;
2. income from business activities carried out in Finland;
3. rental income received from an apartment managed based on shares in a Finnish housing company or other limited liability company or membership in a housing cooperative or another cooperative; or
4. wages/salaries and pension income received from Finland on the basis of an activity other than that referred to in this paragraph.

The provision limiting the scope of tax liability in the Income Tax Act also applies to interest within the meaning of the Act on Withholding Tax on Interest Income (Laki korkotulon lähdeverosta 1341/1990; decision KHO 1992-B-503 of the Supreme Administrative Court). Therefore, individuals to whom section 12 of the Income Tax Act applies do not have to pay withholding tax on interest income in Finland.

According to section 12, subsection 1, paragraph 1 of the Income Tax Act, income from real estate is taxed in Finland. Rental income and capital gains from real estate are taxable. Income from agriculture and forestry is also regarded as income from real estate according to the provision.

However, in the case of an apartment managed based on shares in a housing company or the membership of a cooperative, only the rental income from these is taxed in Finland. Gains on an apartment managed based on shares in a housing company or the membership of a cooperative are tax-exempt.  

Salaries/wages and pension income may be taxed in Finland if it is question of income received from Finland in accordance with the provisions in section 10 of the Income Tax Act. If the salaries/wages are not income received from Finland in accordance with the provisions in section 10 of the Income Tax Act, Finland has no right to levy taxes on them.

Examples of income with no tax liability in Finland:

• Dividend income
• Interest income
• Capital gains (however, capital gains from the sale of real estate are taxed in Finland)
• Income from abroad
• Benefits income, such as a maternity allowance

The provisions in section 12 of the Income Tax Act also apply to family members and private servants of individuals employed by a diplomatic mission or an international organisation if they are not Finnish citizens.

According to its wording, section 12, subsection 1 of the Income Tax Act applies to employed individuals (“palveluksessa olevat henkilöt”). The application of the provision has not been restricted based on this wording only to individuals in a public-service employment relationship (“virkasuhde”), but section 12 of the Income Tax Act applies to both individuals in a public-service employment relationship and individuals in a regular employment relationship (“työsuhde”). However, an individual who receives only occasional income (such as lecturing fees) is not considered to be employed in the manner required by the provision, which means that section 12 of the Income Tax Act does not apply to such cases. Furthermore, the provision does not apply to non-wage compensation for work based on a commission relationship. 

However, section 12 of the Income Tax Act may apply to employees and officials working for the UN, for a U.N. specialised agency, or for the International Atomic Energy Agency, regardless of the country where the UN agency, unit or specialised agency, etc. is situated. An example of circumstances where section 12 would apply is a situation where a UN employee comes to Finland as a project participant or contributor, and works and stays here in such a way that he or she becomes a resident individual taxpayer in Finland. However, section 12 does not apply if the individual who works for the UN comes to Finland for personal reasons, and performs his work here over a remote online connection i.e. teleworking. In these situations the tax residency of a person is determined by section 9 and 11 of the Income Tax Act.

Individuals to whom section 12, subsection 1 of the Income Tax Act applies are not taxable in Finland on their worldwide income. Therefore, such an individual cannot be a resident of Finland for the purposes of a tax treaty. If the individual is not considered to be a resident of the other Contracting State for the purposes of the tax treaty either, the tax treaty does not apply at all.

2.2.3 Intergovernmental meetings held in Finland

According to section 12, subsection 2 of the Income Tax Act, a non-resident taxpayer who is not a Finnish citizen is not liable to pay tax in Finland on salaries/wages or emoluments received for work performed for an intergovernmental meeting held in Finland. There is thus no tax liability in Finland even if the salaries/wages are paid by an employer or principal located in Finland. This provision concerns emoluments paid by the State of Finland to non-resident taxpayers who are not Finnish citizens and who work as interpreters at intergovernmental meetings held in Finland, for example.

2.2.4 Specific tax-exempt emoluments related to working abroad

Section 76 of the Income Tax Act provides for the tax exemption of specific forms of compensation for work done abroad. A local allowance paid to an individual employed by a foreign diplomatic mission or an individual employed by the State of Finland who is posted abroad, or other emoluments paid by the State for work done abroad or additional expenses arising from special local circumstances when stationed abroad are not taxable income (section 76, subsection 1, paragraph 1 of the Income Tax Act). However, in accordance with the wording of the Income Tax Act, section 76, subsection 1, paragraph 1 does not apply to individuals employed locally. For more information on the taxation of individuals working in diplomatic missions, see Chapter 4 of this guide.

Salaries or emoluments paid by the United Nations (UN) or one of its specialised agencies for a consultation task carried outside Finland are tax-exempt in Finland (section 76, subsection 1, paragraph 3 of the Income Tax Act). Similarly, a daily allowance paid by the UN for such a task is tax-exempt, regardless of the party who pays the actual salary/wages. However, the pension accrued for the task is taxable income in Finland (decision 1978-B-II-556 of the Supreme Administrative Court).

The exemption from tax can only apply to a payment made by the UN or one of its specialised agencies. Salaries/wages paid by the Finnish Ministry of Defence for service in a Finnish UN Battalion are therefore taxable in Finland (decision 1978-B-II-514 of the Supreme Administrative Court). For more information on the taxation of United Nations employees, see Chapter 5 of this guide.

National experts working for the European Commission receive their salaries/wages from an employer in their state of domicile. Usually, the experts are ministry officials or other public sector employees. If a Finnish resident works as a national expert, some of the emoluments received by them from the European Commission constitute tax-exempt income (section 76, subsection 1, paragraph 4a of the Income Tax Act). For more information on the taxation of European Union employees, see Chapter 6 of this guide.

2.2.5 Tax-exempt income from an international organisation and taxation of other earned income

According to decision KHO 2021:54 of the Supreme Administrative Court, salaries/wages received from an international organisation do not, in some cases, affect the taxation of the employee’s other possible earned income (the “progression effect”). According to tax assessment practice, income from an international organisation was taken into account in the tax progression of other earned income before the decision was issued. Similarly, a health insurance contribution is levied on a salary/wages if the employee is covered by health insurance in Finland.

Following the decision of the Supreme Administrative Court, wages/salaries that are exempt from tax under the treaty with the UN and its specialised agencies are not taken into account in the taxation of any other income the employee may have earned. This also applies to salaries/wages received from other international organisations if the salaries/wages are exempt from Finnish tax under a treaty concerning the international organisation in question and the treaty does not include any special provisions on the progression effect on the salaries/wages.

Even if an employee is insured in Finland under the Health Insurance Act, the health insurance contribution will not be levied on the basis of a tax-exempt wages paid by an international organisation. The Health Insurance Act specifies that the health insurance medical expenses contribution is determined on the basis of the insured’s earned income taxable in municipal taxation (Chapter 18, section 14, subsection 1 of the Health Insurance Act) and the health insurance daily allowance contribution is determined on the basis of the insured’s taxable earned income and labour income (Chapter 18, section 15, subsection 1 of the Health Insurance Act). Tax-exempt wages/salaries are not included in either of the above-mentioned payment criteria.

However, some conventions on privileges and immunities contain an explicit provision that the provisions of the convention do not prevent tax-exempt income from being taken into account when determining the tax on the employee’s other income. Such a provision means that the tax-exempt income affects the tax progression of other income. In such cases, the employee will also be levied the health insurance contribution based on their salary/wages if the employee is insured in Finland and the international treaty does not provide otherwise.

Furthermore, specific regulations have been adopted for certain international organisations. The Act on the Taxation of Individuals Employed by the Nordic Investment Bank, the Nordic Development Fund and the Nordic Environment Finance Corporation (Laki Pohjoismaiden Investointipankin, Pohjoismaiden kehitysrahaston ja Pohjoismaiden ympäristörahoitusyhtiön palveluksessa olevien henkilöiden verottamisesta 562/1976) contains specific provisions on the taxation of persons employed by the Nordic Investment Bank. For more information on the Nordic Investment Bank, see Chapter 7 of this guide.

2.2.6 Tax-exempt allowances of participants in civilian crisis management

Civilian crisis management operations are usually managed by the United Nations, the European Union, an international organisation or a consortium formed by these. The operations may involve personnel from several states. When Finland participates in such operations, Crisis Management Centre Finland (CMCFinland) or, in the case of international rescue operations, Emergency Services Academy Finland is responsible for the deployment of personnel.

The authority employing an employee participating in civilian crisis management may be CMCFinland, the Ministry of the Interior, the Ministry for Foreign Affairs or Emergency Services Academy Finland (section 5 of the Act on the Participation of Civilian Personnel in Crisis Management, Laki siviilihenkilöiden osallistumisesta kriisinhallintaan 1287/2004; hereinafter referred to as “the Civilian Crisis Management Act”). As the salary/wages is paid by the State of Finland, it is a question of taxable income and the six-month rule on tax exemption of income received for work abroad in section 77 of the Income Tax Act does not apply.

In many cases, compensation for the increased cost of living is paid by the body managing the operations. According to section 76, subsection 3a of the Income Tax Act, emoluments paid by the EU, an international organisation, the State of Finland or the executor of a crisis management operation (CMO) to cover the specific costs and additional living expenses of individuals in an employment relationships pursuant to the Civilian Crisis Management Act are not taxable income.

Travel and accommodation expenses and increased living expenses paid by the participants themselves must be first and foremost covered by tax-exempt allowances paid for these purposes. Only if the actual expenses exceed the amount of the allowance can the expenses be deducted as expenses incurred in acquiring income.

If the European Union, an international organisation or a foreign CMO does not pay any emoluments, the Finnish employer authority (the State) will pay various types of tax-exempt emoluments in accordance with the Civilian Crisis Management Act and the corresponding Government Decree.

2.2.7 Pensions and refunds of pension insurance contributions

According to section 9, subsection 1, paragraph 1 of the Income Tax Act, an individual resident in Finland is liable to pay tax on income earned both in Finland and elsewhere. Pension income received from abroad is also taxable income for an individual living in Finland, even if taxes on the income have already been levied in the country of origin. In addition to tax treaties, other international treaties can affect the taxation of pensions.

Refunds of foreign pension insurance contributions are taxable income for an individual living in Finland. Refunds are taxable income regardless of whether the refund is based on pension insurance contributions paid by the employee or the employer. A refund is not considered to be a salary/wages and cannot be exempted from tax based on it being income from foreign employment under section 77 of the Income Tax Act, even if the employee was working abroad during the period when the pension funds were accrued (decision KHO 15.5.2001 of the Supreme Administrative Court, court record no. 1133).

A refund of pension insurance contributions is often linked to a situation where the individual has worked for an organisation for a short period of time. In some cases, the individual is only refunded the pension insurance contributions they paid, not the actual pension savings, and in other cases they are refunded the entire pension savings, i.e. the pension insurance contributions paid and the profit accrued on them. In practice, there are several ways to refund payments.

Sometimes it is possible for an individual to withdraw their pension savings accrued abroad as a lump sum. This can take place after the retirement age under the scheme or even beforehand. If an individual withdraws their entire accumulated pension savings as a lump sum before reaching the retirement age under the relevant pension scheme, the payment will be taxed as other earned income. On the other hand, if the lump sum is paid only at the retirement age for the pension scheme concerned, it will be taxed as pension income.

In principle, a refund of pension insurance contributions or a lump sum withdrawal of pension savings is taxable income for the individual in full. However, if the employee has paid the pension insurance contributions from their net wages after tax (the after-tax method; decision KHO 2018:55 of the Supreme Administrative Court), only the profit accrued on the contributions is taxable income (capital income).

The transfer of entitlement to pension from the Finnish earnings-related pension scheme to the European Union pension scheme and vice versa is discussed in the Finnish Tax Administration’s guide Euroopan unionin henkilöstön eläkeoikeuden siirto verotuksessa (Transfer of pension rights of European Union staff for tax purposes), available in Finnish and Swedish, link to Finnish.

3 Conventions on privileges and immunities, provisions of tax treaties and Vienna Conventions

3.1 General

The right of a state to levy taxes on the income of individuals employed by another state or by an international organisation or institution may be limited by international treaties (“conventions on privileges and immunities”). International treaties are based on the principles of courtesy and mutual respect between sovereign states, according to which it would be inappropriate to levy taxes on assets of another state used for the exercise of its functions. As the assets of international organisations are usually collected through contributions from member states, the taxation of the wages/salaries of their employees would indirectly affect the assets of other member states.

The right to levy taxes on emoluments received in the employment of an international organisation and a foreign state are determined by any applicable tax treaty between Finland, the state of residence and the country of work or the paying state.  Both a tax treaty and a convention on privileges and immunities may apply at the same time. Tax treaties usually contain a specific note that the provisions of the treaty must not affect the fiscal privileges of members of diplomatic missions or consular posts under the general rules of international law or under the provisions of special agreements.

When deciding on the taxation of income received by an employee working for a foreign state or an international organisation or institution, the extent of the employee’s tax liability and the taxability of the income received must first be examined on the basis of Finnish tax law. If the provisions of Finnish law conflict with the provisions of an international treaty that is binding to Finland, the provisions of the international treaty will prevail.

One such treaty is the Convention on the Privileges and Immunities of the United Nations. In addition to a specific treaty, Finland’s right to levy taxes may be limited by a double taxation convention. Because of the primacy of European Union law, the provisions of the Protocol on the privileges and immunities of the European Union take precedence over Finnish law.

Treaties are governed by the 1969 Vienna Convention on the Law of Treaties. The Vienna Convention contains quite detailed provisions on the conclusion, amendment and interpretation of treaties.

Finland has ratified the Vienna Convention, and it has been published in the Treaty Series of the Statute Book of Finland under the number SopS 32–33/1980. The principles of the Vienna Convention are taken into account in the application of tax treaties concluded by Finland.

3.2 Treaties concerning international organisations (conventions on privileges and immunities)

3.2.1 International organisation

Usually, the establishment, operation and administration of an international organisation between states is agreed with a treaty between the states concerned. In most cases, the treaty includes provisions on the legal personality of the organisation. For example, if a treaty concerning an international organisation contains provisions on privileges and immunities, these provisions, which fall within the scope of legislation, must be enforced in Finland by law.

There are also international organisations or cooperation bodies the existence of which is generally recognised even though there is no actual treaty between states concerning them (e.g. the Organization for Security and Co-operation in Europe or OSCE). Such an organisation has no legal personality. However, most organisations require more permanent bodies with their own facilities and staff to support their operations. Such bodies, which are usually called secretariats or offices, are created for organisations. A treaty may be concluded to create such a body, and the treaty may include provisions on legal personality.

Provisions on the legal personality in the host nation may also be added by means of a host country agreement or a law, for example. Such bodies are often granted privileges and immunities which may require legislation to be enacted in Finland.

The memorandum of association establishing an organisation usually contains a provision on the state in which the organisation’s headquarters or offices are to be located. In many cases, the organisation and the host country conclude a host country agreement which specifies, among other things, the privileges and immunities in the memorandum of association. A host country agreement is only binding on a state that is party to the agreement. However, the fact that an organisation has a designated host country does not mean that it is a legal person resident in that state for tax purposes. An intergovernmental organisation or institution established in Finland is not considered a public sector entity or an employer or principal within the meaning of section 10, subsections 3 and 4 of the Income Tax Act. Such an organisation is also not a resident of a tax treaty state for the purposes of a tax treaty.

3.2.2 Provisions on taxation in conventions on privileges and immunities

Conventions on privileges and immunities usually contain, among other provisions, provisions on the taxation of the members and employees of the organisation and its bodies. Some conventions contain a general provision that employees of the organisation have the privileges required by their duties for which a separate agreement must be concluded. Wages/salaries paid by an organisation will not be considered tax-exempt in national taxation based solely on such a general provision. For income to be tax-exempt pursuant to the convention, there must be a specific mention of the tax exemption.

The provisions on natural persons in conventions on privileges and immunities usually specify the privileges for certain groups of people. The categories mentioned in the convention include, but are not limited to the following:

• Public officials, staff or any other term referring to an employee
• Representatives of member states in the organisation’s general assembly and other governing bodies
• The Secretary General, Director General or any other senior executive officer of the organisation
• Experts

Wages/salaries received by public officials, officials or employees from an organisation are usually exempt from national taxation pursuant to a convention on privileges and immunities. The exemption also applies to other payments similar to wages made by the organisation, such as fringe benefits, staff benefits and reimbursement of expenses paid. The provision may also be considered to apply to other benefits paid in lieu of a salary/wages, such as daily sickness allowances paid by the organisation. For example, the Convention on the Privileges and Immunities of the United Nations (SopS 23–24/1958) provides that officials are exempt from taxation on salaries and emoluments paid to them by the United Nations, meaning that salaries are exempt from national taxation.

Some conventions on privileges and immunities contain an explicit provision that salaries paid by the organisation may be taken into account in national taxation when determining tax on the employee’s other income. For Finnish tax purposes, tax-exempt wages are taken into account in such cases using the progressive exemption method in accordance with section 6 of the Act on the Elimination of International Double Taxation (Laki kansainvälisen kaksinkertaisen verotuksen poistamisesta 1552/1995; the “Methodology Act”).

Member states are also represented in the various assemblies and other governing bodies of organisations. In general, representatives of member states do not receive separate emoluments from international organisations, as participation in the work of a governing body is part of a representative’s official duties, and the salaries or emoluments are paid by the state they represent. The main purpose of the provisions on the tax exemption of member states’ representatives in conventions on privileges and immunities is to prevent the representative from becoming liable to pay tax on their worldwide income in the state where they are residing for the sole purpose of participating in the operations or attending a meeting of a governing body. For example, this can also be done by adding a reference to the Vienna Convention on Diplomatic Relations or another specific provision (e.g. Article 4 of the Convention on the Privileges and Immunities of the United Nations). However, such a provision does not prevent the levying of taxes on worldwide income in the state that is the representative’s state of residence for the purposes of a tax treaty.

The tax-related privileges of senior public officials are often similar to those of state representatives. As the salary is paid by the organisation, it is exempt from national taxation under a convention on privileges and immunities.

In conventions on privileges and immunities, an expert is usually a person acting on behalf of the organisation in a position requiring expertise who is not a public official or employee in an equivalent employment relationship within the meaning of the convention. In general, conventions do not exempt experts from national taxation. Most conventions do not contain any specific provisions on what is meant by an official or a similar term. Organisations have extensive powers to decide on how they organise their activities and usually have their own staff regulations. For tax purposes, an exemption from taxation based on a convention on privileges and immunities may be deemed to apply to individuals to whom the staff regulations apply in accordance with the organisation’s own rules.

Organisations can also enter into service contracts. Income received based on such agreements is, from the perspective of Finnish taxation, non-wage compensation for work, upon which taxes are levied either as income from business activities or as income from other income-earning activities. Such income is not covered by the exemption provisions of any conventions on privileges and immunities.

If there is any doubt as to whether a person is covered by the privileges, the employee may prove their status by providing an explanation of the agreement they have entered into with the organisation or an appointment document and the relevant instructions and regulations of the organisation, or by producing a certificate issued by the organisation stating that the provisions of the convention on privileges and immunities apply to them.

The provisions of conventions on privileges and immunities do not apply to the taxation of pensions from the organisation or the refund of accrued pension funds, unless these are specifically mentioned in the convention.

The following chapters explain the tax assessment practices for the staff of certain international organisations and institutions. However, the exact privileges must always be checked from the convention applied to the organisation or institution concerned.

3.3 Tax treaties

3.3.1 Residence in accordance with a tax treaty

An individual living or working abroad may be taxable in that state on their worldwide income on the basis of residence, a stay or other similar circumstances. If an individual is both a resident taxpayer in Finland and a taxpayer on their worldwide income in another contracting state, the situation, called a dual residence conflict, will be settled according to the provisions on residence in the tax treaty. The solution may be that the individual must be considered to be a resident of the other state for the purposes of the tax treaty.

For an individual to be considered a resident of another contracting state for the purposes of a tax treaty, tax treaties require that the individual be taxable in that other state on their worldwide income. The laws of some states or international treaties may contain provisions that prevent a person employed by a foreign state or an international organisation from being liable to pay tax on their worldwide income, despite living and working in that state. In such a case, the individual cannot be considered a resident of that other state.

The fact that the tax law of another state or an international treaty prevents, for example, the levying of taxes on wages/salaries paid by an international organisation in that state does not prevent the individual from being considered a resident of that state under the tax treaty if the scope of tax liability is otherwise similar to that of other residents of that state.

Some tax treaties contain provisions on the taxation of members of diplomatic missions or consular posts. For example, the tax treaties with the Netherlands, Belgium and Canada contain specific provisions on the state of residence for purposes of the treaty of members of diplomatic missions or consular posts. A Dutch or Belgian citizen who works in a Finnish diplomatic mission or consular post of the state in question is considered to be a resident in the sending state if they are subject to the same income and capital tax liabilities in that state as a resident of the sending state. This provision also applies to employees hired locally. For an individual working in a consular post in Finland, the provision is only relevant if they are a citizen of both Finland and the Netherlands/Belgium. The tax treaty with Canada contains a similar provision, but the nationality of the member is irrelevant.

For more information on tax residency and non-residency, see the Finnish Tax Administration’s guide Tax residency, nonresidency and residency in accordance with a tax treaty – natural persons.

3.3.2 Public employment provision of a tax treaty

Remunerations other than pensions received from a state, a municipality or another legal person governed by public law are, in principle, taxable only in the state where the remuneration is paid. This provision normally also applies to wages/salaries from the public sector received by individuals who are not public officials. However, under many tax treaties, remunerations are taxable only in the contracting state where the work is carried out if the recipient is a resident of the country of work and one of the following conditions is met:

1. the recipient is a citizen of the country of work; or
2. the recipient has not become a resident of the country of work merely for the purpose of performing the work concerned.

A legal person governed by public law in this meaning can only be a legal person that, according to the legislation of the contracting state, was established specifically as a public law body. 

For example, articles on public employment in tax treaties apply to employees of a state’s diplomatic mission in another state. An article on public employment also applies where a state or other public law body posts its employee to work in an international organisation, provided that the public law body remains the employee’s employer.

Some tax treaties concluded by Finland contain unusual provisions on the right to levy taxes on wages/salaries paid by public sector employers. Some of the unusual provisions are mentioned below, but it is always worth checking the text of the tax treaty on a case-by-case basis to take into account any differing provisions in the tax treaty in question. 

According to Article 19 of the tax treaty between Finland and Egypt, the right to levy tax on wages/salaries paid by a state belongs only to the paying state, and the employee’s residence, nationality or the state in which the work was done have no effect on the right to levy taxes. For the purposes of the tax treaty, the salary/wages of a Finnish citizen resident in Finland is taken into account using the progressive exemption method.

The scope of Article 19(1) of the tax treaty with France has been specified with a separate treaty. This provision concerns the taxation of auxiliary staff hired locally. If such an employee of a French diplomatic mission in Finland is a Finnish citizen and resident in Finland for the purposes of the tax treaty, the right to levy taxes on salary/wages belongs exclusively to Finland. If an individual working in a French diplomatic mission is not a Finnish citizen, Finland has no right to levy taxes on the income under Finnish law. If an employee who is a citizen of both Finland and France is not resident in Finland for the purposes of the tax treaty, the tax treaty prevents the levying of taxes on the salary/wages in Finland and the salary/wages will not be taken into account even using the progressive exemption method.

According to Article 19 of the tax treaty between Finland and Japan, wages/salaries paid by a contracting state may be taxed in that contracting state. If an employee of a Japanese diplomatic mission in Finland is a Finnish citizen and a resident of Finland for the purposes of the tax treaty, Finland may levy taxes on the salary/wages paid by the diplomatic mission, but Finland must eliminate double taxation using the credit method. If such an employee is a citizen of both Finland and Japan, the double taxation must be eliminated using the progressive exemption method.

3.3.3 Private employment provision of a tax treaty

The tax treaties concluded by Finland contain a provision on private employment (Article 15 of the OECD Model Tax Convention). As a rule, taxes may be levied on wages/salaries from a private-law employment relationship in the state where the work is done.

The main exception to the general rule on the right of the state where the work is done to levy taxes is the “mechanic’s exception”. This provides that a salary/wages from work done in another contracting state is taxable only in the employee’s state of residence if all the following conditions are simultaneously met:

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

Even if the tax treaty gives the country of work the right to levy taxes on the salary/wages, the state of residence of the employee for the purposes of the treaty may also levy taxes on the salary/wages. In such cases, the state of residence must eliminate double taxation.

As an international organisation is not a contracting state, a part of a contracting state, a local authority or a public sector entity within the meaning of the public employment article of tax treaties, the provisions of the tax treaty on income from private employment (usually Article 15) apply to wages/salaries received from an international organisation. Due to the provisions of the tax treaty, taxes may be levied on a salary/wages paid by an organisation to an employee in the country of work only if

• the employee is a resident of the country of work within the meaning of the tax treaty; or
• the employee resides in the country of work for more than 183 days during the period specified in the tax treaty.

If a resident taxpayer employed by an international organisation is also a resident of Finland for the purposes of the tax treaty, the tax treaty does not prevent the levying of taxes on the salary/wages in Finland. However, wages/salaries paid by an international organisation are often tax-exempt income under the provisions of a convention on privileges and immunities. Tax-exempt salaries/wages from an international organisation do not usually affect the taxation of other earned income. 

If an individual working for an international organisation is a resident of another contracting state of a tax treaty for the purposes of the tax treaty, Finland may only levy taxes on the salary/wages if the work was done in Finland. In addition, for taxes to be levied on a salary/wages in Finland, the individual must reside in Finland for more than 183 days during the period specified in the tax treaty. However, wages/salaries paid by an international organisation are often tax-exempt income under the provisions of a convention on privileges and immunities.

3.4 Vienna Conventions

3.4.1 Vienna Conventions on diplomatic relations

Finland has ratified the Vienna Convention on Diplomatic Relations (SopS 4/1970) and the Vienna Convention on Consular Relations (SopS 50/1980). In addition to income tax, the conventions contain provisions on social security.

As section 12 of the Income Tax Act contains restrictions on Finland’s right to levy taxes imposed by the Convention on Diplomatic Relations and the Convention on Consular Relations, both in terms of the scope of individuals and the exemption of income from tax, the application of these conventions to income taxation remains limited.

However, the provisions of the Convention on Diplomatic Relations may be relevant in cases where another international treaty refers to the privileges and immunities contained therein.

The Vienna Conventions only limit the right of the receiving state to levy taxes and duties. The sending state and third states may levy taxes on the members of their delegations according to their legislation. Tax treaties also affect the distribution of the right to levy taxes between the sending state, the receiving state and third states. The conditions of application and the content of the provisions in the Vienna Conventions restricting the receiving state’s right to levy taxes on income differ depending on the status of the individual in the diplomatic mission.

Under the Convention on Diplomatic Relations, a diplomatic agent is exempt from all dues and taxes, personal or real, national, regional or municipal. A diplomatic agent is also exempt from real estate tax when private immovable property situated in the territory of the receiving state is in their possession, unless they hold it on behalf of the sending state for the purposes of the mission (Article 34[b]). However, the exemption does not apply to dues and taxes on immovable property located in the receiving state or private income with its source in the receiving state and capital taxes on investments made in commercial undertakings in the receiving state. Members of the family of a diplomatic agent forming part of their household who are not nationals of the receiving state are similarly exempt from dues and taxes.

Members of the administrative and technical staff of a mission, together with members of their families forming part of their respective households who are not nationals of or permanently resident in the receiving state, are similarly exempt from dues and taxes as diplomatic agents. Members of the service staff and private servants of members of a mission who are not nationals of or permanently resident in the receiving state are exempt from dues and taxes on the income they receive by reason of their employment.

Despite the slightly different wording, the provisions on income taxation in the Convention on Consular Relations are broadly similar to those of the Convention on Diplomatic Relations. Consular officers and consular employees are exempt from tax in the same way as diplomatic agents. Members of consular service staff and honorary consular officers are exempt from tax only on wage income received from the sending state. The tax exemption provisions of the Convention on Consular Relations do not apply to individuals who are Finnish citizens or permanently resident in Finland.

Tax treaties may restrict the taxation of members of the staff of consular and honorary consular posts in Finland. When entering into the Convention on Consular Relations, Finland agreed that no tax exemption would be granted for shares or other business interests that entitle an individual to control real property located in Finland.

4 Diplomatic mission in another state

4.1 Foreign diplomatic mission in Finland

4.1.1 Tax liability of individuals working in Finland in diplomatic missions and at intergovernmental meetings in Finland

An individual working in a diplomatic mission, a comparable representative office or the office of a career consul of a foreign state in Finland is liable to pay tax in Finland only on the income mentioned in section 12 of the Income Tax Act if they are not a Finnish citizen. This provision applies to all individuals working in a mission regardless of their status, which means that it can be applied not only to diplomats but also to technical and administrative staff and the service staff of the mission. The provision also applies to individuals employed locally. Section 12 of the Income Tax Act applies to individuals who are not Finnish citizens. If an individual working in a diplomatic mission is not a Finnish citizen, they are not liable to pay tax on their worldwide income in Finland due to the provisions in section 12 of the Income Tax Act. For more information on section 12 of the Income Tax Act, see Section 2.2.2 of this guide.

The Ministry for Foreign Affairs of Finland issues a protocol card to individuals employed by a diplomatic mission, their family members and their private servants. Members of the staff of a mission are in a different position as regards diplomatic privileges and immunities. The letter on the card (A–D) clarifies the status of the cardholder. The Ministry for Foreign Affairs guide Diplomatic Privileges and Immunities in Finland contains information on the diplomatic privileges and immunities of staff members.

Section 12 of the Income Tax Act does not apply to Finnish citizens. Finland may exercise its right to levy taxes on the salary/wages of a Finnish citizen received from the diplomatic mission of a foreign state even if they are also a citizen of another state. The provisions of the Vienna Conventions and section 12 of the Income Tax Act do not prevent the levying of taxes on salary/wages in Finland. The employee’s work duties in the foreign mission are irrelevant in this case. The right to levy taxes on wages/salaries is determined by the provisions of the tax treaty between Finland and the foreign state. The provisions of the article on public employment in the tax treaty (usually Article 19) apply to wages/salaries received from work done in a foreign mission. 

In most cases, Finland has an exclusive right to levy taxes on wages/salaries paid by a public sector entity of another state if

• the employee is resident in Finland for the purposes of the tax treaty; and
• the work is done in Finland; and
• the wage earner is a Finnish citizen.

A non-resident taxpayer who works at a foreign mission in Finland is not liable to pay tax on such income in Finland, even if they are a Finnish citizen. A foreign mission is not a Finnish employer within the meaning of section 10, subsection 4 of the Income Tax Act, and the income is therefore not income received from Finland.

4.1.2 Pension earned in the employment of a mission

A pension earned in the employment of a diplomatic mission is not tax-exempt income within the meaning of section 12 of the Income Tax Act, as section 12 of the Income Tax Act only applies, according to its wording, to individuals employed by a mission. Thus, such pension is taxable income in Finland and the right to levy taxes on the income is determined on the basis of the Income Tax Act and the tax treaty.

4.2 Finnish mission abroad

4.2.1 Tax liability of individuals working in Finnish diplomatic missions abroad

Individuals in the employment of diplomatic and other missions abroad may either be part of the posted mission staff or hired locally (at the country of posting). If an individual is not a member of the posted mission staff, they are locally hired. The Ministry for Foreign Affairs of Finland determines whether an individual is part of the posted mission staff or hired locally. Taxation of the individual will be determined on the basis of the classification by the Ministry for Foreign Affairs.

Finnish citizens in the employment of Finland’s diplomatic and other missions abroad remain resident taxpayers in Finland throughout their employment, provided that they are part of the posted mission staff (section 11, subsection 2, paragraph 1 of the Income Tax Act). An individual hired locally is in other permanent full-time employment of the State of Finland abroad (section 11, subsection 3 of the Income Tax Act).

Locally hired individuals are considered resident taxpayers throughout their employment if they were resident taxpayers in Finland immediately preceding the signing of the employment contract. The “three-year rule” for Finnish citizens does not apply in such cases. However, a locally hired employee may be considered a non-resident taxpayer if they request to be treated as such and if they are able to demonstrate that they have not had any substantial ties with Finland during the tax year. For more information on tax liability and the three-year rule, see the Finnish Tax Administration’s guide Tax residency, nonresidency and residency in accordance with a tax treaty – natural persons. 

If an individual has been considered a resident taxpayer in Finland due to employment in a foreign mission, they may become a non-resident taxpayer in Finland immediately after the end of their employment, provided that three years from the moving abroad have expired when their employment ends.  

If an individual has already become a non-resident taxpayer in Finland before the start of the employment, they will not become a resident taxpayer solely because of the employment in a foreign diplomatic mission. The individual will remain a non-resident taxpayer unless they are part of the posted staff (section 11, subsection 2, paragraph 1 of the Income Tax Act).

The place of residence of the family members of employees employed by foreign missions is normally determined in accordance with section 11 of the Income Tax Act.

4.2.2 Employment in Finnish diplomatic missions abroad

Salaries/wages paid by a Finnish mission abroad are usually taxable income for resident taxpayers in Finland. The employer of posted staff working in Finnish diplomatic missions abroad is the Ministry for Foreign Affairs of Finland. Staff hired locally are employed by the mission, which also pays their salaries/wages. The employment of a locally hired employee is also considered to be employment for the State of Finland.

The provisions of the article on public employment in the tax treaty (usually Article 19) apply to wages/salaries received from work done in a foreign mission. The main rule in most tax treaties is that taxes for wages/salaries paid by a contracting state, a part thereof, a local authority or another legal person governed by public law in that state are levied only in that state. However, taxes are levied on a salary/wages only in the state in which the work is done if the recipient is a resident of the country of work and

1. they are a citizen of that state; or
2. they have not become a resident of the state merely for the purpose of performing the work concerned.

As the salary paid by the mission, i.e. the Ministry for Foreign Affairs of Finland, is income received from Finland within the meaning of section 10, subsection 3 of the Income Tax Act, it is taxable income also for a non-resident taxpayer. However, a salary/wages received by an individual who is a non-resident taxpayer in Finland and works abroad in a Finnish diplomatic mission is not considered income received from Finland if the non-resident taxpayer is not a Finnish citizen (section 76, subsection 1, paragraph 4k of the Income Tax Act). Provisions of tax treaties may also restrict Finland’s right to levy taxes.

5 United Nations

5.1 Convention on the Privileges and Immunities of the United Nations and exemption from tax of wages/salaries

The special status of the United Nations is governed by the Convention on the Privileges and Immunities of the United Nations (SopS 23–24/1958). Under Article V, Section 18, of the Convention, officials of the United Nations are exempt from taxation on the salaries and emoluments paid to them by the United Nations. Their salaries are therefore exempt from national taxes. The salaries and emoluments are exempt regardless of the country where the UN official is working, and regardless of whether the official is present at the workplace or using a remote connection i.e.teleworking.

The exemption applies to individuals covered by the Staff Regulations and Rules of the United Nations. An official is issued a letter of appointment stating that the Staff Regulations and Rules apply to them. It is irrelevant whether the appointment is temporary, for a fixed-term or valid until further notice. United Nations officials are liable to pay an internal UN tax.

5.2 United Nations system

The Convention on the Privileges and Immunities of the United Nations applies not only to the principal organs but also to funds, programmes and other bodies established under the Charter of the United Nations, of which there are several dozen. Such bodies are usually established by a resolution of the General Assembly or other principal organ. The Charter states that such subsidiary organs as may be found necessary may be established in accordance with the Charter. The UN system also includes the specialised agencies and cooperative organisations of the United Nations.

Non-governmental organisations have been established to support the UN system and the operations of the UN, including the UN Association of Finland and the Finnish National Committee for UNICEF. These are domestic associations, and the provisions of the laws and conventions governing the UN or its specialised agencies or their employees do not apply to these or similar associations.

There are provisions in the Income Tax Act that specifically mention the UN or one of its specialised agencies, such as sections 11, 12 and 76. The provisions of the Income Tax Act concerning employees of the United Nations and its specialised agencies cannot be extended to other cooperative organisations. For example, the tax exemption laid down in section 76, subsection 3 of the Income Tax Act does not apply to any salaries or emoluments other than those specifically paid by the UN or one of its specialised agencies. Furthermore, sections 11 and 12 of the Income Tax Act specifically mention the International Atomic Energy Agency (IAEA; a cooperative organisation), which means that the above-mentioned provisions apply to staff of the IAEA.

The Convention on the Privileges and Immunities of the Specialized Agencies applies to the specialised agencies of the United Nations. Annexes to the Convention specify the privileges and immunities of each agency. The cooperative organisations, which are discussed in the next chapter, enjoy separately agreed privileges and immunities.

Finland is a member of the following specialised agencies of the UN:

• The International Labour Organization (ILO)
• The Food and Agriculture Organization of the United Nations (FAO)
• The United Nations Educational, Scientific and Cultural Organization (UNESCO)
• The World Health Organization (WHO)
• The World Bank Group
• The International Bank for Reconstruction and Development (IBRD)
• The International Development Association (IDA)
• The International Finance Corporation (IFC)
• The Multilateral Investment Guarantee Agency (MIGA)
• The International Centre for Settlement of Investment Disputes (ICSID)
• The International Monetary Fund (IMF)
• The International Civil Aviation Organization (ICAO)
• The International Maritime Organization (IMO)
• The International Telecommunication Union (ITU)
• The Universal Postal Union (UPU)
• The World Meteorological Organization (WMO)
• The World Intellectual Property Organization (WIPO)
• The International Fund for Agricultural Development (IFAD)
• The United Nations Industrial Development Organization (UNIDO)

The privileges and immunities of officials of the specialised agencies are equivalent to those granted to officials in the Convention on the Privileges and Immunities of the United Nations. The above provisions on the taxation of individuals employed by the United Nations are also applicable to individuals employed by a United Nations specialised agency.

If Finland is not a member of the UN specialised agency, salaries paid by that agency (such as the World Tourism Organization, UNWTO) are not exempt from Finnish taxation based on the Convention on the Privileges and Immunities of the United Nations.

5.3 Cooperative organisations of the United Nations

The conventions on privileges and immunities concerning the United Nations or its specialised agencies do not apply to cooperative organisations of the UN. Although some international organisations are not strictly speaking part of the UN or one of its specialised agencies, the memoranda of association of several UN-affiliated organisations expressly provide that the staff of the organisation enjoy the same privileges and immunities as the staff of United Nations specialised agencies under the Convention on the Privileges and Immunities of the Specialized Agencies. The extent to which salaries of the staff are exempt from national taxes must be separately verified from each memorandum of association.

Such UN-affiliated organisations include but are not limited to:

The International Organization for Migration (IOM, SopS 31/1993)
The World Trade Organization (WTO, SopS 4–5/1995)
The International Atomic Energy Agency (IAEA, SopS 27/1960)

5.4 Salaries or emoluments paid by the United Nations or one of its specialised agencies to an expert for work done abroad

The main rule is that UN officials are entitled to the tax exemption provided for in the Convention on the Privileges and Immunities of the United Nations. However, experts (other than officials) covered by the Convention on the Privileges and Immunities of the United Nations are not entitled to tax exemption on salaries paid by the agency under the Convention. A salary received by such an expert resident in Finland for work performed abroad is tax-exempt income pursuant to section 76, subsection 3 of the Income Tax Act, however. 

According to section 76, subsection 3 of the Income Tax Act, salaries or emoluments paid by the United Nations or one of its specialised agencies for expert tasks performed outside of Finland are not taxable income. The provision only applies to emoluments paid by the United Nations or a specialised agency of the United Nations. Therefore, the provision does not apply to salaries or emoluments paid by a cooperative organisation, for example.

The exemption from tax provided for in this provision only applies to emoluments from expert tasks performed abroad. In tax assessment practice, the provision has been applied to both officials and experts. According to the wording of the provision, it applies to emoluments received for expert tasks in the context of a regular or public-service employment relationship and non-wage compensation for work based on a commission relationship. However, an individual who is clearly performing manual labour is not considered to perform expert tasks.

The provision has also been applied to daily allowances paid to individuals participating in international projects of the United Nations, even if the individual is not employed by the United Nations and even if the amount of the daily allowance exceeds the amount of daily allowance abroad according to a decision by the Finnish Tax Administration.

Salaries of Finnish peacekeepers are paid by the Finnish Ministry of Defence, which means that the special provisions for the UN do not apply to such salaries, as peacekeepers are employed by the State of Finland instead of the UN. For more information on the taxation of UN peacekeepers, see the customer guide UN’s peace-keeping forces.

5.5 Working in Finland for a UN organisation based in Finland

Some UN agencies and research centres have been established in Finland. These are described in more detail in this section.

The World Institute for Development Economics Research (UNU-WIDER) is a United Nations University (UNU) research centre based in Finland. Finland and the UNU have concluded a host country agreement regarding the World Institute for Development Economics Research (SopS 35–36/1984). It specifies the UNU’s privileges and immunities. The preamble to the agreement states that the provisions of the Convention on the Privileges and Immunities of the United Nations apply to the World Institute for Development Economics Research.

In 2017, the first United Nations Technology Innovation Lab (UNTIL; from 1 July 2020 United Nations Global Pulse Finland) was established in Espoo, Finland, with an agreement between Finland the United Nations regarding the status of the United Nations Technology Innovation Lab (SopS 54–55/2020). The laboratory is open to individuals from the United Nations, educational and research institutions, companies and others.

In 2019, a branch of the United Nations Office for Project Services (UNOPS), headquartered in Copenhagen, was established in Finland. The Helsinki office was established by an agreement between the Government of Finland and the United Nations regarding the United Nations Office for Project Services in Finland (SopS 1–2/2020).

In 2022, the Finnish branch of the United Nations Children’s Fund (UNICEF) was established with an agreement between Finland and the United Nations Children’s Fund regarding the status of the United Nations Children’s Fund (SopS 37/2022). According to the above-mentioned agreement, the agreement between UNOPS and Finland applies, mutatis mutandis, to the operations of the Finnish office. The agreement does not apply to the Finnish National Committee for UNICEF, however, which is a private non-governmental organisation.

The taxpayer status of the staff of the above-mentioned organisations in Finland is primarily determined based on the Income Tax Act and is affected by the Convention on the Privileges and Immunities of the United Nations, any host country agreement and any applicable tax treaty.

According to the main rule, salaries received by UN officials from the UN are exempt from Finnish taxation under the Convention on the Privileges and Immunities. However, experts (other than officials) covered by the Convention on the Privileges and Immunities of the United Nations are not entitled to tax exemption on salaries paid by the agency under the Convention.

If the Convention on the Privileges and Immunities of the United Nations does not apply to an employee, the employee may be covered by a tax exemption rule on salaries through a host country agreement, for example. As an example, an employee of the World Institute for Development Economics Research (UNU-WIDER) who is not covered by the Convention on the Privileges and Immunities of the United Nations will be exempt from the taxation of salaries and emoluments paid by UNU-WIDER under a host country agreement if the employee is a member of the UNU-WIDER staff. According to the host country agreement, “staff” refers to academic and administrative staff.

Even if an individual is not covered by the Convention on the Privileges and Immunities of the United Nations (in the case of an expert, for example), a salary received for the work may still be tax-exempt in Finland in some cases. If the individual is not a Finnish citizen, the extent of the tax liability of the individual employed by the United Nations and their family members is determined according to section 12 of the Income Tax Act. An individual employed by the UN in Finland who is a Finnish citizen is not subject to the provisions in section 12 of the Income Tax Act. For more information on section 12 of the Income Tax Act, see Section 2.2.2 of this guide.

Employees who are non-resident taxpayers are not liable to pay tax in Finland on salaries paid by the UN, because a specialised agency established by an international treaty in Finland is not considered a Finnish employer.

5.6 Health insurance contribution

Where salaries of individuals employed by the UN are exempt from national taxes, no health insurance contribution is imposed on them, even if the individuals are insured in Finland. The Health Insurance Act specifies that the health insurance medical expenses contribution is determined on the basis of the insured’s earned income taxable in municipal tax (Chapter 18, section 14, subsection 1 of the Health Insurance Act) and the health insurance daily allowance contribution is determined on the basis of the insured’s taxable earned income and labour income (Chapter 18, section 15, subsection 1 of the Health Insurance Act). Tax-exempt wages/salaries are not included in either of the above-mentioned payment criteria. For this reason, no health insurance contribution is levied on tax-exempt wages/salaries.

If an individual is insured in Finland and the salary received is not tax-exempt in Finland, the health insurance contribution is normally determined on the basis of the insured person’s taxable income in municipal taxation and the daily allowance contribution is determined on the basis of taxable wage income and labour income.

5.7 Pension income from the United Nations

The conventions on the UN and its specialised agencies do not restrict Finland’s right to levy taxes on pensions paid by the UN or one of its specialised agencies. A pension paid by an agency is taxable as earned income in its entirety. According to a decision by the Supreme Administrative Court (KHO 1978 II 556), an annual pension paid by the United Nations Joint Staff Pension Fund in 1974 was taxable income in its entirety. The pension could not be regarded as a salary or emolument paid by the United Nations within the meaning of the provision corresponding to section 76, subsection 3 of the Income Tax Act at the time.

According to a decision by the Supreme Administrative Court (KHO 1990 B 528), a pension received from the United Nations Joint Staff Pension Fund between 1981 and 1983 could not be considered tax-exempt life or endowment insurance capital within the meaning of the law in force at the time. The payment of the pension in question was based on the individual’s employment relationship with the United Nations.

If a pension can be drawn as a lump sum, the tax assessment practice has been to apply the rules on income spreading and to consider the income to have been accrued over as many years as the individual has been employed by the organisation. Income spreading must be claimed before the tax assessment end date, and the income can be spread over a maximum of five years (section 128 of the Income Tax Act). For more information on income spreading, see the Finnish Tax Administration’s guide Tulontasaus ansiotulojen verotuksessa (available in Finnish and Swedish, link to Finnish).

For more information on the refund of pension contributions, see Section 2.2.7 of this guide.

6 European Union

The European Union is based on the Treaty on European Union (TEU) and the Treaty on the Functioning of the European Union (TFEU). Finland joined the European Union by the Treaty concerning the accession of the Republic of Finland to the European union (SopS 102–103/1994). With the accession treaty, Finland also became a member of the European Atomic Energy Community (Euratom). The treaties are accompanied by protocols which form part of the treaties.

6.1 Tax liability of EU officials and staff

Protocol (No 7) on the privileges and immunities of the European Union, which is part of the treaties establishing the European Union, contains provisions on the tax residence of Union officials and other staff of the European Union and on the taxation of their salaries.

Under Article 13 of the Protocol, the taxation domicile of a resident of a Member State does not change if they establish their residence in the territory of a Member State other than their country of domicile solely by reason of the performance of their duties in the service of the Union. The provision applies to income taxation, property taxation, inheritance taxation and the determination of residence under a tax treaty between Member States. In tax assessment practice, it has been held that the provision is valid as long as the individual is employed by the Union.

The provision does not apply to cases where an individual moves from a third country to a Member State, or where an individual moves from a Member State to a third country, or where residence in a Member State was solely by reason of the performance of duties in the employment of another international organisation.

The provision also applies to the official’s spouse, if the spouse does not engage in a gainful occupation to produce own income, and to dependent children. Given the wording of the provision, the state in which the spouse’s employer is established or the work arrangements are irrelevant. Thus, working remotely from another state is also considered separate engagement in a gainful occupation. For example, even a small amount of work done for a local employer is considered a gainful occupation to produce own income.

According to case law, the above-mentioned provisions of the Protocol on the privileges and immunities of the European Union on tax liability supersede provisions of domestic law. According to decision KHO 2011:88 of the Supreme Administrative Court, the spouse of an official who has moved from Finland to another Member State with their spouse is considered a resident taxpayer even though under the Income Tax Act they should be considered a non-resident taxpayer after three years have passed since the end of the year of moving. In its decision, the Supreme Administrative Court requested a preliminary ruling from the Court of Justice of the European Union. In its decision on Finland, the Court of Justice of the European Union ruled on the spouse of an official who was not separately engaged in a gainful occupation (CJEU C-270/10 Gistö).

6.2 Taxation of salaries received by EU officials and staff

According to Article 12 of the Protocol, officials and other servants of the Union are liable to a tax for the benefit of the Union on salaries and emoluments paid to them by the Union. They are exempt from national taxes on salaries and emoluments paid by the Union. The salary cannot be taken into account when determining taxes on the official’s other income (CJEU C-6/60 Humblet).

According to the Protocol, the provisions on taxation also apply to

• the President of the European Council;
• Members of the Commission;
• the Judges, the Advocates-General, the Registrars and the Assistant Rapporteurs of the Court of Justice of the European Union;
• the staff of the European Investment Bank; and
• the staff of the European Central Bank.

In addition to the above, Regulation (Euratom, ECSC, EEC) No 549/69 of the Council provides that the former Article 12 (now Article 11 on privileges and immunities), the second paragraph of Article 13 (now Article 12 on exemption from tax on salaries) and Article 14 (now Article 13 on the determination of the state of residence of officials and staff) of the Protocol on the privileges and immunities of the European Union apply to certain recipients of pensions and other benefits, as well as to the staff of the European Investment Bank.

The provisions on tax exemption and residence apply to officials in office covered by the Staff Regulations of Officials of the European Union or the Conditions of Employment of other servants. Regulation (EEC, Euratom, ECSC) No 259/68 of the Council lays down the Staff Regulations of officials and the Conditions of Employment of other servants of the European Communities (consolidated version of the Staff Regulations 2016).

According to the Staff Regulations, an official means any person who has been appointed, as provided for in these Staff Regulations, to an established post on the staff of one of the institutions of the Communities by an instrument issued by the Appointing Authority of that institution. According to the Treaty on European Union, the institutions of the Union are

• the European Parliament;
• the European Council;
• the Council;
• the European Commission, hereinafter referred to as “the Commission”;
• the Court of Justice of the European Union;
• the European Central Bank; and
• the Court of Auditors.

The definition of official also applies to individuals appointed by Union institutions. For the purposes of the Staff Regulations, the following are also considered to be Union institutions:

• The European External Action Service
• The European Economic and Social Committee
• The Committee of the Regions
• The European Ombudsman
• The European Data Protection Supervisor

The privileges enjoyed by officials may be extended to the staff of other Union institutions, where appropriate. For example, the statute of the European Investment Bank, which is annexed to the treaty, provides that the Board of Governors of the EIB may decide to set up subsidiaries or other entities. The Protocol on the privileges and immunities of the European Union applies to the staff of these institutions. The EIB has set up the European Investment Fund (EIF). According to the statute of the EIF, the Protocol on the privileges and immunities of the European Union applies to its staff.

6.2.1 Salaries and health insurance contributions of EU officials

As a rule, European Union officials are not insured in Finland. The European Union has its own social security scheme. In its judgment C-690/15 Lobkowicz, the Court of Justice of the European Union ruled that the provisions of the Protocol and the Staff Regulations do not allow that an individual who is covered by the EU social security scheme be ordered to pay contributions to finance a national social security scheme. The judgment concerned income other than salaries paid by the Union, but salaries paid by the Union cannot be used as a basis for imposing national social security contributions either.

Finnish domestic law also prevents the collection of health insurance contributions, as a tax-exempted salary is not included in the grounds for payment of the health insurance contribution (section 18, subsection 14, paragraph 1 and section 18, subsection 15, paragraph 1 of the Health Insurance Act). For this reason, no health insurance contribution is levied in Finland on salaries of EU officials.

6.3 Pensions paid by the European Union

Under Article 12 (formerly Article 13) of the Protocol on the privileges and immunities of the European Union, officials and other servants of the Union are exempt from national taxes on salaries and emoluments paid by the Union. Under Article 2 of Council Regulation (Euratom, ECSC, EEC) No. 549/69, persons receiving disability, retirement or survivors’ pensions paid by the Communities are also exempt from taxes. Taxes are not levied in Finland on pensions paid by the EU to its former staff (officials and other servants) if taxes are paid for these to the EU. In addition, pensions do not have any effect on the taxation of other earned income (Jean Humblet v Kingdom of Belgium C-6/60).

The transfer of entitlement to pension from the Finnish earnings-related pension scheme to the Union pension scheme and vice versa is discussed in the Finnish Tax Administration’s guide Euroopan unionin henkilöstön eläkeoikeuden siirto verotuksessa (Transfer of pension rights of European Union staff for tax purposes), available in Finnish and Swedish, link to Finnish.

6.4 National experts

The European Commission employs national experts who work for the Commission, but their salaries are paid by the organisation that seconded them, usually an authority of a Member State. There are no specific international rules on the tax treatment of salaries.

According to section 76, subsection 4a of the Income Tax Act, emoluments for work done abroad paid by the European Commission to a national expert to cover special expenses and living costs is not taxable income. During the secondment, the expert will receive a daily allowance and additional flat-rate allowance, as well as travel and removal expenses. Even though the wording differs from that used in the law, such emoluments are considered tax-exempt emoluments comparable to the other emoluments mentioned in the law. Allowances paid for working trips are emoluments mentioned in the law for expenses incurred in the performance of a specific task. The conditions and amounts based on section 73 of the Income Tax Act and the regulations on working trips issued under the said section do not affect tax exemption.

6.5 Members of European Parliament

Members of the European Parliament receive their salaries from the European Parliament. Membership also provides for the payment of pensions and certain other payments of an income nature, which are taxable to the European Union. Members of European Parliament are not Union staff or officials, and the Protocol on the privileges and immunities of the European Union does not prevent national taxation of their salaries.

A payment received by an MEP or their family member living in Finland from the Parliament (such as a salary or survivor’s pension) is taxable income. According to section 1, subsection 3 of the Act on the Elimination of International Double Taxation (Laki kansainvälisen kaksinkertaisen verotuksen poistamisesta 1552/1995), the Act applies to the elimination of double taxation of emoluments, transitional end-of-service allowances, pensions, disability pensions and survivor’s pensions received on the basis of membership in the European Parliament. Double taxation is eliminated by means of the credit method, whereby tax paid to the Union is treated as tax paid to a foreign state.

The salary of an MEP is taxed as wage income and, if the conditions are met, the six-month rule on tax exemption for income from foreign employment under section 77 of the Income Tax Act may be applied. For more information on the six-month rule, see the Finnish Tax Administration’s guide Ulkomaantyöskentelystä saatua palkkaa koskeva kuuden kuukauden sääntö (Six-month rule for income from foreign employment).

Pursuant to section 70, subsection 4 of the Income Tax Act, equitable remuneration to cover special expenses and living costs incurred in performing the duties of a Member of the European Parliament is not taxable income. For the purposes of this section, “equitable remuneration” refers to a general expenditure allowance, fixed travel expense allowance, travel expense allowance, residence allowance, telecommunications allowance and secretary allowance or any other allowance of a similar nature paid to a Member of the European Parliament.

There have been changes since the law was enacted as regards the reimbursement of expenses paid to MEPs. The expression “any other allowance of a similar nature” in the section can be considered to refer to any other emoluments comparable to those listed, regardless of the term used. An assistant allowance may also be considered a tax-exempt allowance even if there is an employment relationship between the assistant and the MEP.

6.5.1 Health insurance contribution from MEP salary

Members of the European Parliament are insured in Finland when they hold a seat in the European Parliament. MEPs are normally liable to pay the health insurance contribution in Finland, consisting of a medical care contribution determined on the basis of their taxable income in municipal taxation and a daily allowance contribution on the basis of their taxable wage income. If the six-month rule applies to the MEP’s work abroad, the health insurance contribution is levied on the basis of their salary subject to withholding tax (Chapter 18, section 17 of the Health Insurance Act).

6.5.2 Pensions received by MEPs

Pensions received by MEPs are paid from EU funds and taxes are paid to the EU. The new Statute for Members of the European Parliament (2005/684/EC) allows Member States to apply their national tax law to the salaries and pensions of MEPs, provided that double taxation is avoided. A pension received by an individual living in Finland on the basis of membership of the European Parliament is taxable income in Finland. Double taxation is eliminated by the credit method under section 9a of the Methodology Act.

6.6 Assistants to MEPs

An MEP may have assistants. Accredited parliamentary assistants conclude an agreement with the European Parliament and are paid by the European Parliament. Such assistants are subject to the rules applicable to officials (see Section 6.2 above).

An MEP may also have local assistants who have an employment relationship with the MEP. For the payment of their salaries, the MEP must appoint an accredited intermediary. In addition to paying the salaries, the accredited intermediary ensures that all statutory contributions and taxes are paid. As the status of local assistant is based on an agreement with the MEP, the MEP is considered to be the assistant’s employer. The accredited intermediary acts as the MEP’s agent.

The salary of a local assistant is not subject to the provisions of the Protocol on the privileges and immunities of the European Union. The provisions of any applicable tax treaty concerning residence and the distribution of the right to levy taxes on a salary must be taken into account. Salaries received by a resident taxpayer living in Finland and also by an assistant resident in Finland under a tax treaty are taxable income if the six-month rule on tax exemption for income from foreign employment does not apply.

When the employer is an MEP who is a resident taxpayer in Finland, the assistant is considered to be employed by a Finnish employer. If the work is done wholly or mainly in Finland, the income is considered to be income from Finland (section 10 of the Income Tax Act). In such a case, an assistant who is a non-resident taxpayer must also pay tax in Finland.

6.7 Trainees

Temporary trainees are recruited by the various institutions of the European Union. The tax provisions of the Protocol on the privileges and immunities of the European Union do not apply to a trainee. The work done by trainees is similar to that of an employee in an employment relationship, and the emoluments received from the European Union are considered a salary for tax purposes under the Income Tax Act. For the purposes of the tax treaty, the European Union is not considered to be an employer in the country of work.

Trainees working abroad who are resident in Finland are subject to the normal rules on working abroad and the provisions of tax treaties.

If a trainee who is a non-resident taxpayer works in Finland, they are not liable to pay tax on the salary received in Finland, because it is not income received from Finland. If a trainee working in Finland becomes a resident taxpayer in Finland, the right to levy taxes will be determined in accordance with the provisions of the tax treaty applicable to the salary.

6.8 Marie Sklodowska-Curie fellowships

The Marie Sklodowska-Curie Fellowship Programme (MSCFP) provides research grants. The MSCFP funds the research institution hosting a researcher, even if the grant is called an individual fellowship. These grants are not subject to the provisions on grants in the Income Tax Act.

The research institute where the researcher works is the researcher’s employer. For the purposes of the tax treaty, it is an employer in the country of work. The research institute uses the grant it receives to pay the researcher’s salary and incidental expenses. The salary is subject to the tax law and tax treaties of each Member State.

Under the rules of the MSCFP, researchers are entitled to family and mobility allowances in addition to their salary. Family allowances are taxable wages under Finnish tax law. A mobility allowance may be used to pay a tax-exempt work-related travel expense allowance. If the conditions for a tax-exempt allowance are not met, the allowance is considered taxable wages. A mobility allowance may be considered a tax-exempt work-related travel expense allowance for Finnish tax purposes insofar as it meets the requirements of the Income Tax Act for a tax-exempt allowance. If the allowance paid exceeds the amount of allowance payable, the received sum is considered taxable wages.

6.9 Members of the Committee of the Regions and the Economic and the European Economic and Social Committee

The principal organs of the European Union are assisted by the Committee of the Regions and the European Economic and Social Committee as advisory bodies. According to section 76, subsection 4b of the Income Tax Act, allowances for special expenses and living expenses incurred by a member of these Committees in the performance of their duties are not taxable income. Such allowances include general expenditure allowances and travel expense allowances or other similar allowances paid by the Committee. The conditions and amounts based on the Income Tax Act and the regulations on working trips issued under the said section do not affect tax exemption.

6.10 Experts related to the European Union enlargement process or the development of current or future border regions

According to section 76, subsection 4a of the Income Tax Act, allowances paid by the European Commission to cover special costs and living expenses incurred in carrying out an expert task approved by the Commission in connection with the enlargement process of the European Union or the development of current and future border regions of the European Union are not taxable income. Such allowances include living allowances, fixed supplementary allowances and travel expense allowances, moving expense allowances and other allowances for expenses arising from a special task paid by the Commission.

The terms candidate and potential candidate are used in the context of the European enlargement process. The European Union supports the development of such countries to become eligible countries. The development of current and future border regions referred to in the section is currently understood to mean the European Neighbourhood Policy (ENP), which supports the political and economic development of neighbouring countries. The country-specific situation of the ENP is explained on the European Union website.

The European Union pursues its objectives by, for example, financing projects approved for implementation by external operators. In addition to its own staff, the project promoter may hire external experts. If the host state of the development project is a candidate or potential candidate in the enlargement process or a Neighbour covered by the ENP, section 76, subsection 4a of the Income Tax Act may be applied to the expert participating in the project.

Technically, development projects are usually implemented as either TAIEX or Twinning projects. Depending on the duration of the assignment, experts may receive daily allowances, travel expense allowances, home travel expense allowances, moving expense allowances and allowances to cover the school fees of their children.

Paid allowances are tax-exempt for the recipient and considered to have been received from the Commission, even though the allowance is passed on by the operator implementing the project. The conditions and amounts based on the Income Tax Act and the regulations on working trips issued under the said section do not affect tax exemption.

6.11 European Chemicals Agency

The European Chemicals Agency (ECHA) is a European Union agency based in Helsinki. The tax status and the privileges and immunities of ECHA and its staff are determined in the same way as for other staff of the European Union.

If an employee of ECHA has their main abode and home in Finland or if they stay in Finland for an uninterrupted period of more than six months, they are considered a resident taxpayer. However, an official or member of staff who has transferred to Finland from another Member State solely for the purpose of carrying out this work is considered to be resident in the state of origin for the purposes of a tax treaty in accordance with Article 13 of the Protocol on the privileges and immunities of the European Union. When an official is considered to be resident in another Member State under a tax treaty, the tax treaty usually limits Finland’s right to levy taxes on income from sources in Finland in a manner further specified in the tax treaty. Most tax treaties allow, for example, the taxation in Finland of income from the rental and sale of real estate located in Finland and shares in Finnish housing companies. Taxes may be levied in Finland on dividends paid by a Finnish company, but the tax treaty often limits the amount of tax. Typically, the tax may not exceed 15% of the total dividend. Income from the sale of shares is usually only taxed in the state of residence under the tax treaty. The tax treaty usually limits the amount of tax payable on interest income earned in Finland to 10% of the total amount of interest. To apply the provisions of the tax treaty to, for example, investment income, a tax card may be issued on request, indicating the amount of tax due on the income.

Salaries received by officials from ECHA are tax-exempt income in Finland under the Protocol on the privileges and immunities of the European Union, regardless of nationality, and it is irrelevant whether the individual is a resident or non-resident taxpayer. The salaries cannot be taken into account in the state of residence, even by using the progressive exemption method, and a health insurance contribution must not be levied on the official. However, if the official receives a salary/wages from another employer in addition to ECHA, the health insurance contribution may be levied on such income if the official is insured in Finland.

Taxes are not levied in Finland on payments received by a non-resident taxpayer from ECHA because ECHA is not considered an employer resident in Finland and the payments are therefore not considered income received from Finland.

The privileges and immunities of ECHA and its staff are also provided for in the Headquarters Agreement between the Government of the Republic of Finland and the European Chemicals Agency (SopS 10–11/2008). The agreement specifies, for example, that the term “family member” refers to a spouse, a cohabitant, a direct relative in the ascending line of the individual in question and of their spouse dependent on their care and a child under the age of 21. The Executive Director and Directors of ECHA, together with members of their families forming part of their households, provided they are not Finnish nationals or are not permanent residents of Finland, are accorded the privileges and immunities, exemptions and facilities accorded to heads of diplomatic missions and members of their families.

7 Treaties concerning other international organisations and their privileges and immunities

7.1 Other international organisations established in Finland

Several international organisations and institutions are based in Finland. Finnish law, international treaties, and, in particular, host country agreements concluded by the State of Finland with the organisation concerned, contain provisions on the taxation of individuals working in these organisations. Some of the organisations are not strictly speaking international organisations even though they collaborate with an international organisation.

Even if an international organisation has its registered office, headquarters or other place of business in Finland according to its rules, the organisation is not an employer resident in Finland for the purposes of the Income Tax Act, unless otherwise stated below. When an organisation is not considered an employer in Finland within the meaning of section 10, subsections 3 and 4 of the Income Tax Act, an individual who is a non-resident taxpayer is not liable to pay tax in Finland on the salary received from the organisation, even if the work takes place in Finland.  

Due to their special nature, international organisations established in Finland are not considered employers resident in Finland within the meaning of Article 15 of tax treaties, either.

7.1.1 The Nordic Investment Bank, Nordic Development Fund and Nordic Environment Finance Corporation

The Nordic and Baltic countries have agreed on the Nordic Investment Bank (NIB), which is headquartered in Helsinki. The status of NIB as it stands today is governed by an Agreement between Denmark, Estonia, Finland, Iceland, Latvia, Lithuania, Norway and Sweden concerning the Nordic Investment Bank (SopS 174–175/2004). A host country agreement has been concluded between NIB and the State of Finland, the current agreement being the Host Country Agreement between the Government of Finland and the Nordic Investment Bank (SopS 124–125/2010).

The Nordic Development Fund (NDF) was established by the Agreement concerning NDF between Denmark, Finland, Iceland, Norway and Sweden (SopS 97–98/1999). NDF is headquartered at the NIB headquarters in Helsinki. The status of NDF is governed by the Host Country Agreement between the Government of the Republic of Finland and the Nordic Development Fund (SopS 43/2014).

The Nordic Environment Finance Corporation (NEFCO) was established by the Agreement between Denmark, Finland, Iceland, Norway and Sweden concerning the Nordic Environment Finance Corporation (SopS 90–100/1999). NEFCO is headquartered at the NIB headquarters in Helsinki. The status of NEFCO is governed by the Host Country Agreement between the Government of the Republic of Finland and the Nordic Environment Finance Corporation (SopS 44–45/2014).

Under the agreements, NIB, NDF and NEFCO have the status of international legal persons. NIB is obliged to withhold tax on the salaries paid to its staff. NIB is also obliged to pay the employer’s health insurance contribution on the salaries of staff insured in Finland pursuant to section 3 and section 4, subsection 1 of the Act on Employer’s Health Insurance Contribution (Laki työnantajan sairausvakuutusmaksusta 771/2016).

The agreements do not contain any provisions on the taxation of individuals employed by these organisations.  Under the host country agreements, NIB, NDF and NEFCO are refunded the withholding tax and final tax levied on the salaries of their employees pursuant to Finnish tax law, as explained later in this section.

Salaries of employees who are resident taxpayers are taxable income, upon which taxes and health insurance contributions must be paid. NIB, NDF and NEFCO withhold tax on a salary if the salary is not subject to final tax. NIB, NDF and NEFCO are not considered employers in Finland within the meaning of section 10 of the Income Tax Act. As a result, employees who are non-resident taxpayers are not liable to pay tax in Finland on salaries paid by NIB, NDF or NEFCO, even if the work is done in Finland.

Final tax

The taxation of individuals employed in Finland by the Nordic Investment Bank, the Nordic Development Fund and the Nordic Environment Finance Corporation is governed by the Act on the Taxation of Persons Employed by the Nordic Investment Bank (Laki Pohjoismaiden Investointipankin palveluksessa olevan henkilön verottamisesta 562/1976). The Act applies to individuals who are not resident in Finland under the Income Tax Act when entering into an agreement with NIB, NDF or NEFCO on permanent employment. A 40% final tax is levied on the salaries of the individuals referred to in the Act in lieu of taxes and contributions based on income. The final tax levied on the salary also covers the employee’s health insurance contribution, which means that the employee’s health insurance contribution is not levied separately even if the employee is insured in Finland.

If the employee receives other earned income while working for NIB, the income subject to final tax from NIB is taken into account using the progressive exemption method when determining the tax on the employee’s other income. The method of calculation prescribed by law leads to the same final result as the progressive exemption method.

During each tax year, the employee can choose to be taxed in accordance with the provisions of the Income Tax Act instead of being levied the final tax pursuant to section 7 of the Act on the Taxation of Persons Employed by the Nordic Investment Bank, the Nordic Development Fund and the Nordic Environment Finance Corporation (Laki Pohjoismaiden Investointipankin, Pohjoismaiden kehitysrahaston ja Pohjoismaiden ympäristörahoitusyhtiön palveluksessa olevien henkilöiden verottamisesta 562/1976). The choice can be made at the prepayment stage or when the employee completes their tax return. In such a case, tax is levied on the salary paid by NIB, NDF or NEFCO using the income tax provisions, and the health insurance contribution is also levied. The final tax on the salary is credited in the same way as the withholding tax. The choice to be taxed under the provisions of the Income Tax Act cannot be made by means of a claim for adjustment, however.

If an individual employed by NIB also works abroad, the tax provisions of the applicable tax treaty on residence and the allocation of the right to levy tax on salary must be taken into account. This also applies to income subject to the final tax. However, NIB is not considered an employer resident in Finland within the meaning of the tax treaty.

7.1.2 Baltic Marine Environment Protection Commission

The Baltic Marine Environment Protection Commission (Helsinki Commission, HELCOM) was established by the Helsinki Convention on the Protection of the Marine Environment of the Baltic Sea Area (SopS 2/2000). The HELCOM office (secretariat) is located in Helsinki. The Commission and the State of Finland have concluded a host country agreement, the Agreement between the Commission and the Government of Finland on the Office and the Privileges and Immunities of the Commission (SopS 38–39/1980).

All members of HELCOM’s staff, irrespective of their nationality, are granted the same tax exemption in Finland on salaries and emoluments paid to them by HELCOM as to United Nations officials. This is a reference to the Convention on the Privileges and Immunities of the United Nations.

For the purposes of the taxation of employees, tax-exempt salaries paid by HELCOM are not taken into account using the progressive exemption method when determining the tax on the employee’s other income, even if the employee is resident in Finland for the purposes of a tax treaty. If an employee of HELCOM is insured under the Health Insurance Act, no health insurance contribution is levied on them on the basis of the tax-exempt income paid by HELCOM.

Employees who are non-resident taxpayers are not liable to pay tax in Finland on salary paid by HELCOM.

7.1.3 European Forest Institute

The European Forest Institute (EFI) was established by the Convention on the European Forest Institute (SopS 90–91/2005). EFI is based in Joensuu. EFI’s privileges and immunities are laid down in the Agreement between the Government of Finland and the European Forest Institute on the legal status, privileges and immunities of the Institute and its personnel (SopS 14–15/2007).

With certain exceptions, the salaries of employees who are resident taxpayers are taxable income on which tax and health insurance contributions must be paid.

However, Article 10 of the Agreement between the Government of Finland and the European Forest Institute on the legal status, privileges and immunities of the Institute and its personnel provides for an exception to the taxation of salary. The Director and staff of EFI who are not Finnish citizens and have not resided in Finland for three years prior to starting work at EFI are exempt from taxation in Finland regarding the salaries and emoluments paid to them by EFI. If an individual who is not a Finnish citizen has once been exempted from Finnish taxation on the salaries and emoluments paid to them by EFI, the three-year qualifying period does not apply.

For the purposes of an employee’s taxation, a tax-exempt salary paid by EFI is taken into account using the progressive exemption method when determining the tax on the employee’s other income if the employee is resident in Finland for the purposes of the tax treaty (Article 10[5] of the Agreement between the Government of Finland and the European Forest Institute on the legal status, privileges and immunities of the Institute). If such an individual employed by EFI is insured in Finland under the Health Insurance Act, no health insurance contribution is levied on them on the basis of the tax-exempt income paid by EFI.

Employees who are non-resident taxpayers, on the other hand, are not liable to pay tax in Finland on the salary paid by EFI, because EFI is not considered an employer in Finland and the income is therefore not income received from Finland under section 10 of the Income Tax Act.

7.1.4 European Institute for Crime Prevention and Control, affiliated with the United Nations

The European Institute for Crime Prevention and Control (HEUNI) is located in Finland. It operates as an independent unit within the Ministry of Justice Finland. HEUNI is based on an Agreement between the United Nations and the Government of Finland on the European Institute for Crime Prevention and Control (SopS 41–42/1982). HEUNI is not a specialised agency of the United Nations, however.

Section 12 of the Income Tax Act does not apply to staff of HEUNI. Salaries paid by HEUNI are taxable income for employees who are resident taxpayers in Finland, and insured individuals must also pay a health insurance contribution on them. As the salaries are paid by the State of Finland, they are income received from Finland under section 10, subsection 3 of the Income Tax Act. For this reason, non-resident taxpayers are also liable to pay tax in Finland on salary paid by HEUNI.

However, under the Agreement between the United Nations and the Government of Finland on the European Institute for Crime Prevention and Control, United Nations officials working for HEUNI are exempt from tax on salary paid to them by the UN.

7.1.5 European Centre of Excellence for Countering Hybrid Threats

The European Centre of Excellence for Countering Hybrid Threats (HYBRID CoE) is based on a memorandum of understanding between the signatory states. HYBRID CoE is not strictly speaking an international organisation, but a public legal entity pursuant to the Act on the European Centre of Excellence for Countering Hybrid Threats (Laki Euroopan hybridiuhkien torjunnan osaamiskeskuksesta 417/2017).

There are no specific provisions on the tax exemption of salary paid by HYBRID CoE or on the tax status of the staff in the Act. Salaries of employees who are resident taxpayers are taxable income, upon which taxes and health insurance contributions must be paid. Employees of HYBRID CoE who are non-resident taxpayers are liable to pay tax in Finland, as a salary received from HYBRID CoE is considered income received from Finland under section 10, subsection 3 of the Income Tax Act.

HYBRID CoE may also employ staff seconded by participating countries, the European Union or the North Atlantic Treaty Organization (NATO). The provisions of a relevant tax treaty, Protocol (No 7) on the privileges and immunities of the European Union and the Agreement among the States Parties to the North Atlantic Treaty and the Other States Participating in the Partnership for Peace regarding the Status of Their Forces (SopS 64–65/1997) may apply to these employees. In the case of a seconded employee whose employment relationship with the seconding institution remains valid and whose salary expenses are borne by the seconding institution instead of HYBRID CoE, the above-mentioned agreements on privileges and immunities may apply. In the case of an employee seconded by a Member State, the tax treaty’s article on public employment is applied to the taxation of the salary.

7.2 Other international organisations

7.2.1 Organisation for Economic Co-operation and Development

Finland has acceded to the Convention on the Organisation for Economic Co-operation and Development (OECD; 12/1969). The OECD’s privileges and immunities are governed by the Agreement on privileges and immunities of the Organisation for Economic Co-operation and Development in Finland (SopS 26/1969). The agreement provides that the OECD, its officers and the representatives of its member states acting within the OECD enjoy in the territory of Finland such legal status and such privileges and immunities as are provided for in Articles 1 to 19 of the First Supplementary Protocol to the Convention on the Organisation for Economic Co-operation and Development.

Under the Supplementary Protocol, officials of the OECD enjoy the same tax exemption on emoluments received from the OECD as officials serving in key international organisations. In tax assessment practice, the reference has been taken to mean a similar tax exemption to that enjoyed by United Nations officials.

7.2.2 The Nordic Council and Nordic Council of Ministers, their secretariats and the Nordic Culture Fund

Nordic cooperation is based on the Agreement on Co-operation between Denmark, Finland, Iceland, Norway and Sweden (the Helsinki Treaty, SopS 28/1962). The Treaty states that the cooperation is to take place through the Nordic Council and the Nordic Council of Ministers, among others, but the Treaty does not recognise the organisations as legal persons.

The legal status of the Secretariat of the Nordic Council and the Secretariat of the Nordic Council of Ministers is laid down in the Agreement concerning the legal status of the Nordic Council of Ministers’ Secretariat and the Nordic Council’s Secretariat (SopS 69/1989). Under the Agreement, the Secretariat of the Nordic Council of Ministers is located in Copenhagen, Denmark. The Agreement recognises the secretariats as legal persons and also contains provisions on taxes.

According to the Agreement, the secretariat’s salary is subject to an internal payment to the secretariat at 40%. When the payment is imposed, an employee can deduct interest expenses from their income insofar as it could not be used in national taxation. National taxes cannot be levied on the salary, but the salary can be taken into account in the national taxation of any other earned income using the progressive exemption method.

According to an agreement amending the Agreement concerning the legal status of the Nordic Council of Ministers’ Secretariat and the Nordic Council’s Secretariat (SopS 82–83/2006), the provisions concerning the staff of the secretariats also apply to the staff of the Nordic Culture Fund.

7.2.3 Joint Nordic institutions

The Nordic Council of Ministers may establish independent joint Nordic institutions. The legal status of such institutions is based on an agreement between Denmark, Finland, Iceland, Norway and Sweden on the legal status of joint Nordic institutions and their staff (SopS 88–89/1989).

According to the agreement, each joint Nordic institution established by the Nordic Council of Ministers is an independent legal person with the same legal capacity as any other legal person in the country where it is located (Article 1). Institutions operating in Finland are considered Finnish employers.

Salaries of employees who are resident taxpayers in Finland are taxable income, on which taxes and health insurance contributions must be paid.

Non-resident taxpayers are liable to pay tax in Finland if the work is wholly or mainly done in Finland.

7.2.4 The Council of Europe and European Court of Human Rights

The Council of Europe is a cooperative organisation separate from the European Union and the body of the same name. Finland joined the Council of Europe in 1989, at which time the Statute of the Council of Europe (SopS 21/1989) became binding on Finland. Under the provisions of the General Agreement on Privileges and Immunities of the Council of Europe (SopS 80/1989), Council officials are exempt from tax on salaries and emoluments paid to them by the Council of Europe.

Members of the European Court of Human Rights (ECHR) are entitled to the privileges and immunities provided for in Article 40 of the Statute of the Council of Europe and in the treaties made under it in the performance of their duties on the basis of the Convention for the Protection of Human Rights and Fundamental Freedoms (SopS 18–19/1990). They are covered by the same agreement as Council of Europe officials.

7.2.5 The European Bank for Reconstruction and Development

The European Bank for Reconstruction and Development (EBRD) is an international financial institution separate from the European Investment Bank, which is an institution of the European Union. Finland has enforced the Agreement establishing the European Bank for Reconstruction and Development (SopS 27–28/1991).

Salaries and emoluments paid to members, deputy members, officials and agents of the EBRD Board of Directors are subject to internal tax for the benefit of the EBRD. Salaries and emoluments are exempt from tax in Finland.

However, Article 53(6) of the Agreement allows the salary received from the bank to be taken into account for the taxation of income from other sources. The method of calculation prescribed in the Agreement leads to the same final result as the progressive exemption method.

7.2.6 European Organization for Nuclear Research

Finland has acceded to the Convention for the Establishment of a European Organization for Nuclear Research (CERN) (SopS 6/1991). According to Articles 10 and 11 of the Protocol on the privileges and immunities of the European Organization for Nuclear Research (SopS 29–30/2007), the officials and the Director-General of CERN are subject to a tax for the benefit of CERN on salaries and emoluments paid by CERN. These salaries and emoluments are exempt from national income tax.

However, the exemption does not apply to pensions and annuities. Under the Protocol, the States Parties to the Protocol are not obliged to exempt from income tax pensions or annuities paid by CERN to its former officials and Directors-General in respect of their service with CERN.

Under the Protocol, officials employed by CERN are exempt from all compulsory contributions to national social security schemes on the understanding that such persons are provided with equivalent social protection coverage by CERN.

7.3 The North Atlantic Treaty Organization (Nato) and the Defense Cooperation Agreement (DCA)

7.3.1 National representatives and international staff (the Ottawa agreement)

The international agreement governing the status of Nato representatives and staff was signed in Ottawa, and named the Agreement on the Status of the North Atlantic Treaty Organisation, National Representatives and International Staff (SopS 43/2023). The Finnish Act that implements the Ottawa Agreement is ‘Laki Pohjois-Atlantin liiton, kansallisten edustajien ja kansainvälisen henkilöstön asemasta tehdystä sopimuksesta (443/2023)’, providing the base for the agreement to gain legal force here. With Finland joining the other signatory states, the agreement’s date of entry into force was 8 June 2023.

The agreement’s Article 12 (XII) and Article 13 (XIII) contain detailed rules concerning the tax liability status of the persons representing different Nato states. Under Article 12, representatives who have received appointments for working in another Nato state’s territory in the capacity of principal permanent representative are granted immunities and privileges similar to those of diplomats.

In general, as representatives come to Finland to work here, the provisions of section 12 of the Income Tax Act will be applicable to the income they receive. The representatives need to pay Finnish tax only on the categories of income listed under section 12 of the Act. For more information on section 12 of the Income Tax Act, see section 2.2.2 of this guidance. However, if Finland’s representatives are present and working in the territories of other Nato states in the capacity of permanent representatives, the agreed immunities and privileges do not restrict Finland’s rights to levy taxes.

The provisions of Article 13 concern the Nato states’ representatives falling outside of the scope of application of the provisions of Article 12. Under the Ottawa Agreement, where the legal incidence of any form of taxation depends upon residence, a period during which a representative to whom Article 13 applies is present in the territory of another Nato state for the discharge of his duties shall not be considered as a period of residence. The representative is especially granted exemption from taxes on official salary and emoluments payable to him or her during these periods of duty.

Representatives coming to Finland from other countries, within the meaning of Article 13, are treated as nonresidents in Finland even if their circumstances would otherwise give rise to fiscal residency here, in other words, if the individual has a habitual abode or home in this country and he or she would stay longer than 6 months. As a result, the individuals concerned need to pay income tax to Finland only on income received from Finnish sources, in reference to the list of examples of income sourced to Finland per section 10 of the Income Tax Act.

The North Atlantic Treaty Organization, or any foreign state, are no employers based in Finland, so the wage payments from them are not income sourced to Finland although the individual would do their work in Finland.  Accordingly, representatives who are nonresidents are not liable to pay income tax to Finland on their salary received in Finland for the discharge of duties here in the capacity of a representative. Nevertheless, if Finland’s representatives are working in the territories of other Nato states in the capacity of permanent representatives, the agreed immunities and privileges do not restrict Finland’s rights to levy taxes on the wages they receive.

In accordance with Article 16 (XVI), the provisions of Articles 12 to 14 shall not require any country to grant any of the privileges or immunities referred to therein to any person who is its national i.e. citizen, or to any person as its representative, or as a member of the staff of such representative.

Article 19 of the Agreement contains provisions governing receipts of wage income by Nato staff members. Under the Agreement, Nato staff members are granted an exemption from taxes on salaries, emoluments, wages and related employee benefits that Nato pays them when they work as staff members. When a Finnish-resident individual taxpayer works as a Nato staff member in Finland or in another state, the wages received from Nato are exempt from Finnish taxation. In addition, if the individual receives other earnings, the Nato-paid amounts do not add to the progressive Finnish income tax on those other earnings. When a nonresident staff member works in Finland, the Nato-paid wages are not deemed to be income sourced to Finland because Nato is not an ‘employer based in Finland’ (section 10 of the Income Tax Act). The Agreement contains no specific provisions concerning the tax liability status of staff members, and for this reason, the provisions of Finland’s internal legislation will apply when determining the fiscal residency or nonresidency of an individual.

7.3.2 Members of forces and the accompanying civilian staff (the Nato Status of Forces Agreement, SOFA) 

The status of a Nato country’s forces, and of the civilian component accompanying the forces, is controlled by the Agreement between the parties to the North Atlantic Treaty regarding the status of their forces (Nato SOFA, SopS 23-24/2024). The status of international military headquarters, set up in accordance with the North Atlantic Treaty, is controlled by the provisions of the Protocol of Paris (SopS 25/2024). The Finnish legal statute concerning the Nato SOFA is the Act on the status of members of forces belonging to the States, parties of the North Atlantic Treaty (Laki Pohjois-Atlantin sopimuksen sopimuspuolten välillä niiden joukkojen asemasta tehdystä sopimuksesta (124/2024)). It has been in force since 27 April 2024.

Article 10 of Nato SOFA provides for exemption from Finnish taxes, with respect to wages paid by the sending State, to members of forces and accompanying civilian staff who come to Finland. Under the provisions of Article 10, where the legal incidence of any form of taxation in the receiving state depends upon residence or domicile, periods during which a member of a force or civilian component is in the territory of that state by reason solely of his being a member of such force or civilian component shall not be considered as periods of residence therein, or as creating a change of residence or domicile, for the purposes of such taxation.  For this reason, the individuals within the meaning of Article 10 are treated as nonresidents in Finland even if their circumstances would otherwise give rise to fiscal residency here, in other words, even if the individual had a habitual abode or home in this country and he or she would stay for a longer period than 6 months. From this, it follows that these individuals are liable to pay tax to Finland on their Finnish-source income only.

The provisions of Article 10 pose no restriction against Finland’s rights to levy taxes on income in situations where Finland would be the sending state, which sends forces or civilian staff to another Nato state.

7.3.3 Agreement on defense cooperation (the DCA) between Finland and the United States

The Defense Cooperation Agreement (SopS 70/2024) is a bilateral convention between Finland and the U.S.A, creating the framework for working together in the areas of military defense and security. The agreement was signed on 18 December 2023. The Finnish legal statute that lays down the DCA’s entry into force is the Act on co-operation in the area of defence between the governments of the Republic of Finland and the United States of America (Laki puolustusyhteistyöstä Suomen tasavallan hallituksen ja Amerikan Yhdysvaltojen hallituksen välillä tehdystä sopimuksesta (485/2024)). The DCA has been in force since 1 September 2024.

Article 17 contains detailed rules on personal tax exemptions that are granted to members of forces, their dependents, and to employees of U.S. contractors. Article 17, paragraph 2 of the DCA contains a reference to Article 10 of the Nato SOFA and the items of income listed under Article 10. According to the text of the Finnish Government proposal (HE 58/2024), the provisions concerning tax exemption of Article 17, paragraph 2 of the DCA are generally similar to those in Article 10 of the Nato SOFA. However, Article 17, paragraph 2 of the DCA provides that the exemptions under Article 10 of the Nato SOFA are extended to some other groups of employees and categories of income.

The individuals concerned by the scope of application of Article 17, paragraph 2 of the DCA are treated as nonresident individuals in Finland, liable to pay tax to Finland for income received from Finnish sources only. If a nonresident individual works in Finland for the U.S. government or for a contractor company from another country, the wages in the nonresident individual’s hands are not income sourced to Finland, because the work is not being done for an employer based in Finland. For this reason, Finland does not levy taxes on the wages received by members of forces, etc.

Article 17, paragraph 2, also provides that the income received by members of forces, or received by employees of U.S. contractors, is exempt from Finnish taxes especially in circumstances where the members or employees receive it for work done in the service of non-commercial organisations from countries other than Finland. This additionally requires that the work is exclusively related to furthering the wellbeing of U.S. forces, their morale and training, or that the work is related to Article 21 (service activities for the military) and Article 22 (military post offices). The income described here is not equated with the income sourced to Finland that under Finland’s internal legislation, due to its Finnish source, would become subject to tax in a nonresident individual’s hands.

The tax exemptions under Article 17, paragraph 2 of the DCA also concern dependents. However, the immunities and privileges under Article 17, paragraph 2 do not apply to citizens of Finland nor to other individuals who have previously, up to the time when they begin their defense co-operation work, lived in Finland on a permanent basis.

7.3.4 Health insurance contributions

The legal rules affecting health insurance contributions and other social contributions of employees and employers are connected not only to Finland’s internal legislation but also to Regulation (EC) No 883/2004 on the coordination of social security systems, including its Implementing Regulation No 987/2009, and to international conventions on social security. As a result, the legislation of the European Union and Finland’s bilateral conventions on social security may become applicable on Nato representatives’ and staff members’ social insurance, in addition to the Nato agreements discussed above.

When an individual working in Finland continues to be covered by the social insurance system of the country where he or she comes from, no health insurance contribution is withheld in Finland. The Finnish internal legal provisions of the Health Insurance Act, which concern individuals covered by Finnish social security, determine the insurance contributions on the basis of the insured person’s taxable earnings subject to municipal income tax (Chapter 18, § 14, subsection 1 of the Health Insurance Act), and additionally, on the basis of the insured’s taxable earnings in the form of wages plus business income, if any (Chapter 18, § 15, subsection 1 of the Act). Neither one of the Health Insurance Act’s criteria has relevance when an individual earns a tax-exempt wage. For this reason, no health insurance contribution is levied on the tax-exempt wages paid out by Nato.

8 Preassessment and tax return

8.1 Preassessment

If Finland has the right to levy taxes on the income of an individual and the payer has not collected tax on the payment, the employee must submit an application to the Finnish Tax Administration on the prepayment of the tax. The Tax Administration may also impose the prepayment ex officio. A prepayment may also be imposed for the payment of the health insurance contribution only if no tax is due based on the salary. 

If an individual works for an international organisation whose salary can be taken into account in the taxation of the individual’s other income by means of the progressive exemption method, the progression effect may be taken into account in determining the withholding rate or prepayment on other income.

8.2 Tax return

Pursuant to section 7, subsection 1 of the Act on Tax Assessment Procedure (Laki verotusmenettelystä 1558/1995) a resident taxpayer in Finland must declare their taxable earnings, any deductions, information about their assets and debts as well as other relevant information to the Finnish Tax Administration for tax assessment purposes.

However, diplomats and other individuals listed in section 12 of the Income Tax Act are not required to declare income on their tax returns that is exempt from tax under section 12 of the Income Tax Act unless specifically requested to do so. The individuals listed in section 12 of the Income Tax Act only have to declare income taxable in Finland on their tax returns as mentioned in section 12 of the Income Tax Act.

Furthermore, income received from an international organisation with which Finland has made an agreement to waive the right to levy taxes and that is not taken into account in the taxation of any other earned income does not have to be declared on the tax return.  However, taxpayers must declare all their income in accordance with section 11 of the Income Tax Act if the Finnish Tax Administration specifically requests the information.