Taxation of students and trainees in international situations

This is an unofficial translation. The official instruction is drafted in Finnish (Opiskelijan ja harjoittelijan verotus kansainvälisissä tilanteissa, record number VH/5710/00.01.00/2022) and Swedish (Beskattning av studerande och praktikanter i internationella situationer, record number VH/5710/00.01.00/2022) languages.

These instructions provide information on the taxation of income earned by students and trainees coming to Finland and students and trainees leaving Finland to pursue studies in other countries. In these instructions, you can also read about the impact of tax treaties on taxation and about relief from double taxation.

Section 4.4 discussing the taxation of the study grants of students coming to Finland is an addition to the previous version of these instructions and the contents of a number of sections have also been made more specific.

1 Foreword

In many cases, the taxation of students and trainees coming to Finland/leaving Finland to study abroad is at least partially governed by the tax treaties between Finland and other countries. The country in which a student or a trainee is staying on a temporary basis cannot normally tax the income earned by the student or the trainee outside its territory. At the same time, this country has, as a rule, the right to tax the income earned in its territory. Some of the tax treaties contain provisions stating that this income, too, is fully or partially tax-exempt in the country where the student or the trainee is staying.

The following topics are briefly discussed in these instructions: concepts of tax residency and non-residency, the impact of tax treaties on the taxation of students and trainees and the impacts of national legislation on the taxation of students and trainees coming to Finland/leaving Finland for other countries.

You can read more about the rules applying to employees and employers in the Finnish Tax Administration’s instructions Taxation of income earned abroad and Taxation of employees from other countries. More detailed information on health insurance contributions is contained in the Finnish Tax Administration’s instructions Health insurance contributions in international employment situations.

2 Resident and non-resident tax liability

2.1 Tax residency

Under § 9, subsection 1, paragraph 1 of the income tax act (Tuloverolaki 1535/1992), natural persons living in Finland are resident taxpayers in Finland. Separate provisions of income tax act define 'living in Finland'. Under § 11, subsection 1 of the income tax act, individuals with permanent residence and home in Finland are treated as individuals living in Finland. Similarly, people who stay in Finland for more than six months are treated as Finnish tax residents.

As a rule, Finnish citizens moving abroad will remain Finnish tax residents for three years after they have left Finland. Tax residency of foreign citizens and stateless persons normally ends on the day on which the individual in question leaves a country on a permanent basis. You can read more about the matter in the Finnish Tax Administration’s instructions Tax residency, nonresidency and residency in accordance with a tax treaty – natural persons.

The general provisions referred to above also apply to students and trainees. The reason why an individual has come to Finland is irrelevant when their taxpayer status is determined. A student or a trainee is a Finnish tax resident if they have their permanent residence and home in Finland or they stay in Finland for a continuous period of more than six months.

Resident taxpayers are liable to pay tax on income that they have received in Finland and elsewhere (§ 9, subsection 1, paragraph 1 of the income tax act). In most cases, the income received by resident taxpayers in a foreign country is also taxed in Finland even if the income was taxed in the country of source. However, there are exceptions to this rule in the Finnish legislation. For example, income from foreign employment may be tax-exempt in Finland if the requirements for what is called the six-month rule are met (§ 77 of the income tax act). Tax treaties may also limit Finland’s right to tax specified in its national legislation.

2.2 Tax non-residency

An individual who has not lived in Finland during the tax year is a non-resident taxpayer in Finland (§ 9, subsection 1, paragraph 2 of the income tax act). As above, ‘living in Finland’ means in this connection the living referred to in § 11, subsection 1 of the income tax act. Foreign citizens living abroad are non-resident taxpayers. If a foreign citizen living outside Finland comes to Finland to stay here for a maximum period of six months, they will remain non-resident taxpayers.

Finnish citizens who have moved abroad and have lived outside Finland for at least three years or have presented evidence before the end of the three-year period that they did not have substantial ties to Finland during the tax year are also treated as non-resident taxpayers. You can read more about the matter in the Finnish Tax Administration’s instructions Tax residency, nonresidency and residency in accordance with a tax treaty – natural persons.

As a rule, students and trainees coming to Finland are treated as non-resident taxpayers in Finland if they can be considered as individuals living outside Finland and they are coming to Finland to stay here for a maximum period of six months.

Provisions on the taxation of non-resident taxpayers are contained in the act on the taxation of non-resident’s income (Laki rajoitetusti verovelvollisen tulon verottamisesta 627/1978). A non-resident taxpayer is only liable to pay taxes in Finland on income received in Finland (§ 9, subsection 1, paragraph 2 of the income tax act). The income tax act, section 10, contains a list of income earned in Finland. However, the list is not exhaustive as it does not mention such income as study grant and scholarships. Under § 10 of the income tax act, income received in Finland includes wages paid by Finnish public organisations and other wages received for work mainly performed in Finland for a Finnish employer. However, Finland’s right to tax the income received in Finland may be limited by tax treaties.

2.3 Three-year rule

Under the income tax act, a Finnish citizen moving abroad is normally regarded as a Finnish tax resident in the year of move and in the three years after that. However, if the Finnish citizen in question presents evidence that they no longer have substantial ties to Finland they may already be considered as non-resident taxpayers before the end of the third year following the year of move (§ 11, subsection 1 of the income tax act). You can read more about the three-year rule and the definition of the substantial ties in the Finnish Tax Administration’s instructions Tax residency, nonresidency and residency in accordance with a tax treaty – natural persons.

A key requirement for the breaking of substantial ties is that the individual in question has permanently left Finland. A Finnish citizen is considered to have substantial ties to Finland if they have not permanently settled in another country even if the individual in question no longer had any permanent residence and home in Finland. For example, an individual is considered to have substantial ties to Finland when studying is the only reason for living outside Finland.

Substantial ties to Finland may be broken if the reason for living outside Finland changes and studying is no longer the only reason for living abroad. The change may be prompted by family relations, personal ties or work. Other substantial ties to Finland, such as being covered by Finnish social security, must also be broken. In taxation practice, being covered by Finnish social security is considered a substantial link to Finland.

3 Tax treaties

3.1 General information about the student article contained in tax treaties

In many cases, the taxation of students and trainees coming to Finland/leaving Finland to study abroad is at least partially governed by the tax treaties between Finland and other countries. Finland has concluded tax treaties on income taxation with more than 70 countries (List of tax treaties). In a tax treaty, two or more countries have agreed on the sharing of the right to tax between them and on relief from double taxation in situations where a natural or legal person residing in one of the contracting states receives income from another contracting state.

Most of the tax treaties between Finland and other countries contain an article (student article) on students and trainees limiting the right to tax of the country in which the student or the trainee is staying on a temporary basis (country of study). This means that the country of study cannot normally tax the income received by the students and trainees outside its territory. At the same time, the country of study has, as a rule, the right to tax the income earned in its territory. In some of the tax treaties, the right to tax of the country of study has been limited so that this income, too, is fully or partially tax-exempt.

The student tax relief specified in a tax treaty is only granted if the student or trainee in question lives or has immediately before coming to the country of study lived in another contracting state as specified in the tax treaty.

In Finland, the student article is applied to postgraduate students and researchers. Such students also include licentiates doing research. However, in Finland, postgraduate students working on a dissertation are treated as researchers whereas in some other countries, they are considered as students. The difference between a student and a researcher is not always clear but the interpretation of the country of study is always used as a basis for tax treatment. You can read more about the tax relief granted to teachers and researchers in the Finnish Tax Administration’s instructions Taxation of people working for higher education institutions – international situations.

The student tax relief also applies to trainees. For purposes of student tax relief, a trainee is an individual who is receiving vocational training in their home country that includes acquisition of practical experience by working, such as apprenticeship training.

3.2 Income from outside the country of study

The country of study cannot normally tax the income received by a student or a trainee outside its territory. Most of the tax treaties contain a student article under which the money received by a student or a trainee for livelihood, education or practical training is not taxed in the country of study if the money comes from sources outside the country of study. For example, scholarships and study grants received by students and trainees from their home country cannot be taxed in the country of study.

The tax treaties between Finland and other countries are largely based on the Model Tax Convention of the OECD. The Model Tax Convention contains an article on students and trainees. Under Article 20 of the Model Tax Convention,

“... payments which a student or business apprentice who is, or was immediately before visiting a Contracting State, a resident of the other Contracting State, and who is present in the first-mentioned State solely for the purpose of his education or training, receives for the purpose of his maintenance, education or training, shall not be taxed in that State, provided that such payments arise from sources outside that State.”

A provision identical or nearly identical with Article 20 of the Model Tax Convention is contained in the tax treaties between Finland and the following countries:

Argentina, Armenia, Australia, Austria, Azerbaijan, Barbados, Belarus, Belgium, Bermuda, Bosnia and Herzegovina (treaty with former Yugoslavia), Brazil, British Virgin Islands, Bulgaria, Canada, Cayman Islands, China, Croatia (treaty with former Yugoslavia), Cyprus, Czech Republic, Egypt, Estonia, France, Georgia, Germany, Greece, Guernsey, Hong Kong, Hungary, India, Indonesia, Ireland, Isle of Man, Israel, Italy, Japan, Jersey, Kazakhstan, Kyrgyzstan, Kosovo (treaty with former Yugoslavia), Latvia, Lithuania, Luxembourg, Macedonia, Malaysia, Malta, Mexico, Moldova, Montenegro (treaty with former Yugoslavia), Morocco, Netherlands, New Zealand, Nordic countries, Pakistan, Philippines, Poland, Republic of Korea, Romania, Russia, Serbia (treaty with former Yugoslavia), Singapore, Slovakia, Slovenia, South Africa, Spain, Sri Lanka, Switzerland, Tajikistan, Tanzania, Thailand, Türkiye, Turkmenistan, Ukraine, United Arab Emirates, United States of America, United Kingdom, Uruguay, Uzbekistan, Vietnam and Zambia.

The student article is not always identical with that of the Model Tax Convention. For example, in addition to ‘business apprentices’, its provisions may also apply to such groups as trainees in industrial companies, agriculture and forestry. It is advisable to check the exact content of the article from the relevant tax treaty.

In addition to the student tax relief concerning the income earned outside the country of study, some of the tax treaties also contain a provision on the tax relief on the income received from the country of study.

3.3 Income earned from work performed in the country of study

The country of study normally has the right to tax the income earned by a student or a trainee from work performed in its territory. In most cases, the student tax relief only applies to income received from outside the country of study. In such cases, the right to tax the income earned from work performed in the country of study is determined on the basis of the tax treaty article on private law employment relationship or the article on service relationship under public law.

In some of the tax treaties, the right to tax of the country of study is limited so that the income earned from work performed in the country of study is also fully or partially tax-exempt.

The tax relief on the income from work performed in the country of study can only be granted if the student is studying in a university or other institute of higher education in their home country. An ‘institute of higher education’ means an education institution corresponding to a Finnish university or university of applied sciences. Because this provision normally also applies to trainees, it may also cover other education provided in the student’s home country if the education includes periods of training giving the student practical work experience. In such cases, the work may be considered practical training within the meaning of the tax treaty.

The tax relief can only be applied to the income earned from work performed in the country of study if the stay and work abroad is connected with the taxpayer’s studies or training in their home country. The only exception to this rule is the tax treaty between Finland and France, under which the work does not need to be connected with studies or practical training. The tax treaties between Finland and all other countries listed below require that the work is connected with studies or practical training. According to the ruling of the Finnish Supreme Court (KHO 19.6.1996 taltio 2063), the student can, for example, present a document provided by an education institution in his or her home country as proof that the work is accepted as study-related training by the education institution in question.

In order to be granted the tax relief, the student must also meet a number of restrictions concerning the stay period. The tax treaty between Finland and France is an exception to this rule as it does not contain any restrictions on the stay period. The student tax relief may also apply to the whole income, part of it or only to the portion required for livelihood. If the exact amount of the relief is not stated in the tax treaty, the deduction specified in § 6, subsection 1 of the act on the taxation of non-resident’s income (€510 per month or €17 per day) is applied in Finland.

For example, under the student article contained in the tax treaty between Finland and Germany, the student tax relief is the amount that the student must earn for livelihood and the relief can be granted if the continuous stay in the country of study does not exceed 183 days. An additional requirement is that the student is studying in a university, an institute of higher education or comparable institution or that the student is an apprentice or a trainee in business, industries, agriculture or forestry. The work must also be connected to the studies or practical training.

Under the tax treaties between Finland and the following countries, the student tax relief can be equal to the amounts required for livelihood (in Finland, €510 per month or €17 per day) provided that the stay in the country of study does not exceed 183 days during a calendar year:

Belgium, Bosnia and Herzegovina (treaty with former Yugoslavia), Bulgaria, Hungary, Indonesia, Kosovo (treaty with former Yugoslavia), Croatia (treaty with former Yugoslavia), Greece, Luxembourg, Montenegro (treaty with former Yugoslavia), Serbia (treaty with former Yugoslavia), Tanzania and Thailand.

Under the tax treaties between Finland and the following countries, the student tax relief can be equal to the amounts required for livelihood (in Finland, €510 per month or €17 per day) provided that the stay in the country of study does not exceed 183 days (length of stay is not tied to a calendar year):

Argentina, Austria, Barbados, Brazil, Czech Republic, Georgia, Germany, India, Israel, Netherlands, Pakistan, Romania, Russia, Sri Lanka, Türkiye, Ukraine, United Arab Emirates and Vietnam.

The tax treaties with the countries listed below also contain a provision on a student tax relief applying to income from work performed in the country of study. However, the requirements and amounts concerning the tax relief are substantially different from what is provided in the other tax treaties listed in these instructions and you are always advised to check them from the treaty in effect (List of tax treaties).

Egypt, Faroe Islands, France, Iceland, Japan, Malaysia, Philippines, Republic of Korea, United Kingdom and Zambia.

The treaty provisions for Faroe Islands and Iceland, which differ from those applying to other Nordic countries, are contained in paragraph IX of the protocol to the tax treaty between the Nordic countries.

3.4 Grants and scholarships received from the country of study

In some of the tax treaties, the student article contains provisions on the right to tax the grants and scholarships received from the country of study (for example, Article 21 of the tax treaty between Finland and the United Kingdom). If there are no references to the right to tax such grants and scholarships in the student article the right to tax them is determined on the basis of the article on other income contained in the tax treaty (usually Article 21 of the treaty).

According to the ‘Other income’ article, income is generally only taxed in the person’s country of residence under the tax treaty.

However, under the tax treaties between Finland and the countries listed below, the other income may also be taxed in the country of source, in which case double taxation is eliminated in the manner specified in each of the tax treaties:

Argentina, Australia, Azerbaijan, Barbados, Brazil, Canada, China, Estonia, India, Indonesia, Latvia, Lithuania, Malaysia, Mexico, Morocco, New Zealand, Pakistan, Philippines, Singapore, Thailand, Türkiye, Uruguay, Vietnam and Zambia.

According to the tax agreement between Finland and Egypt, income classified as other income is only subject to tax in the country of source.

4 Taxation of students coming to Finland

4.1 General

The tax treatment of the income of foreign students and trainees in Finland significantly depends on whether the individual in question is considered a resident or a non-resident taxpayer. In many cases, the treatment also depends on whether the student or the trainee works for a Finnish or a foreign employer. Resident taxpayers must pay taxes on their worldwide income. Non-resident taxpayers only need to pay taxes on income that they have received in Finland. Income received in Finland includes the income specified in § 10 of the income tax act.

However, wages are not considered income earned in Finland and they are not taxed in Finland if the non-resident taxpayer is working in Finland for a foreign employer (§ 10, subsection 1, paragraph 4 of the income tax act).

Resident taxpayers are taxed in the manner specified in the act on assessment procedure (Laki verotusmenettelystä 1558/1995). A non-resident taxpayer can also be taxed on a progressive basis as laid down in the act on assessment procedure. In that case, the non-resident taxpayer must request a non-resident taxpayer’s tax card from the Finnish Tax Administration for the payer or append a claim for progressive taxation of their earned income to the tax return (form 6148).

In the tax assessment carried out in accordance with the act on assessment procedure, a student or a trainee may be granted the tax relief specified in the tax treaty. The tax relief is €510 per month or €17 per day unless otherwise specified in the tax treaty.

Furthermore, the country of residence of the student or the trainee coming to Finland usually taxes the worldwide income of the student or trainee residing in that country in accordance with its own legislation. Thus, even though the income earned by a foreign student or trainee from work performed in Finland can also be taxed in the country of residence, the country of residence specified in the tax treaty eliminates double taxation in accordance with the tax treaty.

Taxation of students and trainees coming to Finland only differs from the taxation of employees coming to Finland to the extent that students and trainees may be eligible for the tax relief based on a tax treaty discussed in section 3.3 above.

The wages earned by a tax non-resident student or trainee from work performed for a Finnish employer in Finland are taxed in the manner specified in the act on the taxation of non-resident’s income.

4.2 Tax at source deduction

Students and trainees coming to Finland and planning to stay here for a maximum of six months are considered non-resident taxpayers in Finland. If a non-resident taxpayer does not request a non-resident taxpayer’s tax card, the payer must collect tax at source in connection with the payment. The tax at source is a final tax and it amounts to 35 per cent of the wages. Fringe benefits are also subject to tax at source as valued in accordance with the decision of the Finnish Tax Administration (§ 3, subsection 1 and § 7, paragraph 1 of the act on the taxation of non-resident’s income).

Before collecting the tax, the payer may deduct tax at source from the combined amount of monetary wages and fringe benefits if the deduction is specified in the tax-at-source card. Provisions on the tax-at-source deduction are contained in § 6 of the act on the taxation of non-resident’s income. The deduction is €510 per month or €17 per day if the wages are earned for a period shorter than one month. The tax-at-source deduction also covers any student tax relief. The employer’s health insurance contribution and the insured party’s health insurance contribution are paid from the amount from which no tax-at-source deduction has been made.

4.3 Progressive taxation

A non-resident taxpayer can request their income to be taxed progressively in place of tax at source. In such a case, a non-resident taxpayer is taxed in the same way as permanent residents of Finland.

Progressive taxation is usually a more favourable alternative for students and trainees than taxation at source. However, students and trainees are not eligible for tax-at-source deduction if their taxation is carried out in the manner specified in the act on assessment procedure. However, a student or a trainee may be eligible for the student tax relief based on a tax treaty in the same manner as resident taxpayers. The tax relief is €510 per month or €17 per day unless otherwise specified in the tax treaty.

You can read more about the progressive taxation of non-resident taxpayers in section 2.3 (Progressive taxation of non-resident taxpayers) of the Finnish Tax Administration’s instructions Taxation of employees from other countries.

4.4 Student grant

A student coming to Finland may also be eligible for the study grant paid by Kela (Social Insurance Institution of Finland) and this benefit can be paid to both resident and non-resident taxpayers.

The study grant paid to resident taxpayers is also taxed in the manner specified in the act on assessment procedure. Because this income is taxable, taxes must be withheld from it as specified in § 1, subsection 1 of the act on tax prepayments (Ennakkoperintälaki 1118/1996). However, no taxes have been withheld from study grants since 2019 (§ 14 of the Finnish Tax Administration’s decision on withholding methods and amounts to be withheld (In Finnish). A student may submit to Kela a tax card in which a withholding rate has been calculated for the study grant (Finnish Tax Administration’s instructions Daily allowances and other benefits).

Under § 3 of the act on the taxation of non-resident’s income, tax at source must also be paid on income on which taxes must be withheld under the act on tax prepayments. Thus, study grants paid to non-resident taxpayers are income subject to the act on the taxation of non-resident’s income. The tax at source on study grants is 35% (§ 7 of the act on the taxation of non-resident’s income).

A student who is a non-resident taxpayer may request a tax-at-source card for study grants, in which the tax-at-source deduction specified in § 6 of the act on the taxation of non-resident’s income (€510 per month or €17 per day) is considered if, under a tax treaty, Finland has the right to tax the study grant. In practice, there is rarely any tax at source to collect because the study grant is usually smaller than the tax-at-source deduction. Moreover, the tax-at-source deduction can only be granted once for the same period. If, for example, an individual receives wages subject to tax at source and a study grant for the same month, the individual in question is only eligible for tax-at-source deduction from one income for the month in question.

Non-resident taxpayers do not need to pay health insurance contributions on study grants subject to tax at source even if the recipient was covered by the Finnish health insurance (chapter 18, § 16, subsection 1 and § 32, subsection 4 of the Health Insurance Act (1224/2004). A non-resident taxpayer may also request that their income should be taxed in the manner specified in the act on assessment procedure. In that case, the health insurance contribution must be collected from the study grant if the individual in question is covered by the Finnish health insurance (chapter 18, § 16, subsection 3 of the Health Insurance Act).

Tax treaties may also impact Finland’s right to tax study grants. If there are separate references to payments based on social security legislation (pension article), this provision also applies to study grants. However, if the tax treaty does not contain any provisions on payments based on social security legislation, the article on other income applies to study grants. Under this article, only the country of residence has normally the right to tax this benefit.

5 Taxation of students going abroad

5.1 General

As a rule, the taxation of income from foreign employment earned by students and trainees going abroad is based on the legal provisions normally applied to wage income. As described in section 3.3 above, some of the tax treaties contain provisions on tax relief applying to students and trainees. The income earned from work performed in the country of study may be fully or partially tax-exempt in the country of study. However, this does limit Finland’s right to tax students and trainees living in Finland.

When an individual who is a Finnish tax resident works abroad, the income from such work is taxable in Finland under the Finnish legislation (§ 9, subsection 1, paragraph 1 of the income tax act) unless it has specifically been declared tax-exempt. The country of study may also tax the same income under its own national legislation. If the work-related stay outside Finland lasts at least six months, the wages may be tax-exempt in Finland on the basis of the six-month rule.

If the six-month rule cannot be applied to the wages earned from foreign employment it must be determined in the tax assessment whether the country of study has the right to tax the wages under the tax treaty. Double taxation is eliminated in Finland if the country of study has the right to tax the income. The income is only taxed in Finland if under the tax treaty, the country of study has no right to tax the income.

5.2 Elimination of Double Taxation

As a rule, the income from foreign employment earned by resident taxpayers is taxable in Finland. The country of study may also tax the same income under its own national legislation. If an individual works in a country that has concluded a tax treaty with Finland, Finland must eliminate double taxation if Finland is the country of residence specified in the treaty and if, under the tax treaty, the country of study has the right to tax the income. Double taxation may also be relieved in situations where people work in a country with no tax treaty with Finland.

Finland has a legal act on how double taxes must be eliminated – the act on the methods to be used when granting relief (1552/95, menetelmälaki). This act is also applied when the country of study does not have a tax treaty with Finland. In this case, only the credit method is in use.

The taxpayer must submit a request for relief from double taxation and provide the details of the taxes paid to the other country and the grounds for the payments. It is possible for taxpayers to lodge such claims when they ask for their prepayment calculation for the current year. Another possibility is to fill in the claim on the year's tax return.

You can read more about the relief from double taxation in the Finnish Tax Administration’s instructions Relief for international double taxation. 

5.3 The six-month rule

Pay for work performed abroad is tax-exempt in Finland (section 77, income tax act) if:

• the stay abroad arises from this work and
• lasts for a continuous period of at least six months and
• the country where the individual works has, under an income tax treaty between Finland and that country, the right to tax the income.

The provision only applies to wage income, which means that such income as social benefits, non-wage compensations and royalty-type payments are not tax-exempt under this provision. The tax exemption does not apply to wages paid by a Finnish public sector body or Business Finland or to wages paid for work performed in a Finnish aircraft or vessel.

The six-month rule only applies if the stay abroad arises from work. The six-month rule may apply to work performed by a student if the student works in the country of study for at least six months on a continuous and regular basis.

Another precondition of the application of the six-month rule is that the country of work has the right to tax income. Some of the tax treaties contain provisions that limit the right of the country of study to tax the income of students and trainees. These tax relief provisions are discussed in section 3.3 above. In the case of graduate students, it is also worth noting that the definitions of 'researcher' and 'student' may vary from country to country. The country of study may consider a Finnish researcher a student and vice versa. The interpretation of the country of study is always used as the basis for tax treatment.

You can read more about the six-month rule in the Finnish Tax Administration’s instructions on the Six-month rule for income from foreign employment.