Taxation of grants, scholarships and awards for merit

This is an unofficial translation. The official instruction is drafted in Finnish (Apurahojen, stipendien ja tunnustuspalkintojen, record number VH/1671/00.01.00/2023) and Swedish (Beskattning av stipendier, understood och hederspris, record number VH/1671/00.01.00/2023) languages.

This guidance concerns the taxation of grants, scholarships and awards for merit received by natural persons, within the meaning of the act on income tax (Tuloverolaki, 1535/1992).

Any other awards or prizes, such as awards given by employers and partners in cooperation, prizes won in art competitions or in competitions organised for school children, are not within the scope of this guidance. Guidance on the taxation of these types of prizes is found in the Tax Administration’s guidance Taxation of prizes (available in Finnish and Swedish, link to Finnish). In the same way, this guidance does not address the tax treatment of athletes’ scholarships, grants, awards, etc. Income received from sports is discussed in the Tax Administration’s guidance Taxation of income received from sports. Taxation of grants in international situations is discussed in the Tax Administration's guidance Taxation of people working for higher education institutions – international situations.

The maximum amount of tax-exempt grant for 2024 has been updated to this guidance. Between 1 January and 29 February 2024, the state artist grant is €2,153.23/month. Between 1 March and 31 December 2024, the state artist grant is €2,196.30/ month. New chapter 2.11 has been added to the guidance. The chapter discusses the reimbursement of travel expenses paid to grant recipients.

1 Foreword

Provisions on the liability to pay taxes on scholarships, grants and awards for merit are laid down in section 82 of the act on income tax (Tuloverolaki 1535/1992). The act does not further specify the meaning of the terms ‘scholarship’ or ‘other grant’.

According to section 82, subsection 1 of the act on income tax, which entered into force on 1 January 2023, taxable income does not include

• a scholarship or other grant awarded for studies, academic research or artistic activities;
• an award granted for academic, artistic or non-profit activities if the award has been received from a grantor independent from the recipient of the award.

Under section 82, subsection 2 of the act on income tax, scholarships, study grants and other grants of the government, a municipality, wellbeing services county, another public entity or the Nordic Council are tax-exempt without any upper limit. From 2023, awards of merit referred to in subsection 1 are tax-exempt for their recipients.

Notwithstanding this, scholarships, study grants and other grants of other than public entities or the Nordic Council are taxable insofar as, during the tax year, their total amount, when combined with the total amount of scholarships, other grants and study grants of public entities and the Nordic Council, exceeds the amount of the annual artist grant awarded by the State after the deduction of expenses incurred in acquiring and maintaining income. The Arts Promotion Centre Finland confirms the tax-exempt amount of the artist grant annually.

Also considered as tax-exempt grants under section 82, subsection 4 of the act on income tax are the grants and subsidies (“library grants”) referred to in section 1 of the Act on Public Lending Right Compensation Grants and Subsidies (236/1961).

Under section 82, subsection 2 of the act on income tax, scholarships, study grants and other grants are taxable income for the year in which they are paid.

2 Grants and scholarships

2.1 Grants and scholarships awarded by a public entity or the Nordic Council

Grants, scholarships and study grants awarded by a public entity or the Nordic Council are fully exempt from taxation (section 82, subsection 2, act on income tax). The public entities referred to in this subsection include:

• State
• municipalities
• joint municipal authorities
• wellbeing services counties
• Evangelical Lutheran Church of Finland and the Finnish Orthodox Church
• Bank of Finland
• Social Insurance Institution of Finland (Kela)
• Central Arts Council
• regional art councils
• State scientific committees, collectively referred to as the Academy of Finland
• Finnish Work Environment Fund, operating under the auspices of the Ministry of Social Affairs and Health.

According to the Universities Act (558/2009), as of 2010, Finnish universities and higher education institutions are not public entities. Most universities are independent institutions under public law, while certain universities are foundations governed by private law. For purposes of taxation, neither public nor foundation universities are public entities.

In addition, the following are not treated as being among the public entities referred to in section 82, subsection 2 of the act on income tax:

• foreign states
• foreign public entities
• government-owned or municipality-owned corporations, such as limited liability companies, because they are not legal entities under public law
• private-sector associations and foundations, registered associations and political parties
• Finnish Cultural Foundation.

Pursuant to section 82, subsection 2 of the act on income tax, grants, scholarships and study grants received from a public entity or from the Nordic Council are exempt from tax on condition that they have been awarded for studies or for academic or artistic activities. In the same way, awards for merit granted for academic, artistic or non-profit activities are tax-exempt. Payments for other purposes made under the name of the grant or scholarship are not tax-exempt income, as defined in the above-mentioned section.

2.2 Grants and scholarships awarded by private entities

Scholarships and grants awarded by private entities for studies, academic research or artistic activities are exempt from tax if their total amount, when combined with the total amount of the scholarships, other grants and study grants disbursed by public entities and the Nordic Council, is at most equal to the amount of the annual artist grant awarded by the State after the deduction of the expenses incurred in acquiring and maintaining income. If the net amount of grants etc. during the tax year exceeds the maximum amount of the annual artist grant, the portion exceeding the maximum limit is taxable earned income (section 82, subsection 2).

All other parties, except for the public entities and the Nordic Council referred to in section 82(2), are private grant-makers.

Maximum tax-exempt amounts of grants awarded annually in different years:

Maximum tax-exempt amounts of grants awarded annually

Year	Amount (€)
2024	26,269.46
2023	25,547.52
2022	24,761.09
2021	23,668.35
2020	23,376.45

2.3 Determining whether the income is taxable

Only grants or scholarships awarded for studies, academic research or artistic activity may be tax-exempt income (section 82, act on income tax). Grants and scholarships awarded for other purposes are always taxable earned income, regardless of who pays them.

The taxability of scholarships and grants is determined on a case-by-case basis. It is important to distinguish academic and artistic activities from working for others. When working for others, the grant is considered wages, regardless of what name is given to the compensation when it is paid. For example, according to legal praxis, even if a payor calls an amount of money a scholarship, the fact that it is paid in compensation for a specific job makes it taxable earned income for the beneficiary (Supreme Administrative Court’s ruling KHO 1976/4136).

If necessary, the beneficiary (grant recipient) must provide information in order to explain why the grant is exempt from tax. Key information for this purpose includes the grant decision or notification, i.e. a document that specifies the grantor and sets out the terms and conditions for awarding the grant.

When deciding whether or not a grant must be taxed as part of the beneficiary’s taxable earned income, the following factors are important:

• Who is the beneficiary?
• Was an open call for applications held for the grant?
• Is the beneficiary employed by the grantor?
• Is the grant given in return for work done by the beneficiary?
• Was the grant awarded without an application?
• What clarifying information did the beneficiary have to present?
• Are there any special terms and conditions for awarding the grant?
• Was the grant awarded by a non-profit entity?

According to legal praxis, a grant awarded for studies has been deemed taxable earned income based on overall consideration when the circle of beneficiaries was actually limited to the members of a certain family (Supreme Administrative Court’s ruling KHO 2013:156).

2.4 Grants and scholarships awarded by employers

A grant or scholarship is tax-exempt only if it was awarded for studies or academic or artistic activities (section 82, act on income tax). From the perspective of the payor, the grant or scholarship cannot be a payment made as a remuneration in exchange for something. In other words, no financial or other benefit to the payor can be connected with the giving of the grant or scholarship.

Generally, if the grant is awarded by the beneficiary’s employer, the payment is compensation for work done. Even if an employer-provided compensation were called a grant, it is still treated as wages. However, if the grant is awarded for studies aimed at maintaining professional competence or for supplementary studies, it may be equated with employer-provided training (Supreme Administrative Court’s rulings KHO 1988-B-587 and KHO 1989-B-521). More detailed information about training provided by the employer can be found in the Tax Administration´s guidance on taxation of training provided by the employer (in Finnish and Swedish, link to Finnish).

The liability to pay taxes for compensation for work cannot be evaded by measures like directing a payment intended for the person who carried out the research to the educational institution, which then forwards the payment to the person studying at the institution, calling it a grant. When money is paid to an individual as a remuneration for any work that they have done, it is considered earned income for the payee.

Remuneration is subject to tax when it is income earned by the university’s research staff for the research they do. Research staff may, however, be awarded tax-exempt grants for research work in addition to their pay as research staff. Exemption from tax is conditional on the grants meeting the general criteria for exemption from taxes.

The following are examples of university posts in which the income is considered wages, i.e. remuneration for research staff:

• Assistant and Research Assistant
• Adjunct Professor
• Amanuensis
• Research Professor
• Senior Researcher and Junior Researcher
• Academy Research Fellow and Academy Professor [research posts referred to in section 9 of the Act on the Academy of Finland (922/2009)].

Some of the above titles have been replaced with new ones. Currently, the most common titles of university research staff are: Doctoral student (PhD student), Post-doctoral Researcher, Research Scientist, Early-Stage Researcher, Project Researcher, University Researcher, and Senior Research Scientist.

2.5 Library grant

Paying library grants (compensation for the right to have books publicly available for lending) to writers, authors and translators is governed by the Act on Public Lending Right Compensation Grants and Subsidies (236/1961). Library grants are paid because works written by authors and translated by translators are made available in libraries free of charge.

Pursuant to section 82, subsection 4 of the act on income tax (Tuloverolaki 1535/1992), library grants are tax-exempt income. A library grant is a working grant intended for covering living expenses. For this reason, it must not be used to cover expenses incurred in artistic activities.

However, a compensation based on the number of borrowed books, on the other hand, is income subject to tax. This type of compensation may be paid retroactively. In this case, the beneficiary can ask for income spreading. Read more about income spreading: Income spreading in the taxation of earned income (in Finnish and Swedish, link to Finnish).

2.6 Public display grants for artists

A grant may be paid to visual artists on the grounds of enabling the public display of works they have made and works that are under public ownership (Act on Compensation Grants to Visual Artists 115/1997). Such a public display grant, funded by the State, is a working grant and treated as tax-exempt income under section 82 of the act on income tax.

2.7 Grants and subsidies awarded by municipalities to their residents

Municipalities may grant various subsidies to their residents (e.g. student financial aid or baby bonus) which are not deemed tax-exempt social benefits under section 92 of the act on income tax. How they are treated for tax purposes depends on the actual nature of the payment.

If a subsidy from a municipality or some other corresponding financial support was actually granted for studies, academic research or artistic activities, it can be deemed a tax-exempt grant or scholarship, as defined in section 82, subsection 2 of the act on income tax, no matter what name has been given to it. A scholarship or other grant awarded by the municipality is not income subject to tax solely on the grounds of the municipality only awarding it to its residents. Notwithstanding this, the criteria for tax exemption must be met.

However, if the beneficiary is given the money solely based on the fact that they live in the municipality or become a resident there, the amount, scholarship, grant, etc. is not tax exempt. For example, incentives paid by municipalities to attract new residents to the community are not exemptible. Baby bonuses granted by municipalities are also treated as taxable earned income as referred to in sections 29 and 61 of the act on income tax. Eligibility for a baby bonus depends on the parents’ own choices and actions because it is paid to the parents of a newborn for having the baby while living in the municipality. This means that the bonus cannot be deemed a gift, because a gift must be given without having received something in return.

2.8 Tax year of grant (periodisation)

Under section 82, subsection 2 of the act on income tax, scholarships, study grants and other grants are taxable income for the year when the payor pays them.

A grant can be paid to the beneficiary in such a way that the expenses attributable to it arise only after the year of payment. In such a case, the expenses incurred in a later year can be taken into account by deducting cost reserves from the grant on the basis of clarifying information. Such expenses are often already known by the time when the Tax Administration assesses the taxes for the year.

Grantors of grants and awards for merit must report to the Tax Administration all scholarships, study grants, library grants, public display grants and awards where the combined total value given to a single beneficiary during the calendar year is at least €1,000.

2.9 Allocation of expenses to grants

To calculate the taxable portion of a grant awarded by a party other than a public entity or the Nordic Council, any natural deductions from the grant must be made first (section 82, subsection 2, act on income tax). The natural deductions referred to in section 82, subsection 2 are research-related direct expenses, such as expenses arising from purchases of research materials, of the services of personal assistants, travel, transcription, etc.

If the scholarship or other grant was awarded for a specific job, trip or research project, no expenses can be deducted other than those relating to said job or research project. In such a case, the grant is an expense grant that is awarded in order to cover the expenses related to a specific activity. The expense grant is sometimes referred to as the target grant. In the Tax Administration’s instructions, the term target grant is synonymous with the term expense grant.

Another type of grant is a maintenance grant or working grant, which is intended to cover living expenses. According to legal praxis, costs associated with research work are not deductible from a working grant awarded to cover maintenance (Supreme Administrative Court’s rulings KHO 2.2.2007/230 and KHO 2010:4). Instead, the costs are deductible from the grant recipient’s other income.

Expenses incurred in artistic work may not even partly be attributable to an artist grant awarded by the State for securing and improving the artist’s working conditions (Supreme Administrative Court’s ruling KHO 1983-B-II-516). In other words, expenses incurred in artistic work may not be allocated to the maintenance grant or working grant. Instead, they are deductible from the artist’s other income. If the artist receiving the grant has no other income, a loss will be recorded for the artist for tax purposes.

2.10 Calculating the taxable portion of grants

If the recipient’s grants were awarded by both a public entity and private parties, the total amount of the grants will affect whether the portion received from a private party is taxable or tax-exempt income. If the total grants received from public-sector organisations and private parties is greater than the annual state artist grant, the part of the exceeding amount received from the private parties is taxable.

In order to calculate the total amount of grants, expenses relating to the production of income must be deducted first (section 82, subsection 2, act on income tax). In other words, the net amount of the grant is applied in the calculation.

If grant money was awarded to the recipient for the same research by both a public entity and another party, the research expenses must be allocated in proportion to the amounts of the grants received. If the grant money is allocated to different research studies, expenses must also be allocated separately for each research project. From 1 January 2023, a tax-exempt award for merit is not taken into account when calculating the taxable portion of grants.

No expenses must be allocated for a maintenance grant or a working grant intended for covering living expenses. Instead, expenses are primarily deductible from other grants based on how and where they are allocated. However, if the expenses are unrelated to research or work to be performed under other grants, the deductible expenses must be deducted from the beneficiary’s other earned income as general expenses incurred in acquiring or maintaining income.

However, deductible expenses do not include the beneficiary’s normal living expenses. Normal living expenses include expenses related to studies (e.g. tuition charges and study materials) as well as living and meal expenses (Supreme Administrative Court’s ruling KHO 2021:18).

2.11 Reimbursement of travel expenses paid to grant recipient

In principle, only employers can reimburse business-related travel expenses to wage earners exempt from tax (section 71, subsection 1 of the act on income tax). In other words, when travel expenses relate to research funded through grants, they cannot be reimbursed to the grant recipient exempt from tax.

On the other hand, a person whose research at a university is funded through grants may have an employment relationship with the university at the same time. In such a case, the university can reimburse the person's travel expenses exempt from tax when they relate to business trips made as an employee of the university. Travel expenses related to research funded through grants, however, cannot be reimbursed exempt from tax. If the university reimburses the grant recipient's travel expenses related to research funded through grants, the reimbursement is either trade income or other earned income, and it is subject to tax. The grant recipient can claim a deduction based on actual travel expenses in their personal taxation (see also section 2.9 of this guidance).

More detailed information about travel expenses reimbursed by the employer can be found in the Tax Administration's guidance on reimbursement of work-related travel expenses for tax purposes (available in Finnish and Swedish, link to Finnish).

2.12 Grants received by research groups

The group’s shared expenses must first be deducted from a grant awarded to the group. The remaining portion is then allocated to the members of the group, and they can also deduct their own research-related expenses from it. If a request for information is made to the group regarding how the grant money was divided and shared, further information must be provided. Grants awarded to groups of researchers can be treated as grant income only for the members who participate in the actual research work.

If the group of researchers hires assistants, the compensation paid to the assistants is treated as wages even if it were funded with a grant awarded to the research group expressly for the purpose of paying compensation to assistants.

A grant awarded to a research group covers the individuals who have been named as grant recipients in the grant decision. If new members join the group during the grant period, a portion of the grant cannot be allocated to the new member if they are not named in the grant decision. If a new member joins the group and no changes are made to the grant decision and the person is paid for their work, these payments are considered wages, not a grant. The payer must withhold taxes from the wages and report the paid-out wages to the Incomes Register.

2.13 Management of grants (research accounts)

Both individual grant recipients and research groups can make an account management agreement with a research institute or a university. This means that the party awarding the grant pays it directly to a research account managed by the institute or university. Making this type of a management arrangement may require consent from the party awarding the grant. Based on the agreement, the institute or university takes care of the practical matters related to the account, such as payment transactions, but the funds in the account are still the property of the researcher or research group.

A management agreement made with a third party (i.e. other than the grantor) does not transfer the reporting obligations related to the grant to the third party. Instead, the party that awarded the grant is still responsible for filing the annual information return on the grant.

2.14 Filing grants

Payers of grants must report to the Tax Administration the grants, scholarships and awards for merit that they have awarded to natural persons if the amount of the grant paid to a single recipient is at least €1,000 in a calendar year (Tax Administration’s decision on general information-reporting requirements, section 3, in Finnish and Swedish, link to Finnish).

Annual information returns on grants are always filed by the party that awarded and paid the grant. The grantor must file annual information returns on the grants they have awarded to natural persons even if the grant was paid to an account of a research institute, for example. The research institute is not the grantor or payer of the grant and it does not file an annual information return on the grant it manages (see section 2.12). 

If the grant was awarded to a group, the grantor must report the grant portion paid to each member of the group separately on the annual information return. If the grantor does not have information on how the grant is divided between the members of the group, the person who applied for the grant or the person in charge of the group must be reported as the benecifiary. If the grantor has reported the grant in its entirety as a grant awarded to the person in charge of the group, the person may need to make corrections to their pre-completed tax return and explain how the grant was divided between the members of the group. See section 2.11 for more detailed information about grants for research groups.

3 Taxes on awards for merit

From 1 January 2023, awards granted for academic, artistic or non-profit activities are wholly tax-exempt for their recipient if the award has been received from a grantor independent from the recipient of the award. The change applies to awards for merit paid in or after 2023.

Because awards for merit are wholly tax-exempt when the requirements set out in the provision are met, regardless of whether the payor is a public entity or another party, no application for the tax-exemption of the award for merit needs to be submitted to the Ministry of Finance. In its tax assessment procedure, the Tax Administration determines whether the question is of an award for merit referred to in the provision or another award. Furthermore, tax-exempt awards for merit do not affect the calculation of the tax-exempt maximum amount of other grants and scholarships.

The concept of an award for merit is not defined by law. However, the Government proposal for the provision (HE 153/2022 vp) presents criteria that have generally been considered typical for awards for merit. Awards for merit must be granted in recognition of academic, artistic or non-profit activities. Such awards are given in recognition of significant work that has already been carried out or long-term participation in significant positions in an academic, artistic of non-profit field. For example, awards for merit granted for a single literary work or in recognition of a long-term academic career can be tax-exempt under this provision. Awards for merit are given afterwards, whereas scholarships and other grants are usually given beforehand.

Examples of awards for merit in recognition of non-profit activities include an ore exploration award (Central Tax Board’s preliminary ruling KVL 243/1976), and cash or non-cash prizes given to Olympic winners by their municipality of residence. According to the Government proposal, non-profit activities also include long-term participation in organisation activities for the common good (non-profit organisation).

The award for merit laid down in section 82, subsection 1 of the act on income tax can only be exempt from tax when it is granted to a natural person. Therefore, the provision does not apply to awards received by organisations, limited liability companies or other corporate entities or partnerships. The recipient cannot apply for an award for merit. Therefore, awards for merit do not include competition prizes that are received in a competition, in which the person participates or for which the person prepares a work. Furthermore, awards for merit do not include such competition prizes for which the person can apply or nominate themselves as a candidate for the prize.

Awards for merit are not taxable income if they have been received from a grantor independent from the recipient. Awards for merit do not include a payment received in compensation for work, even if it was named as an award for merit. An award paid by the employer for one of their employees is not an award for merit as referred to in the provision.

As a rule, awards for merit do not include a prize whose grantor or a party within the grantor’s sphere of influence is in another contractual relationship with the recipient, or if there is another interdependent relationship between the grantor and recipient. However, if the other requirements set for awards for merit are met, awards for merit can include a prize granted by a publication company or a party within its sphere of influence to an author who has a publication agreement with the publication company, if the possible recipients of the prize have not been limited to persons with whom the publication company has a publication or other agreement.

4 Pension for meritorious service

A pension for meritorious service in academic, artistic or non-profit activities, or a family pension connected thereto, granted by the government before 1 January 1984, is also tax-exempt income (section 82, subsection 1, paragraph 3, act on income tax). Such pensions may be granted on the basis of any of the following Government resolutions:

• Government Resolution on Supplementary Pensions for Artists (75/1974)
• Government resolution on supplementary family pensions connected to supplementary artist pensions (Päätös ylimääräisiin taiteilijaeläkkeisiin liittyvistä ylimääräisistä perhe-eläkkeistä 216/1974)
• Government Resolution on Supplementary Journalist Pensions (37/1977)
• Government resolution on supplementary pensions (Päätös ylimääräisistä eläkkeistä 30.12.1959/Supplementary pension granted by the Government on special grounds according to section 24 of the Ministry of Finance’s Circular 6660).

If any of the above-mentioned pensions was granted on 1 January 1984 or later, it is taxable pension income subject to income tax.