Leased employees from other countries and taxation in Finland

This translation into English is not official. The official instruction texts are available in Finnish and Swedish.

This article explains the tax treatment of foreign leased workers in Finland and contains guidance for the workers, for foreign employee leasing companies and for contractors in Finland at whose worksites the work is done. The guidance has been updated due to the legislative changes that came into force on 1 January 2018. In addition, chapter 4 below contains a few revisions.

1 Introduction

As a rule, workers leased from providers in other countries must pay tax on their earnings from work performed in Finland to Finland. The tax status of the workers depends on the length of their stay in Finland and the provisions of a tax treaty between the worker's country and Finland, and on other factors. The provisions on the workers' tax status vary.

Usually, the countries of residence will also impose tax on the worldwide earnings of their residents according to their own laws. For this reason, the worker's pay from work in Finland can also be taxed in the worker's home country. Any double taxation is eliminated in the worker's country, according to the provisions of the tax treaty between that country and Finland, or as provided by the national laws of the worker's country.

2 Income taxation on earnings of leased employees in Finland

2.1 Tax liability and income from a source in Finland

Two categories of tax liability exist in income taxation: unlimited and limited liability to tax in Finland (=residency and non-residency, respectively). Pursuant to section 11.1 of the Income Tax Act (tuloverolaki 1992/1535), residents include individuals who live in Finland and individuals who live in other countries but are present in Finland for longer than six months. Nonresidents i.e. taxpayers with limited liability are those who have not stayed in Finland during the tax year or have only stayed for a shorter period. More information on resident and non-resident tax liability can be found in the Tax Administration's guide on "Full liability and limited liability to pay tax" – Yleinen ja rajoitettu verovelvollisuus (in Finnish and Swedish).

Finnish residents pay tax to Finland on anything they earn both in Finland and other countries. Non-residents only pay tax to Finland on what they earn in Finland (§ 9.1, Income Tax Act).

Pursuant to section 10.4c of the Income Tax Act, income that must be treated as being from a Finnish source includes wages paid by a foreign employer for work performed in Finland, if the foreign employer has leased the worker to a service recipient in Finland.

2.2 Effect of tax treaties

Wages earned from work performed in Finland by leased workers who live abroad and have a foreign employer can be taxed in Finland, if there is a tax treaty between Finland and the worker's country that does not prevent Finland from taxing the worker's wages. The wages of workers from countries with which Finland has signed a tax treaty are taxed in Finland if the worker stays in Finland for more than 183 days – either over a period of 12 months, or in the course of a calendar year, depending on the provisions of each treaty.

However, the following tax treaties, and some others, allow the wages of leased employees to be taxed in the country where the work is done, starting the first day of work and regardless of how long the worker is present in the country:

• Since 2007: Iceland, Norway, Sweden, Denmark, Latvia, Lithuania and Estonia
• Since 2009: Moldova, Georgia, Belarus and the Isle of Man
• Since 2010: Guernsey, Bermuda and Jersey
• Since 2011: Poland, Kazakhstan, Cayman Islands
• Since 2013: Turkey
• Since 2014: Cyprus and Tajikistan
• Since 2018: Germany and Turkmenistan

Pursuant to the tax treaty between Finland and Bulgaria, wages earned from work done in Finland can be taxed in Finland if a resident of Bulgaria works for a non-Bulgarian employer in Finland (Agreement between the Republic of Finland and the Republic of Bulgaria on avoiding double taxation of income, Article 7 (11/1986)). This provision of Finland's tax treaty with Bulgaria applies to both leased workers and other workers.

The wages of a leased worker are also taxed in Finland if he or she comes from a country with which Finland does not have a tax treaty. In this case, the wages are taxable income in Finland from the very first day of work, regardless of how long the worker is present in Finland.

3 Applying for a personal identity code and (the construction sector's) individual Tax Number

3.1 Personal identity codes issued by tax offices

Finnish personal identity codes are normally issued to people from other countries when their personal details are added to the Population Information System which is maintained by the Population Register Centre and local register offices. Foreign nationals may ask for a Finnish personal identity code at their local register office in person. Individuals who come to Finland to work can also be given a Finnish personal identity code by their local tax office.

The following entries are made in the Population Information System when a personal identity code is issued by the tax office: the foreign individual's full name, date of birth, gender, address in Finland, nationality, mother tongue and occupation.

However, if you stay longer than a year, your case is handled by the Local Register Office and a Finnish municipality may be entered in the Population Register System as your Finnish domicile. For more information, see the www.maistraatti.fi website.

Documents needed for the personal identity code:

• Citizens of EU countries/countries of the European Economic Area: a valid passport or official proof of identity with a photograph from which they can be easily identified, as well as a certificate of residence from the Finnish Immigration Service (after a stay of three months)
• Non-EU/EEA citizens: a valid passport as well as a valid residence permit or visa, where applicable

You must also show your employment contract or alternatively, a written description, provided by the employer, of the main terms and conditions of the work being done in Finland.

Read more: "Finnish personal IDs for workers arriving in Finland".

For more information on work rights and residence permits, visit the website of the Finnish Immigration Service, www.migri.fi.

3.2 Individual tax numbers in the construction sector; the Tax Number Register

People who work on building sites must wear a name tag with their photo. The name tags must also show their registered tax number. To be given a tax number, workers need a Finnish personal identity code.

The Tax Administration enters each worker's unique tax number and other personal details into the Tax Number Register. Entering a construction worker into the register always requires a specific request. Requests are made by the worker, their employer or the main contractor on the building site. In addition, the Tax Administration may also enter individuals in the register on its own initiative.

For more information, click www.tax.fi/taxnumber.

4 Employee leasing defined

Employee leasing refers to a contractual arrangement by which a business (leasing company) leases employees to another business for a charge. The leased workers or employees perform work for the other business (the service recipient company). This way, a contractual relationship is established between the (foreign) leasing company and the (Finnish) service recipient. If natural persons, not companies, are the main contracting parties, the arrangement described above is equally possible.

Usually, the right to direct and supervise workers primarily belongs to the employer. However, if an employer assigns a worker, with his or her consent, to another company, the right to direct and supervise the work is transferred to that company. Not only the right to direct and supervise work but also the employer obligations directly related to the performance of the work and the associated arrangements are also transferred.

In an employee-leasing arrangement, the leasing corporation pays wages to the worker and withholds tax on the wages. The amounts per invoice, paid to the leasing corporation by the service recipient, are treated as "trade income" i.e. nonwage compensation for work. For purposes of income taxation and pre-assessment of income taxes, workers are considered "leased" if the following criteria are met:

• The right to direct and supervise the work is in the hands of the service recipient who signed the contract.
• The work is performed in a workplace over which the service recipient has control and for which it is responsible. This means that the leasing company does not operate there. It only leases its employees to the other contracting party i.e. the service recipient.
• Most tools, supplies and consumables are given to the worker by service recipient.
• The leasing company cannot unilaterally decide on the number of workers on site, or on their qualifications.
• Responsibility for the results of work rests with the service recipient.
• The leasing company pays wages to its employees and the amount of pay reaches at least the level that the collective agreement has defined.

The concept of employee leasing, for purposes of this article, and the work done under an employee-leasing arrangement, require that all the above terms and conditions are satisfied. If this is not the case, the payments from the service recipient are treated as the individual worker's wages instead of being treated as fees paid out against the invoice received from the leasing company. In this case, the service recipient must withhold tax on the wages as usual and also pay the employer's health insurance contribution on them.

If a corporate entity is only offering the work performance of its owner-shareholder without providing any other leased employees to a service recipient, the requirement is still in force that wages must at least reach the levels of pay that the collective agreement has defined. The owner-shareholder must receive such wages from his or her company. This requirement is also valid in case there are other people besides the owner-shareholder whose work performance is offered to service recipients so that they can work as leased employees.

It may be that instead of a corporate entity, a self-employed operator of a trade or business is the party that provides its workers to service recipients so that they can work under a leasing contract. For these leased employees, too, the requirement is in force that wages must at least reach the levels of pay that the collective agreement has defined. However, it is impossible for a self-employed to offer his or her own work for employee leasing. This is due to the fact that if the business is a sole proprietorship, i.e. a self-employed operation (T:mi; F:ma), there cannot be an employer-employee relationship, and there cannot be any payroll transactions where wages could be paid to the individual who owns the business. For this reason, an operator of a trade or business who is self-employed cannot fulfil the above requirements of a leased employee.

Managing Directors or members of the Board of Directors are not treated as being in an employer-employee relationship with their company. For this reason, the Act on Employment Contracts is not applicable. This means that no arrangements are acceptable where a leased employee is supposed to be a Managing Director or board member. Compensation paid to the individual who acts as a Managing Director or board member is always fully treated as wages of the individual appointed as the Managing Director, or as wages of the individuals appointed as board members, regardless of how what route was used when the payment from the company was made.

In addition to traditional employee leasing, the concept also includes situations in which a worker is not directly employed by the leasing company with which the Finnish company (service recipient) has an agreement, but is leased from another business. In such circumstances, the employer's reporting obligations belong to the employer who pays the leased worker's wages and with whom the worker has an employment contract, and the reporting obligations of the service recipient belong to the Finnish company for whom he or she performs the work.

4.1 Differences between employee leasing and subcontracting

In the case of subcontracting, the right to direct and supervise the work belongs to the subcontractor. In the case of employee leasing, it belongs to the service recipient, i.e. the business for which the leased workers work.

In the case of subcontracting, the workers get their tools and equipment from the subcontractor. In the case of employee leasing, they get them from the service recipient. In the case of subcontracting, responsibility for results of the work rests with the subcontractor. In employee leasing, work results are the responsibility of the service recipient.

4.2 Differences between employee leasing and employment agency services

Employment agency services and employee leasing are different sectors of business activity. Employment agencies bring workers and employers together so that they can sign an employment contract between them.

If a business that provides workers from foreign countries only acts as an agency, and does not act as the workers' employer, the arrangement is not employee leasing. The workers' employer is the Finnish company for which the work is performed. The Finnish company has hired them and signed employment contracts with them. Consequently, the Finnish company must fulfil all the usual obligations that belong to the employer.

4.3 Working on board a Finnish ship or aircraft

People who work on board a Finnish ship or a Finnish aircraft and who are leased employees and residents of foreign countries must pay tax to Finland under the provisions of section 13, Income Tax Act (tuloverolaki 1535/1992, TVL). Tax treaties do not usually prevent Finland from taxing the wages of leased employees who live abroad if the wages are earned from work on board a Finnish ship or aircraft. There are exceptions, however, such as the multilateral Nordic tax treaty. Under Chapter 15, Article 4 of the Nordic treaty, tax on income earned on board an aircraft is only payable to the worker's Nordic country of residence.

Work in international transport is almost always done outside Finland. The reporting obligations discussed below of foreign leasing companies and Finnish service recipients apply only to work performed in Finland. This means that those reporting obligations do not apply to employees leased to work in the transport sector on international routes.

Read more: Taxation of employees from other countries – International traffic (Section 3.7)".

5 Instructions for foreign leased workers

5.1 Non-resident leased workers

5.1.1 Special tax treatment

If you are treated as a Finnish tax nonresident, your income is taxed as provided by the Finnish Act on the taxation of nonresidents' income (laki rajoitetusti verovelvollisen tulon verottamisesta 627/1978, LähdeVL). This means that your employer withholds the tax due at source when paying wages to you. This is a final tax, which discharges your tax liability for the year, and its rate is 35% (§ 7.1 (1), Act on the taxation of nonresidents' income).

However, nonresident leased workers are taxed in a special process. Basically, your taxes are assessed in the same way and at the same time as those of Finnish residents. The special process for leased workers does not, however, constitute taxation under the Act on Assessment Procedure (1558/1995) as referred to in section 13 of the Act on the taxation of nonresidents' income, which is why income tax is imposed at the rate of 35%. Your employer deducts €510 per month or €17 per day for the duration of employment from the wages earned. You get no other deductions.

However, if you are a citizen of an EU country or a citizen of the countries in the European Economic Area or of a country or region that is governed by the Convention on Mutual Administrative Assistance in Tax Matters or a Tax Information Exchange Agreement, or if you have a residence permit pursuant to the Researcher Directive, you are entitled to demand tax treatment under a domestic, progressive scheme in accordance with the Finnish Act on Assessment (with the exception of dividends). (Section 13.1 (6), Act on the taxation of nonresidents' income).

5.1.2 Asking for a calculation of tax prepayments

If you are a nonresident and you receive wages as referred to in section 10 (4c) of the Income Tax Act, they are subject to prepayment taxation i.e. pre-assessment. This rule applies if your employer is not obligated to withhold tax at source, and if there is no international convention preventing the wages from being taxed. You must ask for prepayment taxation by the end of the calendar month following the beginning of your employment in Finland (Section 16a, Act on the taxation of nonresidents' income).

Failure to apply for prepayment taxation by the deadline may result in a punitive tax increase of up to €2,000, which is payable to the State. The amount of the punitive tax increase depends on the degree of culpability, previous failures and other similar factors.

You must submit your request for prepayment taxation to your local tax office as soon as you start working in Finland and in any case by the end of the month following the beginning of your employment.

An amount of €510 is subtracted from your monthly wages as a tax-exempt portion. If you do not work for a full month, the amount is €17 per day.

Workers can apply for prepayment taxation by filling in a Prepayment taxation application form (5057e). In addition to personal details, you must fill in the following information:

• Your address in Finland and abroad
• Dates of arrival and departure from Finland
• Amount of wages earned in Finland
• Length of employment in Finland
• Bank account number (BIC/IBAN)

Pre-assessed taxes must be paid monthly for the duration of employment.

In addition, if you work in Finland for at least four months, you are liable to pay health insurance contributions. The amount of the contribution is calculated from the wages before the €510/month or €17/day is deducted. No contributions are deducted if you are able to present a Certificate A1 or other proof showing that you continue to be covered by another country's social insurance system.

For tax treatment under the Act on Assessment Procedure, you must prepare an application for prepayments and enclose an Application for progressive taxation with it.

5.1.3 Proof of tax payments for the authorities of the worker's country of residence

As a rule, workers also pay tax on earnings in Finland to their country of residence. Double taxation is eliminated in the worker's country of residence according to the applicable tax treaty. Any tax paid to Finland by a worker on his or her earnings is taken into account in the calculation of tax payable to the worker's country of residence. The elimination of double taxation is governed by international tax treaties.

The Finnish tax authorities provide statements of taxes paid to Finland through prepayment taxation. You can use the statements as proof of tax payments for the tax authorities of your country of residence. This way, they are able to take account of any tax you paid to Finland, in order to avoid double taxation.

5.1.4 Tax assessment in Finland

It is normal procedure in Finland to assess taxes on wages the year after they are earned. At that stage, your final tax liability is calculated on the basis of the actual income earned. If the tax you paid in advance is not enough to satisfy the final tax liability, you must pay back tax. If more than the required amount of tax was paid in advance, the excess is refunded.

Each year in spring, the Finnish Tax Administration sends workers a pre-completed tax return relating to the previous tax year's income and deductions. The pre-completed tax return, which is sent to your home address in your country of residence, shows the wages reported by the employer and the length of employment in Finland. Workers who are not sent a pre-completed tax return are responsible for completing their tax return for Finland.

After you received the pre-completed tax return by letter, you are expected to check the facts and information printed on it. Any mistakes or omissions must be corrected. If you make corrections or additions to the pre-completed return, you send its first pages back to the Finnish Tax Administration.

Even workers who have not applied for progressive taxation at the prepayment taxation stage can apply for this retroactively by sending back their tax return. In this case, the return must be accompanied by an Application for progressive taxation.

Employers give the Tax Admininstration reports on not just the wages paid to leased workers but also on the exact dates when a worker had worked in Finland. The reported information is recorded in the worker's tax return. However, if a worker's pre-completed tax return does not contain information about their wages or the length of their employment, or if the information is incorrect, they must enter the exact dates during which they worked in Finland in their tax return themselves, in order to be eligible for tax-at-source deductions.

The Finnish Tax Administration uses the corrected tax return to calculate the worker's final tax liability and sends a statement to the worker's address in the country of residence by the end of October the following year. This is why it is important that you inform the Finnish Population Information System of your new address after you move house. This can be done online. Guidance for change-of-address reporting is available at posti.fi.

Foreign employees working in Finland can sometimes arrange for their employer to pay their taxes in Finland ("net-of-tax contract"). In this case, you as the worker give your employer authorisation to receive any tax refunds that you might receive. However, any arrangements by which workers transfer their right to tax refunds to another person are not binding on the Tax Administration. Tax refunds are paid in euros into the bank account given by the taxpayer. You can inform the Tax Administration of your bank account details in MyTax. You can submit bank account numbers also by filling in and signing a written notice (7208, Individuals' Bank Account Notice). Read more: Change of bank account details.

5.2 Leased worker who is a Finnish tax resident, fully liable to pay tax

The wages of resident leased workers are taxed at the progressive tax rate, similarly to permanent residents of Finland.

Workers whose employer is a foreign business that does not have a permanent establishment in Finland, or that has not asked to be entered into the Employer Register in Finland, need to take care of their prepayment taxation themselves. It is important for workers to contact their tax office to arrange prepayment taxation. Without prepayment taxation, the resulting back taxes will bear interest. Moreover, workers who are not sent a pre-completed tax return are responsible for completing their tax return for Finland themselves.

6 Instructions for foreign employee leasing companies

6.1 Reporting obligations of foreign employers

6.1.1 The form informing Finnish authorities of leasing operations – Employee Leasing Notice

Foreign employers who lease foreign individuals to work for service recipients in Finland need to notify the tax authorities of any employees of theirs who work in Finland pursuant to section 15a.1 of the Act on Assesment Procedure. For each leased worker, a completed form must be submitted by the end of the month following the beginning of their work.

Employee leasing notice forms (6147a or 6147e) must be submitted to the Helsinki Area Tax Office. The tax authorities must be notified of all foreign leased employees who work in Finland regardless of the length of their employment.

Notifications are required if there is no tax treaty preventing Finland from taxing the worker's wages. This is the case with leased workers arriving from Iceland, Norway, Sweden, Denmark, Latvia, Lithuania and Estonia as well as Moldova, Georgia, Belarus, the Isle of Man, Guernsey, Bermuda, Jersey, Poland, Kazakhstan, the Cayman Islands, Turkey, Cyprus, Tajikistan, Germany and Turkmenistan. Leased workers who reside in Bulgaria but work in Finland as leased employees of non-Bulgarian employers must also be included in this reporting.

You must also give a notice if the leased employee is from a country that does not have a tax treaty with Finland. Finland's current tax treaties are listed on Tax.fi (Tax treaties in force).

Notices are required from all foreign employers who are included in the Prepayment Register. If a worker's employer is not included in the Prepayment Register, responsibility for notification rests with the employer's representative as per section 4a of the Act on Posting Workers. If the employer has not appointed a representative, however, responsibility for notification always ultimately rests with the foreign employer.

Notifications must include details of the service recipient for whom the employees actually perform work. Even employers who provide workers to an agency must give the details of the Finnish end client and not the employment agency.

Foreign employers who have a permanent establishment in Finland have a responsibility to apply tax at source or prepayment taxation to their workers' wages, and do not therefore need to report their leased employees' work in Finland (6147a or 6147e).

6.1.2 Employer payroll reports

Workers who stay in Finland for up to six months

Foreign employers who are included in the Prepayment Register, or the representative of an unregistered employer, must report the details of their leased workers and the wages paid to them annually, unless there is an international treaty that prevents the taxation of their wages (under section 15a(2) of the Act on Assessment Procedure). Payroll reports must be submitted by the January of the year following the tax year in question, using the Annual notification – payments to recipients with limited tax liability – to nonresidents form (7809e). In circumstances where there is no representative appointed by the employer, the obligation to submit the report is in force in all situations i.e. the employer has the responsibility for reporting regardless of whether they are prepayment-registered.

Wages paid to leased workers are reported under code A9 "Wages earned by employees leased from abroad". Employers or their representatives must also specify the exact start and end dates when their employees worked in Finland. Workers' Finnish personal identity codes must also be provided.

No payroll reporting is needed if there is a tax treaty that prevents the taxation of leased employees' wages. In other words, reporting is required for those arriving from Iceland, Norway, Sweden, Denmark, Latvia, Lithuania and Estonia as well as Moldova, Georgia, Belarus, the Isle of Man, Guernsey, Bermuda, Jersey, Poland, Kazakhstan, the Cayman Islands, Turkey, Cyprus, Tajikistan, Germany and Turkmenistan.

Leased workers who reside in Bulgaria but work in Finland as leased employees of non-Bulgarian employers must also be included in this reporting. You must also file the report if the leased employee is from a country that does not have a tax treaty with Finland. Finland's current tax treaties are listed on Tax.fi (Tax treaties in force).

Workers who stay in Finland for more than six months

Foreign employers or their representatives must submit annual information (7801, Employer payroll report, itemisation and summary) of all employees of theirs who stay in Finland for more than six months (§ 15a.2, Act on Assessment Procedure). The worker's country of residence or the employer's line of business are irrelevant.

If an employer has made advance tax payments on behalf of its workers, the amount paid should not be reported on the payroll reports as "tax withheld". However, employers registered as regular employers in the Tax Administration's register who withheld tax on the wages must report the amounts (for more information on the Employer Register, see section 6.2 of this guidance, Inclusion of foreign employers in the Employer Register).

The types of payment that must be used in payroll reports are listed below:

The payment categories to be used in annual declarations

Payment type code and name	Is the worker covered by the Finnish social security system?	Does the employer have a permanent establishment (PE) in Finland?
7M Wages paid by a foreign employer (with no PE in Finland) to a worker who is covered by the Finnish social security system	Yes	No
7L Wages paid by a foreign employer (with no PE in Finland) to a worker who is not covered by the Finnish social security system	No	No
7Q Wages paid by a foreign employer (no permanent establishment in Finland) to a worker who has not stayed longer than 183 days in Finland during the tax-treaty-defined period of sojourn	Yes/No	No
7N Wages paid by a foreign employer (with no PE in Finland) to a worker, where the employer has assumed responsibility for paying taxes on its employees' behalf ("net-of-tax contract")	Yes/No	No

6.1.3 Consequences of not reporting the required information

Employers, or their representatives, who fail to submit reports either on who works for them as leased employees or who fail to file their employer payroll report, or who submit their reports late, may be fined up to €15,000 (§ 22a, Act on Assessment Procedure).

6.2 Inclusion of foreign employers in the Employer Register

Foreign employee leasing companies that have a permanent establishment in Finland must register with the Finnish Employer Register before they pay out wages to any worker for the first time.

Employers can register as regular wage-paying employers in Finland even without a permanent establishment in Finland. Foreign employers who are included in the Employer Register have the same obligations in Finland as Finnish employers. This means that they need to deduct taxes from their employees' wages automatically, and their employees do not need to apply for prepayment taxation. However, foreign employers who do not have a permanent establishment in Finland are not employers in Finland as defined in the Income Tax Act, even if they are included in the Employer Register.

Businesses that have been entered into the Employer Register must deduct prepayment tax and tax at source from their employees' wages and pay the related amount to the Tax Administration. You must apply the withholding rates that are printed on each individual worker's tax cards. Foreign workers who stay in Finland for up to six months are given a tax-at-source card or a non-resident tax card by their tax office. Workers who stay for more than six months are given a resident tax card.

Employee leasing companies that are included in the Employer Register must pay prepayment tax and tax at source as well as any social insurance contributions to the Tax Administration, and submit a tax return showing their contributions (formerly "periodic tax return"). Veroilmoitus työnantajasuorituksista pitää antaa viimeistään palkanmaksua seuraavan kuukauden 12. päivä. Tax returns showing employer contributions can be submitted electronically via the Tax Administration's MyTax service, for example.

Foreign employee leasing companies must submit leased employee notifications (form 6147 or 6247a), even if they have joined the Employer Register voluntarily.

For more information, see Being an employer.

6.3 Inclusion of foreign employee leasing companies in the Prepayment Register

It is recommended that foreign businesses that lease employees to Finland register with the Prepayment Register in Finland. Finnish parties with whom they do business do not have withhold tax at source from the money (=trade income) they pay to foreign compenies that are on the Prepayment Register. The rate is 13% on payments going to companies that are similar to Finnish limited-liability companies or partnerships. The tax-at-source rate is 35% if the recipient is a sole trader (= self-employed individual) (§ 7, Act on the taxation of nonresidents' income).

Whether a business is or is not included in the Prepayment Register has no effect on income tax liability in Finland. Income tax liability depends on whether a business has a permanent establishment in Finland. Businesses that are treated as having a permanent establishment in Finland must apply to their local tax office for prepayment taxation in order to pay income tax to Finland.

Only businesses that are established in a country with which Finland has a double taxation agreement can be entered in the Prepayment Register.

Read more: "Starting up business".

7 Instructions for companies in Finland where the leased workers work

Service recipient companies can also have other obligations in addition to their tax-related ones. For example, they must ask their contractual partners to provide the documents specified in the Act on the Contractor's Obligations and Liability when Work Is Contracted before they agree on using the leased workers. Read more: www.tyosuojelu.fi.

7.1 The Finnish companies' reporting obligations

Business enterprises based in Finland need to notify the Tax Administration of any foreign businesses from which they lease foreign employees for work performed in Finland (§ 17.7, Act on Assessment Procedure). A separate notifice is required for each foreign leasing company they do business with. The Tax Administration must be provided with the required facts as well as the leasing company's contact information and information on its line of business.

Finnish service recipients also need to provide the details of any representative of the business as per section 4a of the Act on Posting Workers (1146/1999) as well as the related contact information. The Tax Administration also needs to be notified of any changes in the information. The above reporting obligations apply to both businesses and natural persons.

Service recipients must provide the details of the foreign employer company that actually has the workers on its payroll. Even if the workers are leased through an intermediary or an employment agency, the notice must include information about the foreign employer with whom the workers have an employment contract and not the employment agency.

Service recipients must provide the information to the Tax Administration as soon as the first employee of the company in question starts working for them. The deadline for submittal of this report is the end of the calendar month after the month when the workers started.

Notifices on any changes to the information must also be provided by the end of the following month. This refers to issues such as changes in the contact details of the foreign businesses.

Service recipients must also notify the Tax Administration when a contract ends or when a leased worker, leased out by the foreign business stops working for the service recipients. Temporary breaks in contracts or in the work of the leased workers do not need to be reported. A contract or the work of a worker leased from a foreign business is treated as having ended when nobody from the foreign business has been working for the employer for six months.

Notices on changes must be submitted by the end of the following calendar month. This information is provided by filling in a copy of "Työn teettäjän ilmoitus verotusta varten" (6146a) (the domestic form for this purpose) and submitting it to the Helsinki Area Tax Office.

The notices are required if there is no tax treaty preventing Finland from taxing the worker's wages. This is the case with leased workers arriving from Iceland, Norway, Sweden, Denmark, Latvia, Lithuania and Estonia as well as Moldova, Georgia, Belarus, the Isle of Man, Guernsey, Bermuda, Jersey, Poland, Kazakhstan, the Cayman Islands, Turkey, Cyprus, Tajikistan, Germany and Turkmenistan. Leased workers who reside in Bulgaria but work in Finland as leased employees of non-Bulgarian employers must also be included in this reporting.

Notification is also required of leased employees arriving from countries with which Finland does not have a tax treaty. Service recipients must report all leased employees working in Finland, regardless of the length of their employment.

7.2 Consequences of not reporting the required information

Service recipients who fail to file notices or who submit their notice late can be fined up to €15,000. Fines are not imposed on natural persons, unless the failure relates to reporting obligations associated with running a business or agriculture or forestry operation (§ 22a, Act on Assessment Procedure).

7.3 Service recipients' obligation to withhold tax at source on the amounts of trade income paid out

Service recipients have an obligation to withhold tax at source for any trade income paid to a foreign business, if the work was performed in Finland. The rate is 13% on payments going to companies that are similar to Finnish limited-liability companies or partnerships. The tax-at-source rate is 35% if the recipient is a sole trader (= self-employed individual) (§ 7, Act on the taxation of nonresidents' income).

The payer of trade income does not need to withhold tax at source if

• The foreign company is prepayment-registered in Finland;
• Shows the payer/customer a zero-rate tax card for tax at source;
• Shows other documentation establishing that withholding is not necessary. This means documentation that proves that the foreign company cannot be treated as having a permanent establishment in the prevailing circumstances.

If the recipient of trade income is not a resident of Finland, the payer must file an annual information return on any tax withheld at source for the trade income paid out. The code of payment type is A4. The inclusion of foreign businesses in the Prepayment Register can be checked free of charge from the Business Information System at ytj.fi.

Read more about how tax at source must be withheld on amounts paid out as "trade income": Starting up business.

Guidance in Estonian and Russian:

• Välismaised renditöötajad ja nende maksustamine Soomes
• Финское налогообложение в случае аренды иностранного персонала