Taxation of income earned abroad

This is an unofficial translation. The official instruction is drafted in Finnish (Ulkomailla työskentelyn verotus, record number VH/6129/00.01.00/2023) and Swedish (Beskattning av utlandsarbete, record number VH/6129/00.01.00/2023) languages.

These instructions concern the income taxation of persons working outside Finland and the procedures applicable to employees working outside Finland and their employers.

Other detailed instructions of the Tax Administration provide guidance concerning the six-month rule applied to pay earned outside Finland, and concerning health insurance contributions in employment situations involving work in foreign countries. In addition, the Incomes Register has released detailed instructions for submitting the employer’s reports known as the “earnings payment report”.

The present instructions were updated, and because other instructions of the Tax Administration have been released giving guidance on payroll issues, wages and contributions concerning employees of international organisations, the European Union and consular missions, the text in these instructions on the same subject was deleted in connection with the updates. Besides these updates, the present instructions also contain other revisions providing more precise information.

1 Introduction

If an individual resident in Finland works in another country, their income is as a rule taxable in Finland. However, in some cases, the provisions of Finland’s national legislation treat such income as tax-exempt. Often income is not only taxable in Finland but also in the country of work. These instructions concern the effects of the Finnish act on income tax (Tuloverolaki (1535/1992)) and tax treaties on the taxability in Finland of income earned outside Finland.

Finland has made bilateral or multilateral income tax treaties with more than 70 countries (current tax treaties). The treaties address the elimination of double taxation and the criteria for determining which of the treaty countries is treated as the country of residence under the treaty. Tax treaties concluded by Finland with different countries may limit Finland’s right to tax granted by Finland’s internal legislation. These instructions do not contain further information on the taxes to be paid in the country of work. It focuses on the question of whether that country has the taxing rights under the provisions of the applicable tax treaty.

These instructions discuss the Finnish taxation of wage income earned outside Finland by a resident or a non-resident taxpayer. For more information on residency and non-residency, see Finnish Tax Administration instructions Tax residency, nonresidency and residency in accordance with a tax treaty – natural persons.

These instructions also include guidance to employers and employees on the requirement to submit reports to the Finnish Tax Administration in a situation where an employee has started working in a country other than Finland. Reporting to the authorities of the country of work is only discussed in the case that the individual works in another Nordic country and only to a limited extent. For this reason, the employer and the employee must take action independently in order to ascertain what facts and information the country of work will require and what the deadlines for reporting are.

These instructions also discuss situations where an employee’s pay is tax-exempt in Finland, i.e. situations where the six-month rule applies. For more information on the six-month tax exemption rule, see the Finnish Tax Administration instructions Six-month rule for wage income earned abroad.

Double taxation is usually eliminated by the country of residence. If Finland is the country of residence, double taxation is eliminated in accordance with the provisions of the applicable tax treaty or Finland’s national legislation. More information on this is available in the Finnish Tax Administration instructions Relief for international double taxation.

Insurance policies are an integral part of working outside Finland. Employee’s and employer’s health insurance contributions are discussed in the Tax Administration’s instructions Health insurance contributions in international employment situations.

The following Finnish Tax Administration instructions also include instructions for situations involving taxation and working outside Finland:

• Taxation of students and trainees in international situations
• Taxation of people working for higher education institutions – international situations
• Taxation of employee stock options and employee offerings in cross-border circumstances
• Taxation of income received from sports in international situations
• A performing artist’s tax treatment in international situations
• Taxation of cross-border commuters
• Taxation of wage income from international organisations, the EU and diplomatic missions

2 Taxation on non-resident taxpayers’ wage income

In Finland, non-resident taxpayers are only liable to pay tax on income earned in Finland. § 10 of the act on income tax contains a definition for income earned in Finland. The definition is a non-exhaustive list and other types of income than those included on the list can be considered income earned in Finland. The income types included on the list are, however, considered to be earned in Finland only within the limits set by the wording of each list item. Separate provisions applied to the wage income and pensions of the employees who work on board a Finnish ship or aircraft are provided in § 13 of the act on income tax.

Income earned in Finland includes wage income from Finnish public bodies (§ 10 (3) of the act on income tax), i.e., the Government of Finland, wellbeing services counties, municipalities, federations of municipalities, the Evangelical-Lutheran Church and related parishes, the Orthodox Church and related parishes, their federation of parishes or other federations of parishes, the Bank of Finland, Kela (the Social Insurance Institution of Finland), the Academy of Finland, the Arts Promotion Centre Finland, and the Natural Resources Institute Finland. As of 1 January 2010, for purposes of income tax, Finnish universities no longer have the status of a ‘public body’.

If the employer is a Finnish public body, wages paid to a non-resident are subject to Finnish tax under the act on income tax even if the work is carried out outside Finland. Nevertheless, the provisions of a tax treaty may limit Finland’s taxing rights. Tax treaties often contain a provision to the effect that the wage earner’s country of residence, as defined in the tax treaty, is the country that has the taxing rights. This requires that

• the work is carried out in the country where the employee is resident; and
• the employee is a citizen of that country or has not become its resident merely for the purpose of performing their work duties.

However, the provisions of tax treaties on this matter vary, so the country that has taxing rights on wage income and the conditions for the taxing right must be verified from the applicable tax treaty. 

Wages received from a source other than a Finnish public body are also considered income earned in Finland if the work is primarily carried out in Finland for an employer established in Finland (§ 10 (4) of the act on income tax). ‘Finnish non-public employer’ refers to a Finnish company or a permanent establishment in Finland of a non-Finnish company or a non-Finnish organisation whose primary headquarters are in Finland. Work is considered primarily carried out in Finland if more than half of the work is carried out in Finland. The comparison must be made separately for each payday.

The wages received by a non-resident taxpayer are not subject to Finnish tax if the taxpayer mainly works outside Finland for an employer that is not a Finnish public body. If the non-resident taxpayer primarily works in Finland for an organisation other than a Finnish public body, their pay in full is considered to be subject to tax in Finland. However, if a share of the wages was earned working outside Finland, the applicable tax treaty may prevent Finland from collecting tax on the share in question.

3 Taxation on resident taxpayers’ wage income

Residents are under the obligation to pay Finnish tax on income sourced in Finland and other countries (§ 9, subsection 1, Paragraph 1 of the act on income tax). This means that generally all income from non-Finnish sources is subject to Finnish tax regardless of whether it is subject to tax in the country of work or in a third country.

Income earned by a resident taxpayer can be tax-exempt under Finnish legislation when the conditions for the application of the ‘six-month rule’ are met, for example (Finnish Tax Administration instructions Six-month rule for wage income earned abroad). Income may also be considered a tax-exempt compensation, pay or fee within the meaning of § 76 of the act on income tax (see section 5). In addition, the tax treaty between the country of work and Finland may limit Finland’s taxing rights on the income earned outside Finland.

4 Effect of tax treaties

4.1 Tax treaty provisions on taxation of wage income

4.1.1 Private-sector employer

According to the general rule of tax treaties, wages are only taxed by an individual’s tax treaty country of residence unless the individual works in another country party to the treaty. If work is carried out in another country party to the treaty, the other country also has the right to collect tax on the wages (OECD Model Convention, Article 15, Paragraph 1).

However, tax treaties include the 183-day rule according to which if all conditions are met, only the individual’s country of residence has the right to collect tax on their wages (OECD Model Convention, Article 15, Paragraph 2). This rule prevents the country of work from collecting tax if the following are met:

• The employer is not domiciled in the country of work; and
• The pay does not cause an increase of payroll expenses in a permanent establishment located in the country of work; and
• The employee does not stay longer than 183 days in the country of work during a certain period of time.

This means that the rule limits the taxing rights of the country of work when the party paying the wages is established in a country other than the country of work. Tax treaties do not prevent the country of work from collecting tax from wages if the wages are paid by an employer established in the country of work.

Depending on the applicable tax treaty, the period of 183 days of the 183-day rule may instead be a full calendar year, the customary tax year in the country of work, or a period of 12 consecutive months.

Tax treaties where the residence is tied to the calendar year:
Belgium, Croatia, Egypt, France, Greece, Hungary, Italy, Japan, Kosovo, Luxembourg, Malaysia, Montenegro, the Philippines, the Republic of Korea, Serbia, Switzerland, Tanzania and Zambia.

Tax treaties where the residence is tied to a period of 12 consecutive months:
Albania (as of 1 Jan 2024), Argentina, Armenia, Australia, Austria, Azerbaijan, Barbados, Belarus, Bermuda, Brazil, Bulgaria, Canada, China, Cyprus, Czech Republic, Denmark, Estonia, Georgia, Germany, Guernsey, Hong Kong, Iceland, India, Indonesia, Ireland, Israel, Jersey, Kazakhstan, Kyrgyzstan, Latvia, Lithuania, Macedonia, Malta, Mexico, Moldova, Morocco, Netherlands, Norway, Pakistan, Poland, Romania, Russia, Singapore, Slovakia, Slovenia, South Africa, Spain, Sri Lanka, Sweden, Tajikistan, Thailand, Turkey, Turkmenistan, Ukraine, United Arab Emirates, United Kingdom, Uruguay, USA, Uzbekistan and Vietnam.

According to the tax treaty with New Zealand, residence is calculated for the period of the local tax year, which is from 1 April to 31 March.

Some of the tax treaty countries include short absences from the country of work in the calculation of the length of stay periods; this means that days of absence must be included when counting the 183 days. In the above circumstances, the tax assessment in Finland can also be based on the view that the country of work has received the taxing rights.

No importance is attached to the purpose of the stay in the country of work. ‘Stay’ refers to actual physical presence. It may consist of a longer single period or several shorter periods. However, an employee’s stay outside Finland due to an illness is not included in the period of stay if the employee is unable to leave the other country due to their illness and their work would have otherwise met the conditions for the application of the 183-day rule. (OECD Model Tax treaty, commentary on Article 15)

Different tax treaties include slightly different definitions of the 183-day rule, which is why the content of the applicable tax treaty must be verified separately.

4.1.2 Public-sector employer

The 183-day rule discussed above only applies to the taxation of income from private-sector employers. According to the general rule of tax treaties (OECD Model Tax Treaty, Article 19, Paragraph 1), the source country usually has the right to collect tax on wages paid by public bodies.

Nevertheless, the provisions of a tax treaty may limit Finland’s taxing rights. Many tax treaties include a provision stating that only the country of residence has the right to collect tax on wages paid by public bodies, not the source country (OECD Model Tax treaty, Article 19, Paragraph 2). This requires that

• the work is carried out in the country where the employee is resident; and
• the employee is a citizen of that country or has not become its resident merely for the purpose of performing their work duties.

However, the provisions of tax treaties on this matter vary, so the country that has taxing rights on wage income and the conditions for the taxing right must be verified from the applicable tax treaty. 

4.2 Other tax treaty provisions on the taxation of wage income

4.2.1 Common provisions limiting wage income taxing rights

In addition to the 183-day rule, tax treaties may have other provisions that limit the country of work’s right to tax. Such limitations may, for example, only be applicable to construction work, as is the case with the tax treaty concluded with Russia.

The Nordic tax treaty includes special provisions on the taxation of cross-border commuters. These provisions can be applied to wage income when an individual resides in a municipality limited to the land border between Finland and Sweden or Finland and Norway, and the individual works in a municipality limited to the same land border in the other country. More information on the taxation of cross-border commuters is provided in the Finnish Tax Administration’s instructions Taxation of cross-border commuters.

Certain tax treaties include provisions that limit the country of work’s right to tax when work is carried out by a student, trainee, teacher or researcher. More information concerning them is available in the Finnish Tax Administration instructions Taxation of students and trainees in international situations and Taxation of people working for higher education institutions in international situations.

Fees received for being a member of the board of directors of a Finnish company or organisation or a similar administrative body are income earned in Finland. Whether the work is carried out in Finland or outside Finland is irrelevant (act on income tax, § 10, subsection 1, Paragraph 4a). Most tax treaties do not limit Finland’s right to tax, but there are exceptions. For more information on taxes on fees paid to members of administrative bodies and managing directors, also in international situations, see the Tax Administration’s guide Hallintoelimen jäsenen ja toimitusjohtajan palkkion verotus (in Finnish and Swedish only) (Taxation on fees of members of administrative bodies and managing directors, § 12).

4.2.2 Employee leasing

Employee leasing is an arrangement by which one company provides employees to another (the hirer) under a leasing contract. Between the leasing company and the hirer, there is a contractual relationship under contract law.

The actual employer continues to have the tax obligations of an employer. This is so even though the normal employer obligations related to the performance of work are transferred to the hirer. Examples of the latter include the employer obligations related to occupational safety and to maximum regular hours of work. Work is usually done in the hirer’s premises, under the hirer’s control and direction, using the tools, materials and supplies provided by the hirer. However, as the employees are 'leased', their employment contracts are with the leasing company, which also is the company that pays them.

The tax treaties concluded with a number of countries include special provisions on employee leasing (including the Nordic tax treaty and the treaties signed with Estonia, Latvia and Lithuania). The provisions allow for the taxing rights always being granted to the country of work, regardless of the leased employee's days of presence, if the conclusion is made that the employee who works at a Finnish company is a leased employee. If a leased employee needs to prove the existence of a leasing contract, the employee must present the Finnish Tax Administration sufficient proof in order to show that the country of work, based on the provisions referred to above, actually collects tax on the wages.

4.2.3 The economic employer

Some countries interpret the provisions of tax treaties under the ‘economic employer’ principle. In these countries, it is deemed that if an employee actually works for a company operating in said country and the employee’s wage encumbers or should encumber the company operating in said country, the wage has been paid by an employer operating in this country even if in practice, the wage has been paid by a foreign (e.g. Finnish) employer. If an employee presents proof that the country of work applies the ‘economic employer’ principle and that the employee’s wages have been taxed there, the country of work can be considered to have the taxing rights.

4.2.4 Working in a third country

An employee’s presence in a country that is not the primary country of work (third country) may lead to a situation where the primary country does not receive the taxing rights under the tax treaty. Under the circumstances, the employee’s stays in both the primary country of work and the other country might not exceed 183 days, and neither country has the right to collect taxes on the wages paid.

If a person regularly works in several countries, it is possible that one country of work has the right to collect tax on income earned within its territory under a tax treaty while the other countries of work do not have the right. In these circumstances, the wage income needs to be divided, so as to identify the part subject to tax both in the country of work and Finland, and the part subject to tax only in Finland.

4.3 Residence in accordance with a tax treaty

It may be that an individual taxpayer is fully liable to tax (i.e. a resident, for tax purposes) in many countries at the same time. In this case, the question of taxing rights is resolved by determining the individual’s country of residence under the provisions of the applicable tax treaty.

For example, if a citizen of Finland moves to another country, their country of residence under the applicable tax treaty may be the country where they work. That country will then have the taxing rights on the income sourced there and in other countries. If an individual is considered to reside in the country of work according to the applicable tax treaty, the country of work always has the right to collect tax on income earned within its territory (OECD Model Tax Treaty, Article 15, Paragraph 1). In this case, stay periods in the country of work have no effect on the right to tax.

In the situation above, Finland only has the taxing rights of a source country, i.e. the right to collect tax only on Finnish-source income within the limitations of the applicable tax treaty. If an individual works in another country for an employer that is not a Finnish public body, Finland does not have the taxing rights on the income. If a share of the work is done in Finland, Finland may have the taxing rights for that share of the income.

If an individual works in another country for a Finnish public body, Finland usually has the taxing rights (OECD Model Tax Treaty, Article 19, Paragraph 1). Most treaties give Finland the taxing rights with respect to wage income from a Finnish public body even if the wage earner’s country of residence under the applicable tax treaty was not Finland. Locally hired employees, i.e. people who already lived in the country of work before signing an employment contract with the Finnish public body, and citizens of the country of work (incl. dual citizenship) are an exception. Most often in these situations the country of residence has the right to tax under the applicable tax treaty (OECD Model Tax Treaty, Article 19, Paragraph 2).

Tax treaties have provisions that vary, both on the subject of residency and on the subject of how taxing rights are divided. For this reason, it is Important to check the content of the provisions of each relevant tax treaty carefully. More information on residency under tax treaties is available in the Finnish Tax Administration instructions Tax residency, nonresidency and residency in accordance with a tax treaty – natural persons.

5 Certain allowances arising from working abroad paid by the employer

Normally, the employer cannot pay tax-exempt compensation for an employee’s living expenses. However, some forms of compensation related to the living expenses arising from working outside Finland are exempt (income tax act, § 76, subsection 1, Paragraph 5). Examples of such compensation include moving expenses of the employee and their family members, including travel, children’s education expenses if they can be regarded as not higher than usual, and the expenses for hiring private service staff for the employee working outside Finland if this is usual practice. In addition, the share of an accommodation benefit exceeds the fair value laid down in the Official Decision of the Tax Administration on the valuation of fringe benefits.

Normal school education for children refers to attending to a school that is similar to Finnish schools of the primary, secondary and upper secondary levels (‘peruskoulu’ and ‘lukio’) The employer may compensate, for example, for the corresponding term fees of an international school in the country of work exempt from tax.

The private service staff referred to above means servants and other similar personnel who are regarded as part of the normal practice in the prevailing circumstances of the country. Examples of such personnel include nannies, housemaids, cooks, gardeners, private drivers and bodyguards.

The reimbursements listed above are exempted from tax even if the wage payments by the employer would be subject to tax in Finland and if the employee were to work at their permanent place of work.

• 76, subsection 1, Paragraph 5 of the act on income tax should not be understood as an extension of the scope of deductibility of living expenses, which are not deductible. From this follows that the types of expenses listed in that legal provision are not deductible when the employee pays them, as their employer is not paying them.

If an employee has a special travel insurance contract during the period when they work outside Finland and certain conditions are met, having the employer pay for it may also be regarded as exempted because it may be seen as being part of moving and travel expenses. More details on these conditions (in Finnish and Swedish) are provided in the Finnish Tax Administration instructions Työnantajan ottamien vapaaehtoisten riskihenkilövakuutusten verotus  (Taxation of voluntary personal risk insurance policies taken out by an employer, section 4.6 Matkavakuutus [Travel insurance]) and the Finnish Tax Administration’s statement Tax treatment of employer-provided relocation services for workers sent to other countries.

6 Exceptional situations related to working abroad

6.1 Working on board a ship

Under tax treaty provisions, the pay received for work carried out on board a ship sailing on international routes, which is commissioned by an enterprise resident in a tax treaty country, is normally taxable either in the country of residence of that enterprise or in the country where its management is located. According to the Nordic tax treaty, seafarer’s income is taxable in the ship’s country of residence. In Nordic situations, Finland eliminates the double taxation of a resident taxpayer by crediting the amount of tax paid to another country.

If the country of work has treated the pay as seafarer's income, it is generally also treated as one for Finnish tax purposes, unless facts and circumstances arise that give rise to the conclusion that it cannot be regarded as seafarer's income. If the conditions laid down in § 97 of the act on income tax are fulfilled, the income earned on non-Finnish ships may entitle the employee to the deduction granted to seafarers.

Income from working on a non-Finnish ship can be tax exempt based on the six-month rule (Six-month rule for wage income earned abroad). However, the provision on tax exemption is not applicable to income earned from working on a Finnish ship. A non-Finnish ship leased by a Finnish company is also considered a Finnish ship if only a minor share of the ship’s crew is not Finnish or the ship has no crew.

6.2 Airline employees

Work carried out on board an aircraft refers to all tasks carried out on board an aircraft and related to its operation, as well to tasks directly related to this work that is carried out outside the aircraft.

Depending on tax treaty provisions, the pay received on board an aircraft operating on international routes is usually taxed in the employer company’s country of establishment or in the country where its management exists. Under the Nordic tax treaty, the only country that taxes income from airline work is the employee’s country of residence.

It is advisable to check the definition of ‘international traffic’ in each applicable tax treaty, and whether airline routes flown inside the contracting state are included in the definition. There are several airline companies that fly inside foreign countries; the routes can be within the territory of the other country entirely.

Tax residents are generally liable to tax on their worldwide income. If the employee is considered to be resident in a country other than Finland under the tax treaty, the tax treaty may limit the taxation of wages in Finland. If the work is carried out on an aircraft operating on international routes, the tax treaty usually grants taxing rights to the state of domicile of the payer. If the payer is Finnish, Finland can collect taxes on such work. To qualify, the aircraft must be used to transport passengers or goods. The six-month rule does not apply to work carried out on board a Finnish aircraft.

If an individual who is a resident taxpayer of Finland but whose country of residence under the applicable tax treaty is not Finland works on board a non-Finnish aircraft, Finland can only collect taxes for work carried out in Finland. Only domestic flights (internal flights) are considered work carried out in Finland. In this case, working on board an aircraft operating on international routes is not treated as working in Finland even if the pre-flight work is performed in Finland and the aircraft is in Finnish airspace for part of the time.

6.3 Reporters

Among others, wages and amounts based on copyrights paid to reporters are considered income. Copyright payments are considered compensation for use in Finnish taxation and royalties in international contexts. Copyright payments are taxable income in Finland. Tax treaties include various provisions regarding the right to tax copyright payments, or royalties (OECD Model Tax Treaty, Article 12). If the reporter’s country of residence is Finland under the applicable tax treaty, Finland eliminates the double taxation if the tax treaty also grants income taxing rights to the source country.

If the reporter takes a more permanent residence in the other country, a situation may arise in which the reporter is no longer considered to reside in Finland for tax purposes and thereby does not have tax liability to Finland for income earned outside Finland. In this case, the applicable tax treaty may also limit the taxation in Finland of a compensation for use paid by a Finnish entity.

Copyright payments paid from Finland are also taxable income for non-resident taxpayers (income tax act, § 10, Paragraph 8) if the tax treaty does not limit Finland’s right to tax.

More information on the taxation of wage income is provided in sections 2, 3 and 4 of these instructions. Wage income of reporters may be tax-exempt in Finland if the six-month rule applies. For more information on the requirements for tax exemption, see the Finnish Tax Administration’s guide Six-month rule for wage income earned abroad.

6.4 Working from home

6.4.1 Working from home outside Finland

Wages earned from work carried out outside Finland from home are usually taxable income for taxpayers resident in Finland. The country of work may have the right to collect tax on the wages under the applicable tax treaty, since the work is carried out in that country. If Finland remains the taxpayer’s country of residence under the applicable tax treaty, Finland will collect taxes from the wages and eliminates the possible double taxation.

Usually, the six-month rule is not applicable to working abroad from home because the taxpayer’s presence in the country other than Finland is not due to their work. For example, they may be in the other country due to studies or due to their spouse’s international assignment in the country. If the work done from home does not require the employee’s presence in the country, there are no grounds for applying the six-month rule.

It is also possible that the country of work or the third country are considered the person’s country of residence under the applicable tax treaty. In this case, Finland does not have the right to collect taxes from the wages earned in the other country for work carried out at home for a private-sector employee.

6.4.2 Working from home in Finland

An employee working outside Finland may also work from home in Finland for some of the time. Wages paid for work carried out at home in Finland are considered taxable income in Finland for resident taxpayers even if the income earned from the work carried out outside Finland is tax-exempt based on the six-month rule, for example. Whether the work carried out in Finland is related to the work carried out outside Finland has no effect on the taxation of the wages.

If a taxpayer works from Finland and another country, the income earned is divided according to the share of workdays to income earned in Finland and income earned outside Finland.

If a taxpayer that is considered a resident of Finland under the applicable tax treaty works from Finland, the tax treaty grants Finland the right to collect taxes from the wages earned from that work. The employer’s state of domicile usually does not have the right to collect taxes from such wages.

Finland also has the taxing rights in respect of wages from work carried out in Finland even if another country, not Finland, is employee's country of residence pursuant to a tax treaty. In this case, the country of residence must eliminate double taxation. However, the 183-day rule (section 4.1.1) of tax treaties may prevent Finland from collecting taxes on wages even if the work is carried out in Finland.  

If Finland has no tax treaty with the other country, double taxation is eliminated in Finland in accordance with the provisions of the act eliminating double taxation (Laki kansainvälisen kaksinkertaisen verotuksen poistamisesta (1995/1552)). However, the provisions of this act only apply to the employee’s income sourced to the foreign country, which means that no double tax elimination would extend to the employee’s income sourced to Finland under the provisions of § 10 (4) of the act on income tax. If the employee is teleworking in Finland, evaluations must be repeated for every tax year regarding the question of whether the employee worked in Finland primarily, as referred to in § 10 (4) of the act on income tax.

Finnish employers must report information both on work carried out outside Finland and work carried out at home in Finland to the Incomes Register. Non-Finnish employers must submit reports to the Incomes Register if the employee stays in Finland for more than six months or is insured in Finland. Further instructions on providing the Incomes Register with earnings payment reports are available in Reporting data to the Incomes Register: international situations.

7 Instructions for reporting and for following relevant procedures

7.1 The employee

7.1.1 Obligation to report information on work carried out outside Finland

Resident taxpayers of Finland must submit a tax return on all their income including their earnings from work outside Finland (under § 4 of the Tax Administration’s official decision on the obligations to file tax returns and to file a report on real-estate tax [Verohallinnon päätös veroilmoituksen ja kiinteistötietojen ilmoituksen antamisesta], and § 1 of the Tax Administration’s official decision on the information to be included in submitted returns [Verohallinnon päätös veroilmoituksessa annettavista tiedoista]).

Income earned outside Finland and the taxes paid to countries other than Finland must be reported in a tax return. The information on how much tax was paid to foreign countries is needed for providing relief for double taxation. If the income is exempted in Finland, foreign-paid taxes are not important and the employee does not have to detail them.

Employees must also inform the Tax Administration of how long they have worked abroad; this must be specified by country, by names of employers and by the number of days spent in Finland. Finnish employers that have applied the six-month rule must submit information to the Incomes Register.

The Finnish Tax Administration must also be notified of contact information during a period working abroad if a change of address notification has not been submitted when moving abroad. The Finnish Tax Administration does not receive information on temporary address changes from the Digital and Population Data Services Agency.

7.1.2 Withholding and prepayment

Unless the wage income is tax-exempt in Finland, Finnish employers must withhold tax on the wages they pay to their employee who works abroad. If the six-month rule applies, the employer will act upon it independently, on the employer's initiative; there is no need to ask the Tax Administration to prepare a revised tax card for the employee.

It is the employer's responsibility to apply the six-month rule correctly. Before the employer can apply the rule and refrain from withholding tax from an employee’s wages, the employer is expected to ascertain that all the requirements are likely to be met. In addition, the employer must ensure that the requirements are met during the time the employee works outside Finland. The employee, in turn, must give the employer enough information (including details on the visits made to Finland).

If the country of work has taxing rights, employers should find out if withholding must be carried out and paid in the other country or if the employee must pay prepayments. Similarly, employees must find out what tax obligations they have by contacting the tax authority of their country of work.

If the pay is taxable in Finland and the country of work also has taxing rights, double taxation may be eliminated at the stage where tax is withheld. In this case, the employee must ask for a revised tax card based on a calculation of the elimination, which may either be carried out with the credit method or the exemption method. Alternatively, the employer may reduce the amount withheld in Finland. For more information on this process, see section 7.2.2 of these instructions.

When the work outside Finland is started, it may still be unclear whether the six-month rule can be applied and whether the pay would be treated as tax-exempt in Finland. In this case, the employer must withhold taxes as usual up to the time when it becomes known that the requirements for the exemption will be met. The employer may then, already during the income year, adjust the size of the withholding, i.e. effect refund of the excess amounts withheld. An exception from the above process is a situation where work is done in a Nordic country: in these circumstances, it is prohibited for employers to pay out refunds.

If tax is not withheld from the pay because of the six-month rule and the employee stops working in the other country, the employer must resume the withholding as soon as it becomes obvious that the pay will be subject to Finnish tax. If wage income becomes subject to tax due to changed circumstances, to avoid paying back taxes, it is advisable that the employee ask the Finnish Tax Administration for a revised tax-card for the rest of the year, so that the earlier wage income on which nothing was withheld is taken into account.

7.1.3 Correcting and returning amounts withheld

If the employer does not make an adjustment in order to correct an excess withholding, the Tax Administration may include the too high amounts that had been withheld when revising the employee’s tax card for any other income. This approach can be used e.g. in situations where the employee has already stopped working outside Finland and has returned to Finland, earning wages that are subject to Finnish tax as usual. The exempted pay for the first months of the year will exert an impact on the progression of income tax.

When employees ask the Tax Administration to give them a new tax card, they must give details on whether or not the requirements of the six-month rule were fulfilled and on the fact that their employer will not pay a refund for the excess withholding.

Withheld amounts cannot be refunded during the withholding year i.e. the income year. However, the year after that (the assessment year), if the employee requests it, the Tax Administration may pay back the excess withholding already before the stage is reached when tax assessment is officially closed (under § 22 of the act on prepayment). If the employee does not request such refunding specifically, any excesses are refunded to them in due course, as a normal refund payment.

If the employee had worked in a Nordic country, the amounts that had been withheld are usually not refunded. Instead, the Nordic tax authorities are expected to transfer them to the other Nordic country where the work was done. This way, they will be included in their tax assessment for the employee's benefit. More information on this is available in the instructions Do you work in a Nordic country? – Your taxes can be reassigned to the Nordic country that has the taxing rights.

7.2 The employer

7.2.1 Employer’s general obligations

An employer sending an employee abroad is well advised to contact the Finnish Centre for Pensions or the Social Insurance Institution (Kela) before the employee starts working. This is to determine whether the employee is covered by the Finnish social security system during the foreign assignment. If the employee is covered, the Finnish company must continue to pay Finnish employer contributions for them. Even if the employee works outside Finland only for a short period, it is normally required that a certificate is obtained from the Finnish Centre for Pensions proving that the employee is treated as a ‘posted employee’.

As regards taxes in Finland, the employer must assess whether the conditions for the application of the six-month rule are met (Finnish Tax Administration instructions Six-month rule for wage income earned abroad). If the rule can be applied, the employee’s wages are tax-exempt in Finland and no withholding is carried out in Finland with the exception of a possible minimum withholding (Finnish Tax Administration instructions Health insurance contributions in international employment situations, section 6.2).

If the employee is covered by Finnish social security and the payer of their wages is a foreign subsidiary or similar company with which the Finnish sending company has an associated relationship, no tax withholding is carried out in Finland. In this case, it is not even necessary to carry out the minimum withholding in connection with health insurance.

However, the Finnish company posting the employee must pay the employer’s health insurance contributions from the employee’s wages for insurance purposes on behalf of the foreign company and submit the required reports to the Incomes Register to serve as the basis for the health insurance contributions determined for the employee. If no calculation has been made in order to determine the wages for insurance purposes, the employee’s actual pay will be used as the basis for the employer contributions up to the amount that it would be subject to withholding if the work was carried out in Finland.

The employer submits the reports to the Incomes Register. More information on the reports to be submitted and deadlines is available in the Incomes Register instructions Reporting data to the Incomes Register: international situations. The Incomes Register’s instructions also discuss situations where part of the pay comes from a payor in Finland and the remaining part from foreign countries.

In some situations, amounts that have already been withheld must be corrected. The Finnish Tax Administration instructions Ennakonpidätyksen toimittaminen [Withholding] (section 8 Toimitetun ennakonpidätyksen oikaiseminen [Correcting amounts withheld]) generally explain what an employer should do in such situations. More information on Special procedures related to the Nordics is provided in section 7.3.

7.2.2 Six-month rule is not applicable

If an employee residing in Finland works for a Finnish employer outside Finland for less than six months or if the conditions for applying the six-month rule are not met, the employee’s wages are subject to tax in Finland. The employer must withhold tax at the rate indicated on the employee’s tax card in the usual way, pay social security contributions and submit the required reports to the Incomes Register. Usually, the country of work does not have the right to collect taxes from the employee’s wages.

If an employee is sent to a Nordic country, the employer must provide facts and information (NT1 data) to the Incomes Register when the work in the other Nordic country begins. The Finnish Tax Administration will issue an acknowledgement to the employer, and also to the employee, that the NT1 data was submitted satisfactorily. The employee can use the acknowledgement in the Nordic country where they work if it turns out to be necessary to present proof that Finland is receiving the amounts withheld. This helps to ensure that another Nordic country will not demand prepayment. For more information on providing Finnish authorities with the NT1 data, see Reporting data to the Incomes Register: international situations.

If the company is treated as having a permanent establishment in the country of work or if the company conducts an employee-leasing activity, that country can usually impose tax on the employee’s pay, under the usual provisions of tax treaties. The country of work may do so in circumstances where no tax treaty between Finland and the country exists. In such circumstances, the employer should contact the local authorities to learn more about their employer obligations.

If withholding were to be carried out both to Finland and to the country of work, it is possible to advise the employee to ask the Tax Administration for a revised tax card, on which the withholding rate would be lowered so as to prepare for the elimination of double taxation.

Once double taxation has been eliminated by means of the exemption method, the employer does not have to submit the tax withheld to the degree that the earned income is taxed in the country of work. For this, the revised tax card issued by the Finnish Tax Administration should include a note regarding the matter.

Alternatively, the employer may, when withholding tax in Finland, independently take into account the actual tax withheld in a foreign country as double taxation is eliminated with the credit method in Finland. In this case, a revised tax card is prepared for the pay for the foreign work, indicating that the employer is entitled to subtract the foreign-withheld amounts from what the employer withholds in Finland.

When submitting their application for a revised tax card, the employee must provide proof for the tax office that under the relevant treaty, the country where the employee works has the taxing rights. In addition, foreign-paid amounts cannot be subtracted at all unless the employer really paid them in the country concerned. The maximum amount to be subtracted is the amount equal to the withholding in Finland. However, if the employee is insured in Finland, at least an amount that covers the health insurance contribution must be withheld and paid to Finland.

7.2.3 Employees sent abroad for at least six months

If a Finnish company sends an employee who is a Finnish tax resident to another country to work there for at least six months, the six-month rule in § 77 of income tax act may be applicable on the wages paid (for more information, see the Tax Administration’s instruction The six-month rule for wage income earned abroad).

Before applying the six-month rule and refraining from withholding, the employer must make sure that all the requirements are likely to be fulfilled. In addition, the employer must follow up the work in the foreign countries for making sure the requirements continue to be fulfilled. The employer is the party responsible for correct withholding and may be held responsible for the consequences of neglected withholding if negligence turns out to be the reason for not carrying out the withholding.

When the six-month rule applies, the employer's health insurance contribution will depend on the work income, determined for purposes of insurance. To cover the insured party’s health insurance contributions, an amount called the minimum withholding must be withheld from the employee’s pay.

If the employer does not carry out withholding in Finland because they have made the conclusion that the six-month rule will apply, they must send the NT2 data to the Incomes Register. This must be done by the fifth day after the first payday when the employee was paid without withholding. If an employee moves from one country to another and the six-month rule still applies, the employer must submit new NT2 data to the Incomes Register.

If the situation changes during the work period in a manner that the six-month rule no longer applies, the employer must submit the new working and residence information to the Incomes Register.

If the employer finds that the six-month rule applies on the employee’s wage income, they must check that the applicable tax treaty does not prevent the country of work from collecting tax on the wages earned by the employee there. If the country of work has the taxing rights, tax obligations must be dealt with in that country.

For more information about the reports that need to be submitted in case the six-month rule applies, see Reporting data to the Incomes Register: international situations.

The employer or the employee must contact the country of work’s tax authorities themselves or through an agent for more information on their obligations in the country in question, e.g. how and to which party withholding is paid, and how tax returns are filed.

In some countries, employees are expected to make prepayments themselves, sending money from a post office or bank. Even in these circumstances, it is possible that the party bearing responsibility for fulfilled payments is the Finnish employer. Because the processes vary from country to country, it is advisable to contact the tax authorities of the country of work for exact guidance and instructions.

7.2.4 Employer’s report on periods of stay in Finland

An employee’s stay periods in Finland during their work period outside Finland are reported on the employer’s report on periods of stay in Finland. The periods can be reported to the Incomes Register no later than by the end of January following the year of payment. Normally, the periods are usually not yet known when the wages are paid. For this reason, the employee should inform the employer of them afterwards. However, information on periods of presence can be sent to the Incomes Register immediately after the assignment has ended, or by pay period during the assignment. In the latter case, however, it must be ensured that the data is submitted for the entire tax year.

7.2.5 Exemption of tax not confirmed until during the work

Although the employer might withhold tax and pay it to Finland at the first stage, it may turn out later, i.e. when the employee has already started their work abroad, that the six-month rule is applicable and the pay is to be exempted from Finnish tax. When this has become certain, it is possible to change the procedure and start paying the minimum withholding only. This does not require a revision of the employee's tax card. However, the employer must send the required NT2 data to the Incomes Register when they refrain from carrying out withholding for the first time.

Unless work in a Nordic country is in question, the employer can pay back to the employee the amounts withheld, taking into account that the minimum withholding must be carried out for every month. In the case of Nordic work, it is not permissible to adjust the withholding because, under the multilateral Nordic tax treaty, any paid-in withholding is transferred to the other Nordic country where the employee’s income is taxed.

7.2.5.1 The employer corrects withholding

If the six-month rule applies to the employee’s income, the amounts to be withheld can be re-calculated, taking account of the six-month exemption, and a refund can be paid to the employee for the amounts that had been withheld unnecessarily. In this case, payroll accounting and the earnings payment reports submitted to the Incomes Register must also be corrected. More information on correcting data in the Incomes Register is provided in the Incomes Register instructions Correcting data in the Incomes Register.

If no amounts to be withheld during the calendar year remain, the Tax Administration will refund an amount corresponding to the excess withholding to the employer without any separate request; the Finnish Tax Administration will use the data on the submitted earnings payment reports.

In addition, the employer must report all of their employee’s stays in Finland as explained in section 7.2.4.

It may be that the circumstances are changed when the employee is working in the foreign country. Then the six-month rule may cease to be applicable to the income for which no withholding was carried out. In this case, the employer may withhold a higher amount on the paydays that follow during the same calendar year. However, the withholding may not be raised by more than 10 percent of the amount to be paid unless the employee agrees to it. Earnings payment data submitted early in the year must be corrected by submitting a replacement earnings payment report.

7.2.5.2 Employer does not correct withholding

If it turns out later that withholding was unnecessary, but the employer does not make an adjustment, the employer does not have to submit replacements for the earnings payment reports. In this case, the employee will not receive refund for the unnecessary withholding until the year when tax assessment is completed. If an employer does not correct the earlier withholding but applies the six-month rule on more recently paid-out wages, the employer reports to the Incomes Register the start and end dates of the work carried out outside Finland and the employee’s stays in Finland, covering the entire period when the six-month rule had been applicable.

7.3 Employees posted to a Nordic country

7.3.1 Employer’s general obligations in situations involving an employee working in a Nordic country

Generally, if an employer is posting an employee to another Nordic country, the procedure is the same as that required in other circumstances involving work outside Finland. This section discusses the special characteristics associated with working in Nordic countries.

A multilateral treaty on income tax is in force between all Nordic countries. It provides that tax must be paid either to the employee's country of residence or to the country of work. Employers and employees are not able to select the country that taxes the income. Instead, the selection is made on the basis of treaty provisions. In addition, a multilateral treaty on prepayments and withholding, the TREKK Treaty (no. 97/1997), is also in force between the Nordic countries. TREKK provides that an advance amount must always be paid to one of the Nordic countries.

If the Finnish employer does not carry out withholding in Finland, some type of prepayment must be made in the country where the employee works. TREKK requires that the parties involved must give the NT1 data and NT2 data as appropriate. This also is a method of ensuring that payment of tax to two countries for the same wage income is prevented.

However, if withholding or final taxes have already been paid to a Nordic country that does not have the taxing rights on the income in question, there is no payment of refund to the taxpayer. Instead, the amounts are transferred to the other Nordic country by the tax administrations concerned. This is normally carried out in connection with the employee's final tax assessment or in connection with a readjusted assessment if appropriate.

The TREKK Treaty is discussed in greater detail in the Tax Administration instructions Nordic Agreement Concerning the Collection and Transfer of Tax.

7.3.2 NT1 and NT2 data

When an employee is sent from Finland to work in a Nordic country the company must give the Incomes Register either the NT1 data (withholding in Finland) or the NT2 data (no withholding in Finland). The information must be filed by the fifth date after the first payment date of wages for work abroad once the employee has started working in another Nordic country.

Wages paid to an employee are not always exemptible under the six-month rule. Alternatively, it may remain unclear whether the rule applies or not. In such a case, the employer must withhold taxes in Finland. If work in a Nordic country is in question, the employer must submit the NT1 data. The Finnish authorities send it on to the authorities in the country of work. The Finnish authorities also send an acknowledgment to the employer and the employee, stating that the NT1 data has been sent. The employee can use the acknowledgement in the Nordic country where they work if it turns out to be necessary to present proof that Finland is receiving the amounts withheld. This ensures that in most cases, the country of work cannot make a demand for tax withholding. However, if the tax authorities of the country of work deem that employee leasing is involved, the protection granted by the NT1 data does not prevail.

The requirement to give the NT1 data and NT2 data does not depend on which one of the countries will have the taxing rights of the final tax assessment. This means that in some circumstances, the country of work may demand that money is withheld there even though that country would not get the taxing rights for purposes of final assessment. In these special circumstances, the country of work will refund the withholding later.

For more information on providing Finnish authorities with NT1 data and NT2 data, see Reporting data to the Incomes Register: international situations.

7.3.3 Exemption from tax is established later

Although the employer may withhold tax and pay it to Finland at the beginning, it may, however, later become clear that the six-month rule is applicable. After the date when this is established, the employer should take necessary action to ensure that prepayments are started in the country of work. In case the employer is not obligated to carry out withholding to the foreign country, they should instruct the employee to ask for a calculation of prepayments to be made by the local tax office, and to start paying them as required.

When the collection of prepayments has begun at the country of work, the employer may cease the withholding in Finland on their own initiative. However, the minimum withholding must be carried out if the employee is covered by the Finnish social security system. This does not require a revision of the employee's tax card. Revised cards are only necessary in circumstances where the exemption in Finland is only based on the provisions of a tax treaty and where the six-month rule is not applicable. However, the employer must submit the NT2 data to the Incomes Register.

The employer cannot pay back to the employee the amounts that were withheld in Finland at the beginning of work in another Nordic country. This is due to the multilateral TREKK provisions. It is required by TREKK that the Nordic authorities carry out the transfers of the amounts that had been withheld unnecessarily, sending them to the country of work. The authorities of that country will use the withholding for the benefit of the employee, deducting it from the accrued tax collected there.

7.3.4 Permanent establishment

It is advisable, at an early stage, to contact the tax authorities of the country where work is done to find out whether the country’s tax authorities will treat the employer company as having a permanent establishment in that country. In some circumstances, the existence of a permanent establishment is not confirmed until the employee is working in the country.

If the Finnish employer receives a written notice from the tax authority of a Nordic country stating that they are treated as having a permanent establishment, the employer must begin carrying out withholding in that country. More information on the procedure is available from the tax authorities of the country.

When the amounts withheld must be sent to another Nordic country, the TREKK provides that there is no obligation to withhold tax in Finland for the wages paid to the employee for the time in question. However, the employee’s Finnish tax card must be revised and the Finnish tax office must be given a copy of the written notice from the tax authority of the country of work.

If tax was withheld on the employee’s wages in the beginning, the employer is not entitled to pay the withholding back to the employee. This is due to the said TREKK provisions. They require that the Finnish Tax Administration carry out the transfers of the amounts that had been withheld, sending them to the country of work as coverage of the employee’s tax liability there.

More information on when a permanent establishment is deemed to exist is to be found in section 7.4 of these instructions.

7.3.5 Employee leasing

It is common in the construction sector in particular that Finnish companies doing business in the Nordic countries must deal with the concept of ‘employee leasing’. Especially in Norway, it is usual that an employee is deemed a leased employee if a Finnish company has sent them to work for a company in Norway (or for a permanent establishment in Norway of a third-country enterprise) and bears neither responsibility for the results of the work nor any risk associated with them. Before deciding on the matter, the authorities will also look into the circumstances concerning which one of the companies has the right to manage and control the work and which company gives the employee the tools and determines how many employees are necessary.

If the local authorities of the country of work decide that employee leasing is involved, the wages paid to the employees will always be taxed there. Tax is collected there, even in cases where the employee’s period of employment in the country is very short. If employee leasing is involved, the prepayments must also be paid to the country of work, even if a complete set of NT1 data has been provided.

However, if a Finnish employee, for example, has been sent to Norway and has an A1 certificate issued by Finnish authorities, it will prevent the collection of Norwegian social insurance contributions also in situations of employee leasing.

7.3.6 Agreement regarding mutual assistance between authorities

There is also an intra-Nordic treaty on giving assistance to the authorities of any Nordic country in order to recover overdue taxes from taxpayers. If delinquency of payments either by employers or employees occurs, the authorities of the country of work will receive administrative assistance for the collection and execution of taxes from the Nordic country where the employer or employee is resident.

More information on this is provided in the Finnish Tax Administration instructions Kansainvälinen virka-apu verojen perinnässä (International administrative assistance in tax collection).

7.4 Permanent establishment outside Finland

By virtue of national legislation, a country may have taxing rights with respect to business profits and employee’s wage income, if the company conducts operations in the country. However, if a tax treaty exists, the usual way to apply its provisions is that taxing rights are given to the other country only if the Finnish company is considered to have a permanent establishment there. In this case, the definition of ‘permanent establishment’ is decisive (OECD Model Tax Treaty, Article 5).

Payroll expenses affecting a permanent establishment’s result can always be taxed, with possible prepayments, in the country of the permanent establishment. Tax may be collected there even in cases where the employee's period of employment in the country is very short.

Whether the circumstances give rise to a permanent establishment for a Finnish company operating a business in another country is determined in that country on the basis of the national legislation of the country, and the provisions of the relevant tax treaty. For this reason, if the foreign country has stated that a permanent establishment exists, Finnish tax authorities normally fall in with that statement. However, the Finnish tax authorities will refrain from making appraisals on whether a company will or will not be treated as having a permanent establishment in a foreign country.

The practice is not to treat a company as having a permanent establishment in a country simply because its subsidiary or parent company is located there.

Already when planning the operations, it may be useful to contact he tax authorities of the country of work, through an agent if not otherwise, in order to learn what factors are seen as important when deciding on a permanent establishment. In some circumstances, the existence of a permanent establishment is not confirmed until the employee is working in the country. Whether a permanent establishment is considered to exist in the country of work can be assessed with the criteria used to assess whether a non-Finnish company is considered to have a permanent establishment in Finland (Finnish Tax Administration instructions Income taxation of nonresident foreign corporate entities, section 3).

If the employer company has a permanent establishment in the country of work, the employee must pay tax on their wage income in that country. If the six-month rule applies, the employer may cease to withhold tax on the employee’s pay, only carrying out the minimum withholding where applicable. If the rule does not apply, i.e. the income is taxable in Finland, the employee can ask the Finnish Tax Administration to issue a revised tax card on which the double taxation is eliminated as regards tax that has been paid to the other country. The employee should enclose a photocopy of the letter from the authorities of the country of work with the application for a revised tax card, including documentation that shows that their wage income is entered as a cost in the accounting books of the permanent establishment.

Countries of work often expect, because of the permanent establishment, the employer to withhold tax on the pay of their employee in the country in question. More information on the procedures is available from the tax authorities of each country.

7.5 Non-wage compensation for work

If the employee receives nonwage compensation, the procedures of the payer are the same as if the work were done in Finland. If the recipient of the compensation is not entered in the prepayment register, withholding is carried out according to the rate indicated on the receiver’s tax card. If the receiver does not provide a tax card to the payer, 60% of the compensation is withheld. Employer’s health insurance contributions are not paid for non-wage compensation for work.

7.6 A Finnish public body as an employer

If the employer is the Finnish Government or a Finnish public body, tax will be withheld as usual in Finland from the salary of a resident taxpayer employee posted from Finland. The six-month rule does not apply to wages paid by a public body (income tax act, § 77). According to the tax treaty provision on public-sector employers, the country of work does not usually have taxing rights if the wages are paid by a public body of another country (section 4.1.2).

The wages of a non-resident taxpayer paid by the Finnish Government or a Finnish public body can also be subject to tax in Finland. The payer either collects tax at source or withholds tax from the pay according to rate on the employee’s tax card.

More information on reporting data to the Incomes Register on employees of public bodies is provided in the instructions Reporting data to the Incomes Register: international situations.