Taxation of employees from other countries

This guidance should not be regarded as an official translation into English. We provide comprehensive basic guidance in English. For more information, please refer to pages in either of the two official languages, Finnish and Swedish.

This guidance concerns the taxation of persons arriving in Finland to work and, in less detail, insurances for such workers and the employer's obligations.

The guidance has been updated due to amendments to tax treaties. Under 4.2, an addition has been made on an individual's duty to pay up their health insurance contribution for the entire period, if the employee originally planned to work for less than four months in Finland, but they continue to stay and work in Finland for 4 months or longer. Futhermore, the text under 5.1.6 has been clarified.

1 Introduction

This is an unofficial translation. The official instruction is drafted in Finnish and Swedish languages.

The general rule is that when you arrive to Finland to work here, you must pay Finnish income tax on the pay. How your earnings are taxed in Finland depend on a variety of factors including your length of stay, whether your employer is regarded as a Finnish employer or as an employer based in another country, and the provisions of international treaties governing taxation, which may impose restrictions on Finland's taxing rights.

Similarly, it is also a general rule that the country where you are a resident will collect tax on your worldwide income, applying the provisions of its own legislation on it. This means that you may also have to pay tax on your Finnish-sourced income there. However, if double taxation were to occur, you would receive credit for what you paid to another country's tax authorities; your country gives you credit as provided for in either a bilateral tax convention on the avoidance of double taxation (=a tax treaty) or in the national legislation of the country.

Finnish tax rules on income tax recognize the following two taxpayer statuses: general liability to pay tax (residency) and restricted liability to pay tax (nonresidency). Under § 9, subsection 1, line 1, Income Tax Act (tuloverolaki 1992/1535, TVL) residents must pay Finnish income tax on their Finnish-sourced and worldwide income. Correspondingly, under § 9, subsection 1, line 2, nonresidents only pay Finnish income tax on Finnish-sourced income.

Residents, having unlimited tax liability, are the people who live in Finland, and additionally, those living in other countries but staying 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. For more information, see "Yleinen ja rajoitettu verovelvollisuus" (only in Finnish and Swedish).

This guidance discusses the tax treatment of resident and nonresident foreign nationals who have received wages from a source in Finland, the obligations of their employer, their required social security arrangements and the provision of insurance for workers.

Its first part focuses on situations where the payer of wages is a Finnish employer. In chapter 6 at the final part of the guidance, the payer of wages is a foreign employer.

2 Working in Finland for a Finnish employer

2.1 Tax assessment of nonresidents

Nonresidents pay Finnish taxes on their Finnish-sourced income only. Whether you work for a Finnish or for a foreign employer, and whether the location where you work is in Finland or outside Finland are important factors.

Under § 10.4, Income Tax Act, the pay earned in the service of a private-sector employer is regarded as Finnish-sourced income if the location where you worked is in Finland (or mostly in Finland) and the employer is domiciled in Finland. Under the case law emanating from Supreme Administrative Court rulings (KHO 1994-B-556), Finland is the location of the work if more than half of the work was done in this country.

If a nonresident were to work at a location in Finland but the employer is foreign, his or her pay is not taxed in Finland. In this context, 'foreign employer' means an employer who is not treated as having a permanent establishment in Finland. However, an exception is made with respect to the pay received by nonresident leased employees from certain countries (under § 10.4, Income Tax Act; for more information, see sections 3 and 6 of this guidance — Special Employee Groups and Working in Finland for a foreign employer).

The applicable Finnish legal statute is the Act on the Taxation of Nonresidents' Income (Laki rajoitetusti verovelvollisen tulon verottamisesta 627/1978, abbreviated as LähdeVL). The procedure is to either collect a flat-rate source tax on your income or on request, perform a similar tax assessment as is normally done for Finnish residents under Act on Assessment Procedure (Laki verotusmenettelystä 1558/1995, abbreviated as VML), in which the rate of tax depends on the size of your income.

2.1.1 Taxation at source

Under this scheme (and under § 7.1.1, Act on the Taxation of Nonresidents' Income), the Finnish payer withholds a final tax at a rate of 35 percent. The base of withholding also includes any fringe benefits valuated as defined by the Official Decision of the Tax Administration on the Valuation of Benefits-In-Kind.

Payments of wages and benefits are subject to a special deduction called 'source tax deduction' (lähdeverovähennys; källskatteavdrag) that the payer must implement before withholding the tax. It means that employers deduct €510 per month from the total pay on which the withholding rate is the 35-percent source-tax rate. For pay periods shorter than one month, the deduction is calculated as €17 per day. However, the deduction cannot be higher than the amount of income. Further conditions include the restriction that if the pay consists of a profit-share or profit-surplus distributed by a workers' fund, a fee paid to a Board member or to a member of another governing body of a corporate entity, 'source tax deductions' are not allowed.

The beneficiary must have an entry confirming the right to the deduction marked on the tax-at-source card (under § 6, Act on the Taxation of Nonresidents' Income). Employers must calculate the payroll taxes such as the health insurance contribution and the insured party's medical insurance premiums on the basis of the gross amount before deduction.

The tax-at-source card should be treated as an official instruction to the payer, to be followed when determining the amount to be withheld. If you are going to receive income in Finland and need a tax-at-source card, complete Form 5057e (Application for a nonresident taxpayer's tax-at-source card, prepayment calculation, tax card). The employer cannot deduct the source tax deduction unless an entry is marked on the card confirming your right to get the deduction. The same requirement concern the tax-relief deductions granted to teachers and students (subject to certain restrictions).

If you, as the employee, do not show the card to your employer, they are required to resort to other means for obtaining your personal details for purposes of their Employer Payroll Report. Employers must e.g. have your date of birth, your address in your country, and your personal identity number in that country or your Tax Identification Number.

Employers are also required to file an employer payroll report on the nonresident workers either electronically or by completing the Form 7809e, "Annual notification –payments to recipients with limited tax liability (nonresidents)" and they must also issue a pay slip to the beneficiary of income. Employers and other payers must additionally ask their workers (beneficiaries) to inform them of their Tax Identification Numbers, TIN, issued in the foreign country where they are residents. The employer's report form has a special space for the TIN.

2.1.2 Making corrections to the withheld tax at source

Sometimes the worker doesn't obtain a tax-at-source card on time. In this case, he or she gives it to the employer after the wages (or other remuneration) are paid. The employer has the opportunity to adjust the amount withheld by making a correction on the worker's next payday. However, if no such adjustment is made, the worker (or other beneficiary) may ask the Tax Administration to reimburse the excessively withheld tax at source (under § 11.2, Act on the Taxation of Nonresidents' Income). The form to complete for this purpose is Form 6166e (Application for refund of Finnish withholding tax on other income than dividends).

It may be that the employer has withheld as much as 60 percent because the worker failed to present a card. If they hand over a tax-at-source card to the employer later, the employer has the opportunity to adjust the amount. Employers must in this case submit a replacement for their Self-Assessed Tax Return where the withheld amount had been designated as 'ordinary withholding' - it should be 'tax withheld at source'; similarly, employers must file an annual Payroll Report on the form that specifies the beneficiary as a nonresident rather than using the usual Employer Payroll Report form.

If the payer does not adjust the withheld amount, the worker may turn to the Tax Administration to submit a request for reimbursement.

2.1.3 Travel expenses

Nonresident individuals receiving wage income are entitled to receive tax-exempt reimbursement from their employers under the same rules (laid down by the provisions of Income Tax Act) as for resident wage earners (§ 4, Act on the Taxation of Nonresidents' Income).

Travel expenses paid to nonresidents workers can be tax-exempt but this requires that the wage earner works in Finland at a special place of work. This means that people like lecturers, specialists, workers at construction sites can be paid travel expenses without the need for source-tax withholding on the condition that they present an expense account in the same way as is required of residents.

Prior to the withholding of source tax, it is not permissible to subtract any un-reimbursed expenses as § 15, Prepayment Act (1118/1996, EPL) has provided for. However, if the wage earner has obtained a progressive income tax scheme for a nonresident and accordingly a tax card instructing the employer to withhold tax this way, the provisions of Prepayment Act can be followed by the employer.

Nevertheless, if a nonresident works full time in Finland in a retail store, government office or factory, this place is considered their primary place of work. In such cases, no tax exemption is granted for any travel or accommodation reimbursed. The same rule applies to students and trainees who work in Finland but have no primary place of work overseas. However in these cases, the employer can pay the worker a tax-exempt reimbursement for any trips from a main place of work to a special place of work and back.

For more information, see Työmatkakustannusten korvaukset verotuksessa (only in Finnish and Swedish)

2.2 Withholding on payments of trade income (=nonwage compensation) to a nonresident

Under the general rule (under § 7.1.1, Act on the Taxation of Nonresidents' Income), withholding at source at the 35-percent rate concerns any trade income (nonwage compensation) paid to a nonresident individual who has arrived in Finland. Nonresident beneficiaries can apply for a tax-at-source card for trade income. The card with instructions for source-tax withholding also permits the payer to deduct the upfront 'source tax deduction'. Because the type of payment is not 'wage income', there is no need to pay the employer's health insurance contribution.

If a tax treaty is in force between Finland and the beneficiary's country of residence, its provisions normally prevent the taxation of the trade income in Finland unless there is a fixed place of business from where the beneficiary has carried out the work/service.

When any trade income has been paid to an individual, it is subject to reporting electronically or on Form 7809e - the nonresidents' annual information return - regardless of whether tax is withheld at source. For purposes of annual information reporting, the payer must receive the beneficiary's details such as date of birth, address and Tax Identification Number in country of residence.

If a nonresident individual carries out the work or service from a fixed place of business, the trade income is subject to source-tax withholding unless the beneficiary has presented proof of their prepayment registration.

For more information, see Paying nonwage compensation to a foreign company

For more information, see Ulkomaisen liikkeen- ja ammatinharjoittajan tuloverotus Suomessa (only in Finnish and Swedish)

2.3 Taxation of fees for lectures

The main rule is that fees for giving a lecture at an occasion not arranged by the lecturer themselves are regarded as wage income, not trade income (§ 13, Prepayment Act). Fees for a lecture etc. are regarded as taxable wage income regardless of whether there is an employment contract between the payer and the beneficiary. For this reason, tax must be withheld at source even if the lecturer had formed a registered business entity in his or her country. However, the tax-treaty article governing the treatment of teachers may provide for relief. In this case, the lecturer doesn't pay or pays less Finnish tax (For more information, see section 3.3 of this guidance).

If the lecture is given by someone who represents a well-known training organization or a similar business, the party who arranged the lecture and paid the organization's invoice is treated as having paid trade income, not wages.

For more information, see Palkka ja työkorvaus verotuksessa (only in Finnish and Swedish)

2.4 Tax assessment of nonresidents under the progressive scheme

Nonresident individuals can claim treatment of their earned income under the progressive scheme instead of source taxation. When the progressive scheme is granted, the tax rules are the same as for Finnish residents living in Finland on a permanent basis.

As a nonresident in Finland you are entitled to request tax assessment under the progressive scheme with respect to earned income (not dividends). This option is open to all nonresidents who live in a country belonging to the European Economic Area, or in a country that has made an agreement with Finland on administrative assistance and exchange of information; and to any nonresidents who are holders of a Finnish residence permit within the meaning of the EU Council Directive on Scientific Researchers (§ 13.1.6, Act on the Taxation of Nonresidents' Income).

You must visit a tax office and ask for a nonresident's tax card. Then you must hand it over to your employer (or other payer). The form to fill out is Form 5057e — Application for Tax-At-Source Card. You must enclose Form 6148e with it; this form is an Application for progressive income taxation. When you make the request you must give details on all your earned income from Finnish sources, on all your earned income taxable in your country of tax residence, and on all deductions from the income.

Finland is the country of taxation for the Finnish-sourced income only, but the tax rate that applies to your earnings is determined under the progressive scheme, and this takes any foreign-sourced wages, pension, and social benefits into account if these would be taxed as earned income if they were from a Finnish source, and if their sources are:

1. Outside Finland; and the income is treated as taxable income in the country of your tax residence, or
2. In Finland, and the income is not taxed due to the provisions of the applicable tax treaty (§ 14, Act on the Taxation of Nonresidents' Income).

However, these types of income are not taken into consideration if at least 75% of your worldwide annual gross income consists of taxable income from Finnish sources, and your country is an EEA country or you are a holder of a residence permit within the meaning of the EU Council Directive on Scientific Researchers. To exclude income from progressive taxation, you are required to produce a certificate from the tax authority in your country, with a summary of what income has been taxed and what expenses have been deducted there (§ 14.5, Act on the Taxation of Nonresident's Income).

The nonresident's tax card issued to you serves as an instruction to your employer (or other payer). They must apply the percentage rate marked on it when they withhold tax. The progressive tax on earned income is calculated using the income tax table and the average rate of municipal income tax. Acceptable deductions include commuting expenses and the expenses for production of income. This way, the actual tax rates will depend on how much income you have and on your deductible expenses.

Besides tax, your employer must also withhold social security and insurance contributions (amounting to approximately 7%) unless you have a certificate that establishes that you are covered by the social insurance system of a foreign country; or unless some other exception from ordinary social-insurance rules applies (for more information, see section 4 of this guidance).

If your taxation is by the progressive scale, you will receive a Pre-Completed Tax Return during the following year on which you will find a specification of your income and deductions, and the final result of your assessment (whether you must pay additional taxes or whether you get a refund). You are expected to go over the pre-filled amounts carefully. If you notice any errors and omissions, you must make corrections and send the form back to the Finnish Tax administration.

If you did not ask for progressive tax during the income year when your employer(s) withheld source tax on your pay, you still have the option to do so afterwards if you send back the pre-completed tax return completed with an application form. Give details on all your Finnish-sourced earned income, your earned income taxed in your country of residence in the same year, and the deductions applied.

2.5 Tax assessment of residents

If you stay in Finland for longer than six months, your income is taxed in Finland progressively and in the same way as in the case of people living in Finland permanently. You will also fall into the category of residents if it is deemed that your permanent residence and home is located in Finland (§ 11.1, Income Tax Act). Your employer must withhold tax on your pay according to the instructions marked on the tax card you obtain from a tax office. If you don't produce a tax card, your employer is under the obligation to withhold 60 percent. Employers (or other payers) file an employer payroll report in the same way as for people living in Finland permanently.

The withholding rate includes also the employee's share of their health insurance contribution. The employer's health insurance contribution is paid from the wages as well. However, there is no need to pay health insurance contribution if you as taxpayer have a valid A1 or E101 certificate showing that your country of residence will continue your social security coverage while you work in Finland. Similarly, they don't have to pay it in circumstances where people arriving in Finland have a certificate from Finland's Social Insurance Institution, Kela, proving that the Finnish social security scheme does not cover them (for more information, see section 4 of this guidance).

If it is unclear at the outset whether your stay extends itself past the six-month threshold, the tax office will first give you a tax-at-source card or a nonresident's card. However, they let you have an ordinary card after it has been ascertained that you are staying longer than six months. The counting of the six-month period is straight, i.e. it is not sensitive to start and end dates of calendar years. This means that if you stay begins 15 August, for example, and you leave Finland 15 February the following year, you are treated as a Finnish resident. The length of stay is determined as a total period: it is regarded as continuous in spite of any temporary absence from the country.

3 Special groups

3.1 Foreign key employees (Provisional Act)

Taxation of foreign key employees' earnings is governed by special provisions of law, laid down in Act no 1551/1995. Individuals arriving to Finland for periods longer than six months and thus becoming Finnish residents may, subject to certain restrictions, be treated as foreign key employees who only pay source tax at the 35-percent rate. This requires that

1. The foreign national became a Finnish tax resident when he or she started working in Finland;
2. He or she is paid at least €5,800 per month for this employment during the entire period when he or she works;
3. The work requires special expertise, and
4. He or she is not a Finnish citizen and has not been a resident, generally liable for taxes in Finland, during the five calendar years prior to the start year of employment (§ 2, Act no 1551/1995).

The provisions of this Act are applicable to the pay, on the condition that it is Finnish-sourced income within the meaning of Income Tax Act. Work must mainly be done in Finland for an employer based here. Making reference to ruling no 2943 of the Supreme Administrative Court of 11 November 2005, the Finnish Tax Administration has agreed to also apply the provisions on payments made by a Finnish service provider on a foreign employer's behalf. (Typically 'a Finnish service provider' is an accounting firm.)

The source tax is collected as a final tax; the employer withholds an amount from a wage and forwarded it to the Finnish Tax Administration. No insured' medical insurance premium is collected. The employers are required to pay the health insurance contribution, pension insurance and other insurance contributions in the usual way unless the foreign key employee presents an A1 or E101 Certificate.

To qualify for foreign key employees treatment applicants must submit a request to the local tax office for a tax card within 90 days of starting work as a key employee. The treatment cannot be given for longer than the first 48 months.

People entitled to foreign key employees' taxation may additionally receive other earned income, but that is taxed under the usual progressive scheme and the provisions of the Act on Assessment Procedure. In this case, the fact that they are being paid monthly under the foreign key employees' tax scheme affects the progression: the amount of that pay makes the income tax rate higher for any other earned income (under § 6.1, Act no 1551/1995).

If the foreign national has been taxed as a foreign key employee for the first months of the year only, and other earned income has been paid to him for the same months and he continues to stay in Finland for the rest of the year, the sum of the other earned income affects the progression of the tax rate applied to the income he gets during the final months of the year. However, the amount of the pay under the foreign key employees' tax scheme during the first months of the year does not affect the progression during the final months.

In any case, when foreign nationals arrive in Finland to stay longer than six months they become residents due to the length of their stay. For this reason, the tax authorities will send a Pre-Completed Tax Return also the wage earners who had been taxed under the foreign key employees' tax scheme. They receive it to their home address in the spring of the following year. They must report their earnings taxed under the scheme (under the provisions of § 6.2, Act no 1551/1995) and their other earned income.

3.2 Leased employees

Under § 10.4c, Income Tax Act, the wages received from a foreign employer for working in Finland as a leased employee are treated as being from a Finnish source (the foreign employer having made an agreement with a Service Recipient in Finland concerning employee leasing).

The wage income of leased employees is taxed in Finland, if the leased employees are present in Finland for six months or for a shorter time, and if their employers are foreign, and if the tax treaty between Finland and their country of tax residence does not prevent Finland from taxing it.

The countries with tax treaties providing for Finnish taxation are listed below, including the years when the provisions came into force:

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

The wages received for work as a leased employee are taxed in this country also when the leased employee comes from a country that does not have a tax treaty with Finland. Such wage income is treated as being taxable earned income starting the first day of work, regardless of length of stay. When the leased employee is from a country that does have a treaty but is not listed above, the wages are taxed in Finland if he or she stays here longer than 183 days during a period of 12 consecutive months, or longer than 183 days during a calendar year.

If their foreign employer company - i.e. the leasing agent - does not have a permanent establishment in Finland, it does not have to withhold tax on the wages nor pay it on to the Finnish tax authority. For this reason, leased employees must pay their income taxes themselves. They must contact the local tax office and get a calculation of tax prepayments.

For more information, see Leased employees - taxation in Finland

3.3 Teachers and scientific researchers

In the case of some tax-treaty countries, a full exemption from Finnish income tax may be granted to teachers and researchers who arrive in Finland for a temporary period. Under the provisions that lay down the conditions of the exemption, they cannot stay in Finland on a permanent basis, but at the same time, Finland can be their country of residence for treaty purposes during their stay (which allows for their families to enter Finland with them without losing the exemption). An exception from the above is the treaty between Spain and Finland, under which the teacher or researcher must be a resident of Spain also during the period when they stay in Finland.

The relief from taxation concerns an individual who stays in the other tax-treaty country for a certain maximum period, typically 2 years, as a teacher or as a scientific researcher working for an institute of higher education. However, all the treaties provide for the possibility of multiple periods on the condition that the teacher or researcher has moved back to their country of tax residence for some time between the end of one stay in Finland and the start of the next.

Some treaties have a restriction that makes it necessary for the teacher or researcher to have received an invitation, and defines the exemptible income as relating to the activities described in the text of the invitation. The 'invitation' concept may mean an agreement made with the teacher/researcher before they arrived in Finland, which outlines the teaching or research work to be done; and it can also be understood as a reference to the exchange programs that go on between educational institutions. No such invitation can be in question if an individual has submitted a job application for a open teacher/researcher position.

In 2018, the treaties with France, the United Kingdom, Japan and Egypt provide for exemptions as follows:

• Egypt: Maximum length of stay is two years. The exemption is only granted to people whom a Finnish institution of scientific research/higher education has invited, and only the income from work described in the text of the invitation is exempted.
• Spain: Maximum length of stay is two years. The exemption is only granted to people whom a Finnish institution of scientific research/higher education has invited, and only the income from work described in the text of the invitation is exempted.
• United Kingdom: Maximum length of stay is two years. The exemption is only granted to a professor or teacher, and a certificate of tax assessment in the country of residence must be presented.
• Japan: Maximum length of stay is two years, and it is also required that the professor or teacher who arrives to Finland had lived in Japan just before, in other words, arrives to Finland directly from Japan.

In the case of Egypt, Spain, the United Kingdom and Japan, the teacher or researcher will lose the exemption if the length of stay exceeds two years. Then their entire earnings become taxable under the usual tax rules.

• France: For the income to be exemptible, maximum length of stay is two years but the teacher or researcher does not lose the exemption if the length of stay goes over two years. However, no exemption is given to those who relocate to Finland on a permanent basis.

3.4 Students and trainees (interns)

Some treaties provide for exemptions and reliefs for students: they may result in a more beneficial tax treatment than the 'source tax deduction' discussed above.

These provisions may concern students and trainees (interns) alike. The exemption is granted in circumstances where a foreign national either pursues academic studies in Finland or does that in a foreign country but arrives to Finland in order to work here in a job position that relates to his or her studies. People whose status can be defined as trainee or intern are those who pursue studies in their home country that prepare them for a profession and which require that some work experience be gathered. Examples of trainees and interns include parties in a contract of professional practice (=oppisopimus; läroavtal).

Read more: Taxation of students and trainees in international situations

3.5 Workers "au pair"

Foreign nationals arriving under an "au pair" contract are being paid an allowance/pocket money, which is treated as wage income subject to Finnish income tax. In a typical contract, the host family provides room and board. This and any other benefits the person working as an "au pair" receives are also subject to Finnish income tax. If the stay under the au pair contract exceeds six months, the person working as an au pair must pay tax in the same way as other residents.

If the employment income of an individual arriving from a foreign country to Finland stays below €1,189.00 per month (in 2018) or the hours are fewer than 18 hours a week, there is no requirement to pay the employer's health insurance and the insured party's medical-insurance premiums in Finland. Under the circumstances, the individual does not become covered by the Finnish social-security system.

If length of stay is more than two years, the employer's health insurance and the insured party's medical-insurance premiums must be paid unless the individual has received a Decision of the Social Insurance Institution that defines him or her as excluded from the Finnish residence-based social security system (for more information, see section 4 of this guidance).

Although the employer would not have to pay the employer's health insurance contributions, the requirement to pay the following charges is always in force: the pension insurance premium (in respect of workers who are 18 years old and older), the unemployment insurance (17 years and older) and accident insurance premiums. However, the employer does not have to pay them if the individual comes from an EU or EEA country or Switzerland and presents an A1 or E101 Certificate proving coverage by their home country; or presents a similar certificate from a country that has signed a convention on social security with Finland.

3.6 Performing artists; athletes and sportsmen

Nonresident performing artists, athletes and sportsmen must pay income tax in Finland on their Finnish-sourced income only. Among the income types of this category is the income derived from personal activity or endeavour in Finland or on board a Finnish ship (§ 10.4 b, Income Tax Act).

What is meant by 'personal activity or endeavour' includes an artist's or sportsman's performance, participation in a game, and participation in a sports competition. This also means (under the ruling KHO:2005:31) that a cash prize paid to the winner of a sports event in Finland, received by a nonresident sportsman, is treated as income from a Finnish source.

Consequently, it is not important whether the party is domiciled in Finland who gives the assignment to perform, or e.g. is the party who pays a cash prize to the winner. Such income is invariably regarded as coming from a Finnish source although the activities may be arranged by intermediation of a foreign sports management (artist management) business, and although the payment arriving to the artist/sportsman actually is made by the foreign manager.

Artists and sportsmen in this meaning excludes professionals such as a drama director of a theatre, choreographer, theatrical set decorator, sports referee and sports coach. They receive wages from Finland, if the work only or mostly takes place in Finland and the payor is resident in Finland. Tax at source is withheld from their wages as stated under section 2.

3.6.1 Taxation at source

The compensation is taxed in Finland at source, the rate of tax being 15 percent (§ 7.5; Act on the Taxation of Nonresidents' Income).

3.6.2 Progressive source tax

Performing artists and sportsmen arriving from an EEA country are entitled to claim deductions for the expenses that have a direct economic link to the amount they are paid. If this procedure is implemented, the tax office performs a calculation of progressive taxation at source and enters the corresponding markings on his/her tax-at-source card (under § 7 a, Act on the Taxation of Nonresidents' Income). Use the Tax At Source Calculator to check whether this procedure would result in a more beneficial treatment than taxation at source at the 15-percent rate.

3.6.3 Progressive taxation

As of 2014, nonresident individuals can claim tax treatment of their earned income under the progressive scheme instead of source taxation. When the progressive scheme is granted, your tax assessment is similar to that of Finnish residents living in Finland on a permanent basis (for more information, see section 2.4 of this guidance).

3.7 International traffic

3.7.1 Introduction

Under the provisions of § 13, Income Tax Act, nonresident individuals who work on board a Finnish ship or aircraft must pay tax in Finland only on their wage income earned on board or at another location if the employer has given them orders to work at another location for a temporary period. What is regarded as a 'Finnish ship or aircraft' also includes a rented foreign ship or aircraft if the Finnish employer is renting it and there is a limited foreign crew or no such crew.

If you are a resident of a foreign country and you work on board a Finnish ship sailing in international waters or in an aircraft (as a seafarer, as a pilot, stewardess etc.), the provisions of tax treaties may impose restrictions on Finland's right to tax your earnings. These provisions normally lay down that the employer company's country of residence (or the country of location of its management) gets the taxing rights. According to some of the tax treaties, the country where the ship is registered (bearing the flag of the country) is the one that gets the taxing rights.

3.7.2 Seafarers

Although you are a resident of a foreign country, Finland may impose tax on your seafarer's income if you receive it from Finnish sources including from a Finnish ship. Under the provisions of § 13, Income Tax Act, nonresident individuals who work on board a Finnish ship or aircraft must pay tax in Finland only on their wage income earned on board or at another location if the employer has given them orders to work at another location for a temporary period.

If you work on board a Finnish ship, your pay is subject to taxation at source at the 35-percent rate. Your Finnish employer withholds 35% source tax on your pay. Before computing the amount to be withheld, the employer may deduct €510 per month or €17 per day from your gross income on the condition that you have a tax-at-source card with a deduction instruction printed on it.

As a nonresident in Finland you are entitled to request tax assessment under the progressive scheme instead of taxation at source. This option is open to all nonresidents who live in a country belonging to the European Economic Area, or in a country that has made an agreement with Finland on administrative assistance and exchange of information; and to any nonresidents who are holders of a Finnish residence permit within the meaning of the EU Council Directive on Scientific Researchers.

If you want to have the progressive scheme, you must ask the Tax Administration for a nonresident's tax card. Hand the card over to your employer (or other payer). The form to fill out is Form 5057e — Application for Tax-At-Source Card. You must enclose Form 6148e with it; this form is an Application for progressive income taxation. When the progressive scheme is granted, your tax assessment is similar to that of Finnish residents living in Finland on a permanent basis. One of the benefits is that you are entitled to the Finnish seafarer's tax deduction (for more information, see section 2.4 of this guidance).

Tax card applications are processed at a tax office where the impact of each applicable tax-treaty provision is checked. If you are entitled to an exemption from Finnish tax, the tax office will enter this information on your card. For example, it has been agreed in tax treaties that seafarers who live in the Netherlands or in Russia only pay tax to their own countries.

In addition to the tax, your Finnish employer also withholds insurance contributions on your income. However, they don't do so if you are a holder of the A1 or E101 Certificate proving that no Finnish insurance contributions should be collected. Provisions of tax treaties normally lay down that the employer company's country of residence (or the country of location of its management) gets the taxing rights.

However, in the intra-Nordic treaty it is agreed that the taxing rights for seafarer's income belong to the country where a ship is registered. For this reason, if an individual seafarer residing in Sweden works on board a ship sailing under the Finnish flag, he or she pays tax to Finland. However, seafarers' earnings for work on board a fishing, whaling and seal-hunting vessel are exclusively taxed in their country of residence.

It should be noted that the mere presence of an individual on board a ship cannot be construed as living or residing in Finland for tax purposes.

3.7.3 Airline employees on board the aircraft

If you work for one of the Finnish airline companies, the country that taxes your income is Finland. If you do not live in Finland, your employer withholds 35% tax at source on your income.

An exception to this rule are the employees who live in other Nordic countries of an aircraft that flies international routes: the only country that taxes their income is the country where they live. This means, for example, that if you are a resident of Denmark and you work as a stewardess for one of the Finnish airline companies, Denmark is the only country that taxes your income.

Nevertheless, we recommend that you obtain a Finnish tax card — or tax-at-source card — for handing it over to your employer. Airline employees who live in other Nordic countries are issued cards with the words "Exemption from Tax" marked on them. Other airline employees get cards with information on source tax deductions marked on them: this deduction amounts to €510 per month or €17 per day.

If you are treated as a nonresident in Finland, you are entitled to request tax assessment under the progressive scheme. This option is open to all nonresidents who live in a country belonging to the European Economic Area, or in a country that has made an agreement with Finland on administrative assistance and exchange of information; and any nonresidents who are holders of a Finnish residence permit within the meaning of the EU Council Directive on Scientific Researchers.

For progressive tax you must visit a tax office and ask for a nonresident's tax card. Then you must hand it over to your employer (or other payer). The form to fill out is Form 5057e — Application for Tax-At-Source Card. You must enclose Form 6148e with it; this form is an Application for progressive income taxation. When the progressive scheme is granted, your tax assessment is similar to that of Finnish residents living in Finland on a permanent basis. One of the benefits is that you are entitled to a number of deductions (for more information, see section 2.4 of this guidance).

3.7.4 Drivers of motor vehicles

If you do not live in Finland but you work for a Finnish freight company and on routes spanning several countries, the country that taxes your income is Finland only if more than half of the routes effected during your pay period are in Finnish territory (under the Supreme Administrative Court ruling no KHO 1994-B-556).

Your employer withholds 35% source tax on your pay. We recommend that you ask for a Finnish tax card, whatever your specific circumstances are. The tax office gives you a card with information on source tax deductions marked on it (this deduction amounts to €510 per month or €17 per day). Employer can also apply the tax-at-source card for you.

You are entitled to request tax assessment under the progressive scheme. This option is open to you on the same grounds as it is for other nonresident employees (for more information, see section 2.4 of this guidance).

Although your work may mainly consist of (freight truck) driving in Finnish territory, you are not treated as a tax resident of Finland unless you have a place to live in Finland.

However, if the circumstances were different and the driver were to spend nights in Finland, he could become a resident due to the length of his stay. But as far as the bilateral tax treaty is concerned, even in those circumstances he would not be regarded as a resident unless he has a dwelling in Finland where he stays on a permanent basis.

3.8 Frontier workers

Under the multilateral tax treaty between the Nordic countries (SopS 26/1997, protocol VI) if you are a frontier worker, the only country that taxes your income is the country where you live. 'Frontier worker' is a term that refers to people living in listed municipal districts in Sweden and Norway (the districts being located next to the Finnish border) who work in a Finnish municipality, also located next to the border.

No Finnish income tax is collected on the pay. However, the Finnish employer must pay the employer's health insurance contribution and withhold the insured party's medical-insurance premiums on the pay. These obligations do not concern employers who have frontier workers working for them for a shorter time than 4 months, or employers who have workers who have presented either an A1 or an E101 Certificate.

If you do some of your work elsewhere in Finland, in a district not listed below, the part of the pay attributed to such work is taxed in Finland in the usual way.

• Adjacent to the border with Sweden are the Finnish municipal districts Enontekiö, Kolari, Muonio, Pello, Tornio; and the Swedish Haparanda, Kiruna, Pajala and Övertorneå.
• Adjacent to the border with Norway are, respectively, Enontekiö, Inari and Utsjoki; and the Norwegian Karasjok, Kautokeino, Kåfjord, Nesseby, Nordreisa, Storfjord, Sör-Varanger and Tana.

3.9 Diplomats and people working for certain international organizations

People working in Finland in the service of international bodies or diplomatic representations are treated as taxpayers in Finland only with respect to their possible other wage incomes that are additional to what they are paid for their diplomatic or international service (§ 12.1, Income Tax Act).

This restriction of taxpayer status concerns foreign nationals who work for a diplomatic mission or a comparable representation or for an office of a career consul. In addition, it concerns foreign nationals in Finland working for the United Nations, its special organizations or for the International Atomic Energy Association. By further extension, under an ordinance by the Ministry of Finance and the Ministry for Foreign Affairs, a number of other important international organizations and bodies are added to the list of exemptions.

The family members of the foreign nationals referred to above are also concerned by the rule, including their private servants on the condition that they are not Finnish citizens.

3.10 Members of governing bodies of corporate entities

It is regarded as Finnish-sourced income if you are paid a fee for being a member of the Board of Directors or of another governing body in a Finnish corporate entity. The place where you work in this capacity may be Finland or any foreign country (§ 10.4a, Income Tax Act). Finland is the country of taxation for any fees paid to the members of these bodies or boards regardless of whether its meetings were held in Finland or in foreign countries and even in the case when the member-beneficiary is a resident of a foreign country. This rule also concerns any compensation paid to the members in the form of corporate stock options.

Finland's taxing rights of these fees are usually not restricted by the provisions of tax treaties. However, an exception from this is the treaty between Finland and the U.S.A. Its provisions do not contain specific references to the receipts of fees by board members etc.; instead, the provisions on wage income apply to the fees in this case. For this reason, the fees cannot usually be taxed in Finland unless the place where work is done is Finland.

If you are paid a fee for being a member of a board etc., it is subject to source tax at the 35-percent rate (§ 3 and § 7, Act on the Taxation of Nonresidents' Income). The amount taxed is the gross amount, i.e. the receipts of fees don't entitle you to the conventional 510-euro and 17-euro deductions (§ 6.2, Act on the Taxation of Nonresidents' Income).

As an exception to the above, people residing in EEA countries or other countries that have signed a tax treaty with Finland may be taxed under the progressive income-tax scheme (§ 13, Act on the Taxation of Nonresidents' Income) with respect to all receipts of earned income including any fees of board members etc.

4 Social security and insuring

4.1 General remarks on the insuring of workers and on the health insurance contribution required of employers

The provisions governing medical insurance are laid down in Health Insurance Act (sairausvakuutuslaki 1224/2004, abbreviated as SVL) and the Act governing the implementation of social insurance (1573/1993). The rules on the payment of contributions are laid down by Health Insurance Act. The insurance coverage in Finland is either based on being a resident or on being employed to work in Finland.

A worker arriving to Finland in order to be employed by a Finnish employer is almost always entitled to coverage immediately when relocating to Finland, if this is intended as a permanent relocation, or if he or she works in Finland for at least four months. For purposes of calculation, the cut-off date for the four months is not affected by the quantity of days worked during the first, second, third and fourth month of presence.

The provisions governing the obligation of employers to pay health insurance contributions are laid down in Act no 771/2016 governing the required medical insurance. If the worker is insured in this country within the meaning of Health Insurance Act, the employer must pay a contribution, called "the health insurance contribution", to the Tax Administration.

The health insurance (contributions consisting of an earned-income part and a healthcare premium) is either included in the withholding rate or added to the source-tax rate of withholding. When the income serving as the base is taxable within the source-tax regime, both the health insurance contribution and the medical-insurance premium of the insured are paid on the gross amount from which the 'source tax deduction' is not yet subtracted.

Employers must additionally pay pension insurance (for ages 17 to 67 years), unemployment insurance (for ages 17 to 64 years) and accident insurance premiums. They may also have to withhold an amount of money on their workers' pay in order to cover pension and unemployment insurance payments. It is the employer's obligation to pay the premiums on to insurance companies.

The Commission Regulation (EU) 883/2004 and Finland's international conventions on social security may limit the collection of the above.

Contributions and premiums listed above do not have to be paid if

• An individual arriving from an EU/EEA country or Switzerland presents an A1 or E101 Certificate to the employer (or presents a similar certificate from a country that has signed a convention with Finland).
• A decision of the Social Insurance Institution is presented proving that the individual is not covered by the Finnish residence-based social insurance.

If the pay of the individual who has arrived from a foreign country is below the minimum agreed by a collective labour agreement or if no such agreement is applicable, stays below €1,189 per month or the hours are below 18 a week, he or she is not covered by the Finnish social insurance for work-related reasons. The employer is then not required to pay the health insurance contribution and withhold a health insurance payment on the individual's pay.

With regard to their workers who travel when doing their work, a Finnish transport company, shipping company or airline may have additional obligations to pay insurance even in circumstances where a foreign-resident employee works in a foreign country.

However, when a worker is covered by the social security system of a foreign country, payments of insurance premiums and other charges must be taken care of as required by the country concerned.

For more information on insurance, contact:

• The Finnish Centre for Pensions and pension insurance companies;
• The Unemployment Insurance Fund;
• Accident insurance companies and their Association;
• The Social Insurance Institution, Kela.

Fees paid to sportsmen are not subject to health insurance contributions. For other exceptions, see table below.

Työnantajan sairausvakuutusmaksun ja vakuutetun sairausvakuutusmaksun määräytyminen ja verotus 2017 taulukkomuodossa (only in Finnish and Swedish)

Sosiaalivakuutusmaksut vuonna 2017 (st-maksu, minipidätys yms.) (only in Finnish and Swedish)

4.2 Health insurance contribution paid retroactively

If an individual's work was originally planned as being completed in less than four months but it turns out later that he or she will continue to stay and work for full 4 months or longer, the employer's and the worker's shares of the health insurance contribution must be paid retroactively (for more information, see the Tax Administration's guidance no A54/200/2013 (available in Finnish and in Swedish)).

In this case, the employer must file a replacement tax return in order to make corrections to the employer's tax returns filed for the first months. We recommend contacting the Tax Administration.

An exception from the above is a situation where the worker was originally supposed to work for less than four months but continues working in Finland and moves on to work for another Finnish employer. In this situation, his or her employer does not have to pay health insurance retroactively. Even in this case, the employee's share of the health insurance contribution must be paid retroactively.

If the employer has not withheld the health insurance contribution retroactively, the non-resident taxpayer must report it on their income tax return so that it is imposed for the whole duration of work.

5 The employer's obligations and procedure

5.1 Amounts paid to a nonresident

5.1.1 Accounting records and other record-keeping

Under the provisions of § 2 of the Government Decree on the Taxation of Nonresidents' Income (29.12.2005/1228, LähdeVA), the payers who must withhold tax at source are required to enter the payments into an accounting system or keep other comparable records of them. Payers must follow the rules and provisions laid down by the Prepayment Act that concern Finnish resident beneficiaries.

Payers must maintain a general list entering the following information on each beneficiary of wage income:

• Full name, occupation/profession, tax registration number (if any) in the country of residence, date of birth, addresses both in Finland and the country of residence;
• Rates of source-tax withholding, separately for each Type of Payment;
• Pay period;
• Amount paid in cash as wages/salary or as other payment type;
• Cash equivalent value of any fringe benefits given to the beneficiary;
• Deductions either based on a tax treaty or on the provision of § 6, Act on the Taxation of Nonresidents' Income (= the 'source tax deduction');
• Amount serving as the base for the withholding;
• The withheld tax at source;
• The amounts withheld on the beneficiary's income in order to cover health insurance, pension and unemployment insurance, and
• Amounts paid as reimbursement of travel expenses and out-of-pocket expenses for which documentation was presented.

5.1.2 Paying withheld tax at source to the tax office

Payers who withhold tax at source must pay it on to the tax office by the 12th day of the following calendar month. For further guidance, see Filing and paying self-assessed taxes.

Employers must complete Self-Assessed Tax Returns giving details of the amounts paid, tax withheld at source, and paid health insurance contributions. The due date of this tax return is also the 12th day of the following calendar month. You are required to file it electronically.

If the worker has shown you a nonresident's tax card, read further instructions on how to fill out the Self-Assessed Tax Return form, especially on what should be reported as employer's contributions.

Read more about filing employer's contributions.

Tax at source must be withheld in amounts rounded out to exact figures of euros and cents. However, if the total amount you are paying to the beneficiary in the course of a calendar month is so low that the withheld source tax would stay below ten euros, you do not have to carry out the withholding at all (under § 9.3, Act on the Taxation of Nonresident's Income). In these circumstances, if you are a non-regular employer (= a casual employer), you also don't have to pay the employer's health insurance contribution.

Under § 9, subsection 3, Prepayment Act, there is no need for a household employer to withhold tax on the wages paid to one worker during one calendar year if the amount stays below the threshold (set in the relevant Decree) or if the payment is not connected to a business or other comparable activity of the household. However, this provision is not applied on the wages paid to a nonresident worker, as the pay is subject to tax at source under § 3, Act on the Taxation of Nonresident's Income, even though the wages do not reach the threshold defined by the Decree.

5.1.3 Preparing the certificates distributed to beneficiaries

Payers are required to hand out a certificate to beneficiaries (§ 5, Decree on the Taxation of Nonresidents' Income). It must at least have the following information printed on it: beneficiary's name, amount paid, category or type of payment, year of payment, amounts of withheld tax, insurance contributions, and your name. We recommend using English. This facilitates any administrative processes in foreign countries, for example, if the authorities of the beneficiary's country of residence were to give credit for the Finnish-paid taxes. We also recommend informing your worker (or other beneficiary) that they should keep their certificates in storage because they might have to enclose them with the income tax return they submit to the tax authority of their country. Click the link below to see a model certificate.

Certificate on final tax in Finland / remuneration for work (6171)

5.1.4 Description of the information to be reported annually

Payments, such as wages and trade income paid to a non-resident taxpayer must be reported in an annual information return either electronically or on form 7809e.

If you paid wages, nonwage compensation for work, or other amounts of money to a nonresident, you must file Form 7809e, the Annual Information Return on payments made to nonresidents. Under the Tax Administration's official decision on the information-reporting requirement, a household employer is not required to submit an Employer Payroll Report if the amount paid to one worker stays below €200 during the calendar year. However, the official decision contains separate provisions on the Employer Payroll Reports that concern the wages paid to nonresidents. There is no threshold in euros, which means that all payments of wages to nonresidents are subject to the annual information-reporting requirement so the report must be submitted.

The information you submit after the end of the year must also contain sufficient details for identifying the nonresident. For this reason, we emphasize that you must collect the personal data needed for identification on your workers (other beneficiaries) upfront, i.e. before making any payments to them. If the nonresident you are paying has presented a tax card to you, the sufficient personal details for identification are printed on the card (either a tax-at-source card or a nonresident's card).

If they have not shown a tax card, you must use other means in order to gather their personal details. The required details permitting identification are full name, address, their Tax Identification Number, TIN, in their country of residence (if issued), date of birth or a Finnish personal identity code (the last two requirements concern natural persons only).

If you as the payer don't succeed in gathering the beneficiary's details on their address in country of residence and date of birth (in the case of a natural person), you must always withhold the source tax without implementing any deductions or exemptions based on a tax treaty. The reason for this is that if the details about the beneficiary's identity are incomplete, it is deemed that his or her facts remain unclear: it is not certain that he lives in a foreign country and has the right to enjoy the benefits offered by the treaty.

If your worker (other beneficiary) gives you the details after you have paid them, you have the opportunity, within the same year, to adjust the amount withheld by making a correction on the worker's next payday (next date when the other beneficiary is paid). However, if no such adjustment is made, the worker (or other beneficiary) may ask the Tax Administration to reimburse the excessively withheld tax at source (under § 11.2, Act on the Taxation of Nonresidents' Income. For more information, see section 2.1.2 of this guidance).

Annual notification For payments to persons with limited tax liability in Finland (7809e)

For more information read How to file annual information returns - companies and organisations

Further guidance on annual information reporting and payments (in Finnish; in Swedish): Työnantajan sairausvakuutusmaksun ja vakuutetun sairausvakuutusmaksun määräytyminen ja verotus 2017 taulukkomuodossa

5.1.5 Responsibilities of the party obliged to withhold tax at source

If a payer who must withhold source tax has failed to do so, the unpaid amount is invoiced afterwards (§ 8.1, Act on the Taxation of Nonresidents' Income; § 38.1, Prepayment Act. If you withheld an amount that should have been a source tax (=lähdevero, källskatt) but you reported and paid it on as an ordinary withholding, the tax office will accept it as a partial payment of your source-tax liability (§ 11.1, Act on the Taxation of Nonresidents' Income). In these circumstances, the tax office calculates a late-payment interest on the difference between the source tax that you failed to withhold and the ordinary withholding you carried out.

The payer who must withhold source tax must also pay up the full amount also in a situation where they have implemented a tax-treaty provision incorrectly (and carried out no withholding because of that). The payer's interests are protected, in terms of having proven the payer's bona fide (good faith), by the fact that the worker has presented their tax-at-source card.

5.1.6 Fringe benefits instead of cash wages

Sometimes the withholding of source tax cannot be carried out because employers only give fringe benefits to their workers instead of paying them in cash. The benefit payor must report the taxable benefit on the annual information report of non-resident taxpayers and pay employer's social security contribution for the benefit (for more information, see section 4 of this guidance with the descriptions of when no health insurance payment is required).

The worker must report the received income in the form of fringe benefits on their tax return the following year in May, if the income is not shown on their pre-completed tax return (§1,Tax Administration's decision on details to be given on tax return). After this, the Tax Administration imposes tax at source for the employee.

However, these obligations are not in force in circumstances where the worker's work effort in Finland is not regarded as being in the service of the party who gave the fringe benefit, and the expenses associated with the fringe benefits are not entered in the accounting system of the party who gave the fringe benefit; instead the expenses are billed on and covered by a foreign employer company that the worker works for.

5.1.7 Too small amount of tax withholding at source

If the payer has not withheld enough tax at source, they have the opportunity, during the same calendar year, to adjust it by withholding more when making the following payments. However, the payer must ask for the beneficiary's consent for increasing the amount withheld by more than 10% of the total amount being paid at the time (§ 19, Prepayment Act).

5.2 Amounts paid to a resident

If the individual arriving in Finland to work here is treated as a resident, fully liable to Finnish tax, it is the employer's obligation to follow the same reporting and payment procedures as is customary for other people who live in Finland and are Finnish residents.

For more information, see Being an employer.

5.2.1 Fringe benefits instead of cash wages

Sometimes the employer cannot carry out withholding because they only give fringe benefits to their workers instead of paying them in cash. In these circum-stances, the party giving the fringe benefit must report it on an Employer Payroll Report and pay the employer's health insurance contribution.

The fringe benefit is regarded as taxable income for the beneficiary also in these circumstances. Either the party giving the benefit or the worker should contact the Tax Administration and ask for a calculation of income-tax prepayments. Paying the prepayments in the course of the year lets the worker avoid back taxes and the ensuing late-payment interest. The Tax Administration will also ascertain whether the worker must additionally pay Finnish income-tax prepayments on any foreign-sourced wages he or she receives. As an alternative, it is permissible for the worker to pay up the taxes on the fringe benefits in the form of back taxes or in the form of a supplementary prepayment. Supplementary prepayments cannot however be made after 31 October 2018; instead, tax prepayment is to be applied for.

In exceptional circumstances it may be that the worker does not perform work in the service of the party giving the fringe benefit at all; instead, he or she only works in the service of their foreign employer company. In this case, if the party giving the fringe benefits passes on the expenses associated with them to a foreign company by issuing invoices to it, the tax office will consider the fringe benefits as being given by the foreign employer company instead. Then the Finnish business is not under the obligation to pay the employer's health insurance contribution. However, in its capacity as a 'substitute payer' (sijaismaksaja; ställföreträdande betalare), the Finnish business is the party with the obligation to submit an Employer Payroll Report to the Finnish Tax Administration.

5.2.2 Cash wages and a 'substitute payer'

If an individual who works for a foreign employer gets paid by a Finnish business for the work he or she does in Finland, the Finnish business is regarded as a 'substitute payer' (sijaismaksaja; ställföreträdande betalare) and must therefore carry out tax withholding and file an Employer Payroll Report. However, such a payer does not have to pay the employer's health insurance contribution. The worker must ask the Tax Administration for a tax card. When the request for the card is being processed, the Tax Administration will also check whether the tax treaty in force has an impact on the worker's taxes.

If the wage expense remains with the Finnish business and is booked as a cost in its profit-and-loss account, that business will become the party deemed as the worker's employer and must accordingly fulfil all the employer's obligations relating to taxation.

5.2.3 Tax withheld at source during the first months

If an individual has been present for more than six months, he or she is treated as a tax resident of Finland. This means that his employer (or other payer) must only submit an Employer Payroll Report on Form 7801e to the Tax Administration. This filing must be made even if the individual's pay had during the first months of stay been subject to the withholding of tax at source. This procedure must be followed in order to ascertain that the Finnish Tax Administration can receive correct, up-to-date information on the income and taxation for pre-printing it on the worker's Pre-Completed Tax Return form. Form 7809e, which is intended for nonresident workers or beneficiaries, must not be submitted at all.

Read more about filing a payroll report: Annual information return -Employer payroll report.

6 Working in Finland for a foreign employer

6.1 Amounts paid to a nonresident

If an individual is treated as being a nonresident in Finland under the provisions of Income Tax Act and the employer is domiciled in a foreign country, the pay is not taxed in Finland. In these circumstances, the individual concerned must only complete a tax return and pay taxes in his or her country of residence.

However, a foreign company that has a permanent establishment in Finland is comparable to a Finnish employer. Examples of what constitutes a permanent establishment include a long-term building project, an installation job, an assembly operation. It is in the jurisdiction of the Finnish Tax Administration to decide whether a foreign company is treated as having a permanent establishment: Employers that are domiciled in a foreign country but are treated as having a permanent establishment in Finland are employers from which any payments of wages or salaries are taxed in Finland.

If a leased employee is in question, coming from a listed country — see the countries listed in section 3.2 of this guidance — or coming from a non-tax-treaty country, Finland may always impose tax the wage income. Finland may tax the wages of the leased employee even if the payer were a foreign employer with no permanent establishment (for more information, see section 3.2 of this guidance).

If the foreign employer company - i.e. the leasing agent - does not have a permanent establishment, it does not have to withhold tax on the wages nor pay it on to the Finnish tax authority. In this case, the nonresident leased employee must ask for an official calculation for tax prepayments by the end of the calendar month that follows the month when he or she started work (under § 16a, Act on the Taxation of Nonresidents' Income). To request a calculation of prepayments, to ask for a tax card, for a tax-at-source card, or for a nonresident's card, the form to use is Form 5057e "Application for a nonresident taxpayer's tax-at-source card, prepayment calculation, tax card".

6.2 Amounts paid to a resident

If the individual arriving in Finland to work here is treated as a resident, fully liable to Finnish tax, he or she pays tax to Finland on the wage income received. The country of the employer (Finnish or foreign) has no significance. If the employer is not Finnish, the payments of wage income made by such an employer are not taxed in Finland during a year when all the following conditions are fulfilled:

1. the recipient is present for a period not exceeding 183 days either in any 12-month period or, depending on the provisions of the tax treaty con-cerned, not exceeding 183 days within one particular calendar year, and
2. the employer is not treated as having a permanent establishment in Finland, and
3. under the provisions of the tax treaty, the recipient's country of residence continues to be the original country where he or she is a resident, also for "treaty purposes".

If the employer is domiciled in a foreign country and is not treated as having a permanent establishment in Finland, there is no requirement to withhold tax on the pay and remit it to the Finnish Tax Administration. In this case we recommend that the worker contact the Tax Administration and asks for an income-tax prepayment calculation so that there will not be an invoice for back taxes and late-payment interest after the tax assessment is completed. The form to fill out for requesting the calculation is Form 5042e — Application for a tax card or prepayment calculation.

The income-tax prepayment scheme requires that the worker must have a Finnish personal identity code. The form to fill out for requesting the identity code is Form 6150e, which must be submitted to a tax office that deals with registrations.

More information on getting a personal identity code.

Workers who are treated as Finnish residents have the obligation to file a Finnish tax return after the year is over. Generally the country of tax residence is also interested in collecting tax on all the income of its residents, applying the provisions of its own legislation. It is the country of residence that implements the procedures of eliminating double taxation.

6.2.1 What is required of the employer

If the foreign company is not treated as having a permanent establishment in Finland, it is not concerned by the employers' usual obligation to withhold tax when paying out wages. Similarly, it is not required to pay the employer's health insurance contribution.

Foreign employers are entitled to seek registration on a voluntary basis. Then their obligations are the same as those of a Finnish employer. Nonresident workers in Finland must pay Finnish tax on their income, including wage income, if the work is entirely or mainly done for an employer treated as a Finnish employer (under § 10.4, Income Tax Act). However, if the employer is foreign and treated as having no permanent establishment, they are not a "Finnish employer" within the meaning of Income Tax Act although they may have a valid registration in the Finnish Register of Employers.

Consequently, foreign employers with no permanent establishment in Finland are not required to withhold tax at source on the wages they pay to nonresident workers, and not required to file Employer Payroll Reports to the Tax Adminis-tration. Employee leasing, discussed above in the 3.2 section, constitutes an exception from this rule.

If workers remain present in Finland for longer than six months, the information-reporting requirement associated with the filing of an Employer Payroll Report is always in force (Form 7801e). The report must cover the work done in Finland. If the foreign employer company provides leasing contracts, sending its employees to work in Finland as leased employees, it must file an annual notification for payments to persons with limited tax liability in Finland, (Form 7809e) for the nonresident workers on its payroll (under §15a, subsection 2, Act on Assessment Procedure). Companies are not required to register in Finland in order to file the annual information report.

Whenever the workers have not presented an A1 or E101 Certificate, the foreign employer must make arrangements with a Finnish insurance company to obtain the mandatory pension coverage. However, the employer does not have to do so if the worker is a 'posted employee' from a country that has not signed a convention with Finland on social security, staying for two years maximum. Similarly, the employer does not have to do so if the Finnish Centre for Pensions has given a Decision of exemption.

Employers and workers may in some circumstances have signed mutual agreements on having the worker contact the insurance companies and buy the insurance on the employer's behalf. However, in this case it is required that the contracts are made in the employer's name, not the worker's. The worker is only entitled to the tax deductions that concern the worker's shares of the paid insurance premiums.

For more information, contact the Finnish Centre for Pensions and Finnish pension insurance companies.

For more information, see Obligations of a foreign employer