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 recent changes in a number of Finnish tax rules, in effect as of 1 January 2021.

New text was added to 3.1 (Foreign key employees). This chapter is now broken down to two subchapters. A more elaborate definition of ‘income from a source in Finland’ was added.

Two new chapters were added: 5.1.8 (The payor has withheld tax at source on an item of income not subject to tax) and 5.1.9 (Nonresident taxpayers working outside Finland).

1 Introduction

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.

An individual who arrives in Finland to work is treated either as a resident, fully liable to tax, or as a nonresident taxpayer having a restricted liability to taxation. Pursuant to section 11(1) of the act on income taxation (tuloverolaki 1992/1535, the Income Tax Act), residents include individuals who live in Finland and individuals who live in other countries but are present in Finland for longer than six months. Nonresidents are those who have not stayed in Finland during the tax year or have only stayed for a shorter period. For more information, see the Tax Administration’s guidance on tax residency, nonresidency, and residency in a contracting state for purposes of the tax treaty (full name in Finnish: Yleinen ja rajoitettu verovelvollisuus sekä verosopimuksen mukainen asuminen - luonnolliset henkilöt) — Tax residency and nonresidency

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.

The first part focuses on situations where the payor of wages is a Finnish employer. In chapter 6 at the final part of the guidance, the payor 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. The actual working time during the pay period determines whether more than half of the work is considered to have been done in Finland. If the working time varies from day to day, the actual work hours may be counted to determine whether the work has been done mostly in Finland.

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 payor, to be followed when determining the amount to be withheld.  If you arrive in Finland, are going to receive income, 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 requirement that the card must be marked with a relevant entry also applies on the tax-relief deductions granted to teachers and students (subject to certain restrictions).

If you, as the worker, 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 payroll reporting to the Incomes Register. These details include your date of birth, your address in your country, your personal identity number in that country or your Tax Identification Number.

Your employer or other payor must give details to the Incomes Register on all the payments and hand you a pay slip.  To do so, employers and other payors must ask their workers (and beneficiaries) to inform them of their Tax Identification Numbers, TIN, issued in the foreign country where they are residents. For more information on the information-reporting requirement, see Reporting data to the Incomes Register: international situations.

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 presents 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 the payor made no such adjustment, 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, interest and royalties).

It may be that the employer has withheld as much as 60 percent because the worker failed to present a card.  If they do present a tax-at-source card to the employer later, the employer has the opportunity to adjust the amount. The employer must additionally re-classify the amount withheld from ordinary with­holding to tax withheld at source. The employer must file a replacement report for this purpose, to overwrite their previously submitted earnings payment report.If the payor does not adjust the withheld amount, the worker may turn to the Tax Administration to submit a request for reimbursement.

If the employer should have withheld tax at source (including the health insurance contribution) but has not done so and cannot correct the matter, the employee must report their income so that tax at source can be imposed. This is described in more detail in section 4.2.

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 nonresident 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.  

The payors of trade income must withhold tax at source on the amounts they pay out – unless the beneficiary is on the prepayment register or shows a tax-at-source card to the payor – when that amount is paid in compensation for construction work, assembly or installation work, on a project carried out in Finland or primarily in Finland; for transportation services, and for work related to cleaning, nurse service or medical treatment (§ 10e.2 of the act on the taxation of nonresidents’ income).

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 to the Incomes Register on the earnings payment report – regardless of whether tax is withheld at source. For purposes of reporting, the payor must receive the beneficiary's details such as date of birth, address and Tax Identification Number in the 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 is on the Prepayment Register. For more information on the tax treatment of nonresidents who work in Finland or pursue other activities in Finland, see the following guidance:

Paying nonwage compensation to a foreign company

"Taxation of foreign operators of a trade or business" — Ulkomaisen liikkeen- ja ammatinharjoittajan tuloverotus Suomessa (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 make a demand for 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 a Demand for progressive tax treatment of earned income. When you make the demand, 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).

In reference to the above, items of income from sources outside of Finland include the income on which you must pay tax to your country of residence, be it sourced to your country of residence or to a third country.

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 submit the form 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 submit 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 payors) must file earnings payment reports 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 certificate showing that your country of residence will continue your social security coverage while you work in Finland. Similarly, they do not have to pay it in circumstances where people arriving in Finland have received a decision of the Social Insurance Institution of Finland on a residence-based benefit or the Kela card stating that they are not entitled to Finland's residence-based social security benefits (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.

2.6 Treatment of reimbursement paid to workers who move house

The expenses caused by relocation to another town, city or country are generally regarded as living expenses that the worker must pay independently and no tax-free reimbursement from the employer has been possible. However, under § 69 c of the act on income tax, employer-provided reimbursement for moving expenses and related travel is exemptible to 50 percent; and this includes the expenses of the worker and his or her family members. The 50-percent exemption requires that the relocation is entirely due to the fact that the place where the worker is going to work is so far away that it is necessary to move house. In accordance with the text of the Finnish government’s proposal to the parliament (no HE 24/2019), all situations where an individual arrives in Finland to work here would be exemptible.

Within the meaning of the new provisions in 69 c, relevant expenses are expenses directly related to the relocation such as packing, unpacking, and transportation. Correspondingly, the exemptible travel expenses are the trips made between the old and the new home, because they are directly linked to the relocation.

It is further required that the employer make the payments directly to the providers of relocation services. If the employer were to give an amount of money directly to the worker for covering their upcoming moving expenses, it would be taxed as a payment of wages. However, if the worker presents an invoice or receipt proving that a direct expense has been paid, it is allowed that the employer covers it and 50% of such a coverage is exempt from tax. Documents, receipts and vouchers must in that case become part of the employer’s bookkeeping.

The new provisions of § 69 c only govern the situation where an employer is paying for actual expenses. The new provisions do not mean that an extended deduction would have been granted for paid expenses in connection with relocation and travel in cases where the worker pays them. These expenses continue to be treated as non-deductible living expenses even if the worker moves house in order to start living in a new location – or another country – when an employment contract begins. The above expenses are non-deductible living expenses also when the worker moves house during an ongoing employment, on his or her initiative, to start living in a new place or in another country.

Under the established practice of tax assessment, and in accordance with case-law, if the worker has moved house to come nearer to the location of the place of work because the employer has given orders to do so, or because the move has ensured that the worker can keep his/her job, employers have been able to pay the reimbursement exempt from tax. In the same way, the Central Tax Board has agreed in its ruling no 10/2006 that receipts by a worker of reimbursement of expenses were not considered earned income subject to tax because the relocation had been due to the worker’s compliance with his employer’s orders. The new provisions of § 69 c do not concern the above. In circumstances described above, if the employer pays no reimbursement, workers continue to have the right to claim their relocation costs as expenses for the production of income in their personal income taxation.

3 Special groups

3.1 Foreign key employees

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 32-percent rate.

The requirements for applying the provisions of Act 1551/1995 are:

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 Act no 1551/1995 can only be applied on an individual who has become a Finnish resident for tax purposes. A person is regarded as a resident when they have a regular residence and home in Finland or if they continue to reside in this country for a period of more than six months (§ 11, act on income tax). The period of stay is regarded as continuous in spite of any temporary absence from the country.

The provisions of the Act are applicable on wages that under the act on income tax are from a Finnish source. This requires that the work is done in Finland only, or mainly done here, for an employer based in Finland (§ 10.4, act on income tax).  However, in contrast with the above, the following circumstances make the income treated as being sourced to Finland even if the work was not done in Finland or mainly done in Finland:

• The wages were received from the State of Finland, a Finnish municipal entity or other public entity (§ 10.3 of the act on income tax)
• The fee is paid to an individual who is a a member of the Board of Directors or of another governing body in a Finnish corporate entity (§ 10.4a of the act on income tax)
• The wages were paid by a foreign employer for work performed in Finland, and the foreign employer had leased out the worker to a service-recipient company in Finland under an employee-leasing contract (§ 10.4c of the act on income tax)

In order to ascertain the place where work is done, i.e. whether or not an individual’s work has mainly been performed in Finland, the authorities look into the circumstances that prevail during each specific tax year. Because key employees have a resident taxpayer status, they are generally liable to pay Finnish tax on any income that they have received relating to work they have performed outside of Finland. For this reason, there is a difference in how often the tax authorities examine the place where the key employee mainly works compared to the treatment of nonresident individuals, because for nonresidents, the place where work is done must be established separately for every pay period (for more information, see section 2.1 of this guidance).

Under current case-law (ruling no 2943 of the Supreme Administrative Court of 11 November 2005), the provisions of the Act governing key employees, where they refer to “an employer based in Finland”, also apply to payments made by a Finnish service provider on a foreign employer's behalf. (Typically "a Finnish service provider" is an accounting firm.)

3.1.2 Description of the practical process of key employees' taxation at source

The source tax is collected as a final tax; the employer withholds an amount from the paid wages and pays it on to the Finnish Tax Administration. No medical insurance premium of the insured person 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.

Applicants for foreign key employees' treatment must ask the Tax Administration to issue them a special tax card in 90 days from their first day of working as a key employee within the meaning of the Act. 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 during the first months of the tax year, an individual only earns the income of a key employee, and later during the year, at a stage when the individual’s status as a key employee is no longer effective, receives other earned income, the amount received as a key employee will not have any impact on the income tax rate to be applied on the other earned income received later.

If the foreign individual 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 to 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.

If the key employee has presented a tax card to the employer and the employer has withheld tax at source following the instruction on the card, even if the requirements listed above had not been met, the legal statutes on income tax assessment in domestic circumstances must be applied on the entire period when the individual works (as provided in § 5 of the Act governing key employees). In this case, the amounts that the employer had withheld as tax at source are counted towards the individual taxpayer’s assessment for the year, so that they are treated the same as domestic amounts withheld, under Prepayment Act, or the amounts may be treated as tax at source within the meaning of the act on the taxation of nonresidents' income (Laki rajoitetusti verovelvollisen tulon verottamisesta 627/1978).

If the tax card issued to a key employee continues to be in force but the individual’s tax status changes from resident to non-resident, after that the individual’s tax treatment is based on the act on the taxation of nonresidents' income, starting the day when the status had changed. In this case, the tax authority will not change the taxation that relates to the period when the individual was treated as a key employee and the status was that of a resident.

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 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 foreign 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. This requires that the individual has been, just before arriving, a tax resident for treaty purposes of the country where he or she comes from. Under the provisions that lay down the conditions of the exemption, 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 Egypt and Finland, under which the teacher or researcher must be a resident of the country where he or she comes from 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 institution of higher education located in the country concerned. 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 period and the start of the next. The circumstances prevailing at the time when the individual’s presence in Finland begins are considered important when Finnish authorities evaluate whether the presence in Finland is for teaching or for scientific research work.

Some treaties contain a restriction that makes it necessary for the teacher or researcher to have received an invitation, and that 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.

In 2019, the treaties with France, the United Kingdom, Egypt, Morocco, Japan and Korea provide for exemptions.  

• 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. In addition, the teacher or researcher must, for treaty purposes, be a resident of Egypt also during the stay in Finland.
• 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. For example, such a certificate can be a completely filled-out Form 6159e of the Finnish Tax Administration: British teachers /Certificate of residence and tax liability for the use of Finnish tax authorities.
• 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.
• Morocco: Maximum length of stay is two years. The exemption is only granted to people whom a the State of Finland, a Finnish university or institution of education, or another nonprofit institution for the promotion of culture has invited, and only the income from research work is exempted.

For the above countries, 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.

• Korea: Maximum length of stay is five years, and only the income from research work is exempted.
• France: Exemption is granted to a researcher or teacher for the first two years, even if the total duration of stay in Finland is longer.

The above is a brief overview of the provisions in Finland’s tax treaties. For specific instructions on the tax treatment of teachers and researchers, check the relevant treaty text and provisions.

For more information, see the “Taxation of people working for higher education institutions – international situations” guidance.

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 €726.27 per month (in 2021), 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.

However, if the individual starts living in Finland on a permanent basis, 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 on a residence-based benefit or the Kela card stating that they are not entitled to the benefits of 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 17 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

Nonresident performing artists 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 performance, given in person, in Finland. 

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 artist management business, and although the payment arriving to the artist actually is made by the foreign manager.

"Artists" in this meaning exclude professionals such as a drama directors of a theatre, choreographers, theatrical set decorators. 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

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. The rules laid down in § 13 apply on all work done on board of a vessel or aircraft, and on all work performed elsewhere when that work is closely related to the work done on board of the vessel or aircraft. 'Finnish ship or aircraft' also includes a leased foreign ship or aircraft if the Finnish employer is leasing 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 a Demand for progressive tax treatment of earned income. 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 a Demand for progressive tax treatment of earned income. 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.

For more information, see Taxation of cross-border commuters.

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.

For the restriction in § 12 of the act on income tax to apply, it is required that the employee working for the diplomatic representation is not a Finnish citizen. From this, it follows that the restriction also applies if the employee is a citizen of a third country, i.e. some other country than the country that owns the diplomatic representation

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 employer's responsibility to arrange for health insurance is controlled by the Health Insurance Act (1224/2004) and the act on residence-based social security in cross-border situations (Laki asumisperusteisesta sosiaaliturvasta rajat ylittävissä tilanteissa 16/2019). The rules for the payment of social security contributions are laid down in the Health Insurance Act. Health insurance coverage in Finland is based either on a resident status, or based on work done in Finland.  

An employee arriving in Finland will be covered by health insurance immediately after they have moved to Finland if the monthly pay they receive for their work in Finland per month, converted into monthly income, is equal to, or more than, the basic unemployment allowance according to the Unemployment Security Act (€726.27 in 2021). The monthly income is considered to include all the income received during a calendar month. The minimum income threshold is applied separately for each individual. If the conditions set for the work are not met, the individual may be entitled to Finnish health insurance coverage if they have moved here permanently. 

The work of a foreign individual in Finland may temporarily decrease, be interrupted or be terminated. If the individual has worked in Finland for at least six months in such a way that the condition for the monthly income has been met, they may retain their right to health insurance coverage in Finland for a further three months even if their pay does not exceed the minimum threshold in that three-month period. If the employee retains the health insurance coverage in Finland, the health insurance contribution must also be paid for the three-month period.

If the employee needs a residence permit according to the Aliens Act (301/2004), they may be able to retain the health insurance coverage for longer than three months, up until the expiry of the residence permit.

The healthcare contribution withheld from insured employees in 2021 is 0.68% of the earned income taxable in municipal taxation and of other payment criteria referred to in the Health Insurance Act (Gov. Decree, § 1, subsection 1). The daily allowance contribution withheld from wage-earners in 2021 is 1.36% of the wage income. However, the daily allowance contribution is not withheld from wage-earners whose annual wage income and business income in total is less than €14,766 (Health Insurance Act, § 18, section 15  (3); and Gov. Decree, § 2, subsection 1). If the earned income and business income in total is €14,766 or more, the daily allowance contribution is withheld from the entire income amount.

The employer's health insurance contribution is provided by the act on the employer's health insurance contribution (Laki työnantajan sairausvakuutus­maksusta 771/2016). In case the employee is covered by the Finnish health insurance system under the Health Insurance Act, the employer must pay the employer's health insurance contribution to the Tax Administration.  

An employee may receive income from several employers, and one employer does not necessarily know of the other employers and the wages they pay. The employer cannot be considered to have neglected the withholding of the daily-allowance part of the employee’s health insurance contribution if they cannot have known that the employee’s total income during the year exceeds €14,766. Further, the employer cannot be considered to have neglected payment of the healthcare part of the contribution, if the minimum income threshold (€726.27 per month), relating to health insurance, has been exceeded due to wages paid by other employers and the employer has had no knowledge of those wages.

The health insurance (contributions consisting of a part relating to daily allowances and of a part relating to healthcare) 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)
• if the employee presents a decision of rejection from the Social Insurance Institution of Finland (Kela) on their entitlement to the health insurance benefit or the Kela card.

Finland has a bilateral convention in force on social security with: the United States of America, Australia, Canada (and separately the province of Quebec), China, Chile, South Korea, India, and Israel. The conventions signed with the USA, Quebec and Israel are the only ones that contain provisions on health insurance premiums of the insured party and on the employer's social security contributions. The practice to follow with other countries than USA, Quebec and Israel is therefore the same as with countries that have no convention at all.

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.

4.2 Correcting the health insurance contribution

Sometimes it may at first seem that a foreign employee’s monthly income will not exceed the threshold (€726.27 in 2021) so that they would be insured in Finland based on work, and they are not insured based on residence, either. In this case, the employee’s health insurance contribution is not withheld from the wages, and the employer's health insurance contribution is not paid. However, the situation may change in such a way that the employee’s income per month exceeds the monthly threshold and they receive Finnish health insurance coverage based on work for the whole month.

If the employer should have withheld the employee’s health insurance contribution from a payment but has not done so, the employer may raise the rate of tax withheld at source from the following payments and thereby withhold the missing health insurance contribution (§ 8, act on the taxation of nonresidents' income (Laki rajoitetusti verovelvollisen tulon verottamisesta 627/1978) and § 19, act on tax prepayments (Ennakkoperintälaki 1118/1996)). However, the tax-at-source rate may not be raised by more than 10% without the employee’s consent. For resident taxpayers, the employee's health insurance contribution is included in the withholding rate.

If the situation changes and the employee receives health insurance coverage but the employer does not collect the health insurance contribution retroactively, a non-resident taxpayer must report their income to the Tax Administration so that tax at source could be imposed. They can report the income on Form 6220. The income reported must include only the income from which the health insurance contribution has not been withheld. However, if the situation is due to the employer’s neglect, the tax at source/health insurance contribution that has not been withheld will be imposed on the employer.

For correcting and reporting the employer's health insurance contribution, see Reporting data to the Incomes Register: international situations, section 3.6.3.)

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 section 8 of the Government Decree on the self-assess­ment procedure of taxation (1355/2016), the payors who must withhold tax at source and have the general obligation to make accounting must enter the payments into a payroll accounting ledger. If the payor is not under the obligation of accounting but must withhold tax at source, he or she must keep records of the amounts paid out that are subject to tax at source (under § 6, the Tax Adminis­tration’s decision on record-keeping – Verohallinnon päätös työnantajan ja suorituksen maksajan muistiinpanovelvollisuudesta 16.8.2017/564). The payroll accounting ledger and the kept records must contain sufficient specifications of the paid wages and other payments.

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 payment (for example: payments of wages, payments of trade income, payments of royalties);
• 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 (various categories), pension and unemployment insurance, and
• Amounts paid as per diem for travel and out-of-pocket expenses for which documentation was presented.

5.1.2 Paying withheld tax at source to the tax office

Payors 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 on how to pay it on, see instructions for filing and paying self-assessed taxes.

Employers must complete earnings payment reports for the Incomes Register, giving details of the amounts paid and tax withheld at source on the wages they have paid to nonresident workers. Employers must submit separate reports with details of the employer’s health insurance contribution. If the worker has shown you a nonresident's tax card, read further instructions on how to fill out the earnings payment report in the detailed guidance on Incomes Register reporting.  

Read more: Reporting data to the Incomes Register: international situations.

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.

If the employer has assumed that the employee is not covered by Finnish health insurance and has therefore not paid the employer's health insurance contribution and the situation then changes, the employer must file a replacement report to the Incomes Register and pay the contribution. This is described in section 4.2.

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 identity information for the earnings payment report

Payments, such as wages and trade income paid to a nonresident worker must be reported on the earnings payment report.

Your earnings payment reports 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 primary identifier of any worker or other beneficiary for purposes of Incomes Register reporting is the Finnish personal identity code. For foreign nationals, it is also required that you give their foreign-issued tax identification code or personal ID code. It is recommended that both identifiers be reported if they have both a Finnish and a foreign ID code.

If they do not have a Finnish personal identity code, indicate their date of birth, gender and address. You can inform the Incomes Register of their addresses in Finland and in the country of residence. For nonresidents, you must indicate the Tax Identification Number (TIN) of the country of residence if the TIN is in use in their country of residence, and the address.

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).

Read more:

Reporting data to the Incomes Register: international situations.

Reporting data to the Incomes Register: mandatory and complementary data on earnings payment reports

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; § 40.1, Act on the assessment procedure for self-assessed taxes (OVML 768/2016)). 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 (§ 51.4, Act on the assessment procedure for self-assessed taxes).  In these circumstances, the tax office imposes a tax increase 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 payor giving the fringe benefit must report this taxable benefit on the earnings payment report and pay the employer’s health insurance 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 worker.

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). 

5.1.8 The payor has withheld tax at source on an item of income not subject to tax

It may be that the payor has withheld tax at source although the amount paid to the beneficiary consists of income for which no tax is due. It may also be that the payor has withheld more than an international treaty has provided for, or there may be other errors.  The reason for the error may be that the worker did not obtain a tax-at-source card on time. For example, the worker gave the card to the employer when the wages (or other remuneration) were paid already.

If the payor withheld tax at source by mistake, to remedy the mistake, the payor can subtract the excessive withholding from future taxes at source. This requires that the beneficiary is going to receive more pay before the end of the calendar year.

If no further wages (or other remuneration) is due to the beneficiary during the year, the payor can send a refund of the withheld amount to the beneficiary before the calendar year ends.  However, after the year has ended, the payor is no longer in a position to put matters right; not by refunding, not by deducting nor otherwise.

However, if no such adjustment is made, the worker (or other beneficiary) may complete Form 6166 to ask the Tax Administration to reimburse the excessively withheld tax at source (under § 11.2 of the act on the taxation of nonresidents' income).

5.1.9 Nonresident taxpayers working outside Finland

When nonresidents perform work, which is entirely or primarily done in other countries than Finland, the general principle is that the nonresident individual is not liable to pay income tax to Finland. In that case, the nonresident’s Finnish employer is not required to withhold tax at source. If the employer can ascertain the worker’s status as a Finnish tax nonresident, there is no need for a tax-at-source card. However, even in these circumstances, the employer must submit reports to the Incomes Register as described above in 5.1.4, so the employer must collect the necessary information from the worker in order to prepare the reports.

The case where a Finnish public entity is paying wages to someone is an exception: these wages are treated as Finnish-source income regardless of the country where work is done. Even if you are a nonresident taxpayer in Finland, you are liable to pay Finnish income tax if you receive wages from a Finnish public entity. Wage earners must show their tax-at-source card to the payor in order for the payor to deduct the tax-at-source deduction before withholding (see 2.1.1 above). 

Correspondingly, under the provisions of the act on income tax, even if you are a nonresident, 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 payor must withhold 35% as tax at source on the fees. This is discussed in greater detail in 3.10 above.

However, Finland's right to tax may be limited by the tax treaties concluded with other countries. Under the clauses of many tax treaties, it is possible for payors to refrain from withholding taxes at source, or to withhold less than 35%, on the condition that the beneficiary presents the payor a document indicating his or her country of residence and an account that proves that all the other treaty requirements are fulfilled. To provide proof of the above facts and circumstances, the beneficiary can present his or her tax-at-source card. Alternatively, he or she can present their ID code, name, address in the country of residence (§ 10.1 of the act on the taxation of nonresidents' income).

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 circum­stances, the party giving the fringe benefit must report it on an earnings payment 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.

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 file earnings payment reports. Read more: Reporting data to the Incomes Register: payments made by substitute payer.

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 earnings payment reports. 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 The payor has withheld tax-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 starting on the day of arrival in Finland. During the first months of presence in Finland, it may be that the payor or employer had submitted earnings payment reports to the Incomes Register that indicated that the individual was a nonresident. In such a case, the payor must submit replacement reports for the first months to make a correction to his or her residency status.

If no exact end date of presence has been set, the employer can have withheld tax at source on the amounts paid to the individual.  If the individual stays longer than 6 months in Finland and has thus become a resident taxpayer, a report must be prepared to account for all the amounts paid to him or her, and for all the taxes withheld on the payments. Although the withholding has been called “tax at source” during the first months, the report must now combine the entire amount withheld as a sum total.

Read more about submitting a replacement: Reporting data to the Incomes Register: international situations.

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. The wages or salaries received from such a foreign company are subject to Finnish tax under the Income Tax Act if the work is done in Finland in its entirety, or if most of the work is done in Finland. In these circumstances, any wages paid to a nonresident worker are also subject to Finnish tax. The employer must withhold tax at source.

Foreign companies that do not have a permanent establishment (PE) can, on a voluntary basis, ask for registration as an employer. However, under the provisions of the Income Tax Act, such a foreign company with a valid registration in the Tax Administration's register of employers is not regarded as a Finnish employer within the meaning of the Act. For this reason, the wages or salaries received from the company are not considered income from a Finnish source under section 10, subsection 1, line 4 of the Income Tax Act, and if wages have been paid to a nonresident worker, they are not taxed in Finland.

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

If the foreign employer company – i.e. the foreign 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 “Non-resident's application for tax at source card, tax card, tax prepayment or tax number”.  Another option for requesting is to log in to MyTax if the nonresident has a Finnish personal identity code and is able to log in securely with e-bank security codes, a mobile certificate or a Katso ID.

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 con­cerned, 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 tax card, tax prepayment or tax number – current or former foreign residents.

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.

6.3 Employer obligations imposed on foreign companies in Finland

6.3.1 The employer is not treated as having a PE, and has no employer registration

Legal rules on the information-reporting requirements of foreign employers are found in § 15 a, act on assessment procedure. The provision on a foreign employer's obligation to report data to the Incomes Register is found in § 6, subsection 2 of the act on the income information system (Laki tulotietojärjestelmästä 53/2018). 

If the foreign company is not treated as having a permanent establishment in Finland or if it has not registered itself as an employer voluntarily, it does not have to withhold tax on the wages it pays to workers. Such an employer is not required to pay the employer’s health insurance contribution.

However, it is required to report information to the Incomes Register on people who are continuously present in Finland for more than six months. In practice, this information-reporting requirement makes it necessary to provide information on people who are treated as tax residents of Finland. The information-reporting requirement is related to work done in Finland.

In addition, foreign employers must report payroll data to Finnish authorities if the income earner works in Finland as a leased employee for a service recipient in Finland. This payroll data must be reported when the tax treaty between the employee’s country of residence and Finland allows Finland to impose taxes on the pay of leased employees, or when the country of residence has no tax treaty with Finland.

Foreign employers are also required to submit reports to the Incomes Register on any of their workers who have Finnish health insurance coverage.

If a worker’s pay period has contained days when he or she works in Finland along with days of work in other countries, the foreign employer must report information on the period’s entire pay for the Finnish authorities, not subtracting the part relating to work done in a foreign country.

For more information, see “Reporting data to the Incomes Register: international situations”.

6.3.2 The employer has a PE in Finland or a Finnish registration as an employer

Foreign employers that have a permanent establishment within the meaning of § 13a of the act on income taxes are treated the same as Finnish employers and entered in the Tax Administration’s register of employers.

Although an employer is not treated as having a PE in Finland, it may seek entry into the register on a voluntary basis. Foreign employers that have done so are not considered Finnish employers within the meaning of § 10, subsection 4 of the act on income taxes if they are not treated as having a PE.

When an employer is resident in a foreign country but has a PE in Finland, or a voluntary registration in the Finnish Tax Administration’s register of employers, it has the same obligations as a Finnish employer to withhold tax. Foreign employers with a PE in Finland must additionally pay the employer's health insurance contribution on the wages they pay to people covered by Finnish health insurance. Foreign companies registered in the Tax Administration’s register of employers due to their voluntary entry do not have to pay the employer’s health insurance contribution.

Such an employer must provide information to the Incomes Register on the wages paid out. This report must be submitted on the amounts paid due to work done in Finland. However, foreign employers that have voluntarily registered with the register of employers – or are treated as having a PE in Finland – do not have to report the wages paid to a nonresident individual for work performed abroad, or to report other income, not deemed to originate from a source in Finland under § 10 of the act on income tax. However, in contradistinction with the above, if the worker has Finnish health insurance coverage, the report must be submitted.

Such an employer must also withhold taxes on the wages it pays to a worker who is a Finnish tax resident and pay the amounts on to the Tax Administration.

If the employer pays wages to a nonresident worker, tax-at-source must be withheld if the wages are considered paid from a source in Finland. This means that an employer that does have a PE in Finland must withhold tax at source on its wages paid to nonresident workers if the work was done in Finland. However, a foreign employer that is on the register of employers on a voluntary basis only has to withhold tax at source on the wages it pays to leased employees.

More information: Reporting data to the Incomes Register: international situations (chapter 4).