Taxation of people working for higher education institutions – international situations

This is an unofficial translation. The official instruction is drafted in Finnish (Korkeakoulussa työskentelevien henkilöiden verotus kansainvälisissä tilanteissa, record number VH/6131/00.01.00/2023) and Swedish (Beskattning av högskoleanställda i internationella situationer, record number VH/6131/00.01.00/2023) languages.

This in-depth guide concerns the taxation of people working for universities of applied sciences and universities in international situations. Circumstances relating to their work may involve arriving in Finland from other countries, and vice versa, leaving Finland to work for a university elsewhere. Examples of income items include expert fees paid for work abroad and lecture fees. This guide also discusses the tax-treaty regulations concerning teachers and scientific researchers.  The instructions that concern academic researchers are also applicable to researchers who work outside of educational institutions, if the provisions of the relevant tax treaty make this possible. Section 5 below addresses the requirements for research institutes as outlined in different tax treaties, discussing these requirements in detail.

The guide has also been updated with information on how Finnish tax assessment takes account of the income, which the tax authorities of a foreign country have exempted in connection with teachers’ and researchers’ tax relief (section 3.3). In addition, several other minor updates have been added to the present version in order to provide more precise information.

1 Foreword

Often, the taxation of teachers and researchers coming to Finland and of those who leave Finland is dependent on the tax treaties that Finland has signed. Some treaties contain rules concerning teachers and scientific researchers under which the pay for teaching or scientific research work is exempt from tax in the country where the work is done.

This in-depth guide addresses the impact of both tax treaties and the provisions of national legislation on the tax treatment of teachers’ and researchers’ income. The guide covers the circumstances involving arrival in Finland and departure from Finland. In addition, we also address the questions of tax residency i.e. general liability to tax, nonresidency, and the provision of relief from double taxation.

For more information on employment in various cross-border situations and on the taxes related to it, see Taxation of income earned abroad and Taxation of employees from other countries. For the most part, these guides contain instructions that apply to work done for universities and universities of applied sciences.

2 The position of higher education institutions in income tax treaties 

In international employment situations, it is often important for tax purposes to determine whether or not the employer is treated as a public entity for tax purposes. Universities and universities of applied sciences as a limited liability company (or universities of applied sciences) are the kind of entities referred to in the Act on income tax (Tuloverolaki (1535/1992)) that are liable for paying tax on income from business activities (§ 21a and § 21b of the Act). The taxation of higher education institutions is discussed in more detail in Tax Administration guidance Tax guidance for higher education institutions (in Finnish and Swedish, link to Finnish).

Under the rules in force on income taxation, Finnish universities and universities of applied sciences are not public entities.

According to the Universities Act (558/2009), universities are either corporations under public law (public universities) or foundations governed by the Foundations Act.  According to the Ministry of Finance's statement of 25 November 2009 to the tax department of the Parliamentary Finance Committee (VM 084:00/2009), Finnish universities classified as legal persons in either of the above categories have not been treated as public entities for tax purposes since 1 January 2010.

Pursuant to the Universities of Applied Sciences Act (932/2014), Finnish universities of applied sciences falling within the remit of the Ministry of Education and Culture are legal entities in the form of limited liability companies (university of applied sciences as a limited liability company). A university of applied sciences as a limited liability company is not treated as a public entity for tax purposes even if it was owned by a local authority, a joint municipal authority, or another type of public entity. 

As a general rule, the concept of public entity is not defined in the tax agreements concluded by Finland. As a result, the definition for public entity is based on Finnish tax legislation. As Finnish universities and universities of applied sciences are not defined as public entities in Finnish tax legislation, they are also not treated as public entities for the purposes of tax treaties. As a result, the treaty article to be applied on the taxation of salaries paid by a Finnish university or university of applied sciences is the article concerning income from employment (OECD Model Tax Treaty, Article 15). 

By way of exception, in certain tax treaties, a university is defined as a public entity. As referred to in Article 3 of the treaty between Finland and Greece (in Finnish) (SopS 58/1981), all universities and similar institutions of higher education are treated as public entities for the purposes of the treaty. A university of applied sciences may be deemed to be a higher education institution referred to in the treaty. On the other hand, according to the protocols to the treaties that Finland has concluded with Australia (in Finnish) (SopS 91/2007) and Turkey (in Finnish) (SopS 49/2012), only the University of Helsinki is a public entity. Specifically for the purposes of these two treaties, the taxation of salaries paid by the University of Helsinki – and with Greece, also the salaries paid by other universities and universities of applied sciences – is, by way of exception, subject to the treaty provisions of the “public service” article (OECD Model Tax Treaty, Article 19).

It may also be that the national laws of a foreign country have laid down provisions that make an institution of higher education a public-sector entity in its country of location. Priority is given to the interpretation that prevails in the country concerned. To resolve the question of taxing rights in respect of wages and salaries, the important provisions are also in this case the ones found in Article 19 of the relevant tax treaty.

However, in the case of salary paid for work performed in connection with the university’s or university of applied sciences’ business activities, Article 15 is in force for the purposes of the above three tax agreements. ”Business activities” refers to an operation where income is derived from business. The matter is discussed in more detail in Tax guidance for higher education institutions (in Finnish and Swedish, link to Finnish). 

3 Employees leaving Finland for a foreign country

3.1 The six-month rule

Residents must pay Finnish tax on income sourced in Finland and in other countries (§ 9, subsection 1(1) of the act on income tax). However, pay for work performed abroad is income exempt from tax if the conditions of the six-month rule are fulfilled. 

Pay for work done in a foreign country is tax-exempt in Finland (§ 77 of the act on income tax) if: 

• The person's stay abroad is caused by said work; and
• The duration of the work is at least six months, and the person does not stay in Finland for more than six days per each month of work; and
• The country of work has the taxing rights in respect of the income in question under a tax treaty, if there is a treaty on income taxes between Finland and the country of work.

The six-month rule only applies to wage income, which means that, for example, a person’s scholarship and other grants are not tax-exempt income under the above provision. The above provision also does not apply to pay received from a Finnish public entity. Finnish universities and universities of applied sciences are not public entities, and therefore pay from these institutions for work performed abroad may be tax-exempt income based on the six-month rule.

The six-month rule only applies if the person's stay abroad is caused by said work. Section 77 and the six-month rule do not apply to working over a remote online connection as that type of work performance does not fulfil the condition of the stay abroad being caused by the work itself.  For example, someone’s presence may be due to studies or due to their spouse's foreign assignment in the country. Where the performance of remote work does not require staying abroad, the conditions for tax exemption are not fulfilled. 

More detailed information on the six-month rule can be found in The six-month rule for work income earned abroad.

3.2 Taxing rights of the country where work is done

As a general rule, pay for work performed abroad is also subject to tax in the country of work.  The treaty article concerning income from employment generally grants taxing rights to the country of work with respect to wage income received for work performed in that country (OECD Model Tax Treaty, Article 15, Paragraph 1). However, an exception to this rule is the 183-day rule (OECD Model Tax Treaty, Article 15, Paragraph 2), which prevents the country of work from imposing tax if:

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

Where the wages or salary are paid by a Finnish university or university of applied sciences, the country of work generally has the right to tax the pay only on employees who stay in the country for more than 183 days during the period of time specified in the tax treaty – usually a calendar year or 12 consecutive months.

According to the tax agreements Finland has concluded with Australia and Turkey, the University of Helsinki is a public entity. According to the tax agreement between Finland and Greece, all Finnish universities and similar higher education institutions are public entities. As regards wages and salary paid for work done for a Finnish public entity, the pay is taxed in Finland only (OECD Model Tax Treaty, Article 19).  As the country of work does not have taxing rights under a tax treaty, the six-month rule is not in force in Finland.

The taxing rights of the country of work may also be affected by the tax treaty articles concerning teachers and scientific researchers, according to which the pay for teaching and scientific research may be exempt from tax in the country of work. In other words, with the country of work not having taxing rights, the six-month rule also is not in force. Treaty provisions on teachers and researchers are discussed in more detail in section 5 below.

Where no treaty has been signed between Finland and the country where work is done, the 183-day rule or other tax-treaty rules do not limit the taxing rights of the country of work. In such a case, the application of the six-month rule may only be prevented by the fact that the employee's presence in the foreign country is not caused by said work, or that the employee has stayed in Finland, on average, for more than six days during each month of working abroad. 

3.3 Elimination of double taxation

When a Finnish resident works in a foreign country, the income from such work is subject to tax in Finland under domestic legislation, unless it has specifically been declared exempted by definition of law. Similarly, the country of work may impose tax on the income under the provisions of its own national legislation. 

If the individual works in a country that has signed a tax treaty, it is Finland's responsibility to provide relief for any double taxation if Finland is, for treaty purposes, the country of residence and if, for treaty purposes, the country of work has the taxing rights. Under the tax treaty, the method for eliminating double taxation is either a tax credit or tax exemption.

Double taxation may also be relieved in situations where people work in a country with no tax treaty with Finland. In these situations, double taxation is relieved in accordance with the Act on eliminating double taxation (Laki kansainvälisen kaksinkertaisen verotuksen poistamisesta (1995/1552)), with the method always being the ”credit method”. However, the Act’s provisions only apply to income sourced to foreign countries, which means that no elimination of double taxation would extend to any income which, under provisions of § 10 (4) of the act on income tax, is sourced to Finland. 

This means that where the six-month rule does not apply to wage income paid by a Finnish university or university of applied sciences, and the income has also been taxed in the foreign country where work is done, relief for double taxation is provided in Finland.  However, no double taxation arises if, under the relevant tax treaty, the country where work is done lacks the taxing rights in respect of wage income paid by a Finnish university or university of applied sciences. This may be caused by the 183-day rule (section 3.2), the exemptions offered to teachers and researchers (section 5) or other reasons.  In these circumstances, the pay will be taxed in Finland only. In the same way, no double taxation arises if the country where work is done imposes no taxes because the country refrains from using its taxing rights, because of the country’s internal legislation, or other reasons. 

For more information on how double taxation is relieved, see Relief for international double taxation.

3.4 Tax-exempt allowances relating to working abroad

Certain costs of living due to working abroad paid by the employer may be exempt from tax even if the actual pay is not considered tax-exempt income based on the six-month rule. 

According to § 76, subsection 1(5) of the Act on income tax, the individual taxpayer’s – and members’ –moving and travel expenses arising from working abroad, which are paid by the employer, and the usual cost of private service staff and education of children paid by the employer for the duration of working abroad are income exempt from tax. For more information on the above tax-exempt allowances, see the Taxation of work abroad guide and Tax treatment of employer-provided relocation services for workers sent to other countries, a statement issued by the Tax Administration.

Also exempt from tax is the part of accommodation received as a fringe benefit in a foreign country that exceeds the benefit's reasonable value as defined in the Tax Administration decision on in-kind benefits.

Allowances for work-related travel expenses are exempt from tax in both international and domestic employment situations. With regard to commuting between home and regular place of work, travelling to a secondary place of work, or travelling to a special place of work, the nature of trips made to and in a foreign country is determined on the basis of the same rules and principles as the nature of trips made in Finland. More detailed information can be found in Reimbursement of work-related travel expenses for tax purposes (in Finnish and Swedish, link to Finnish).

4 Individuals from other countries

4.1 Permanent residence and home in Finland, or period of stay in Finland exceeds six months

4.1.1 Tax liability in Finland

Individuals arriving in Finland from abroad are regarded as resident taxpayers in Finland if they have accommodation (a permanent home and abode) here, or if their period of stay in Finland exceeds six months (§ 11, subsection 1 of the act on income tax). Residents are liable to tax on both income sourced in Finland and on income earned in other countries (§ 9, subsection 1.1 of the act on income tax).

Due to treaty provisions on the country of residence (OECD Model Tax treaty, Article 4), it is possible that a person who is generally liable to tax in Finland is a resident of another country under a tax treaty. In this case, although the person is a Finnish tax resident, Finland can only tax the person’s income sourced in Finland.

Tax treaties generally do not prevent the taxing of wage income paid by a university or university of applied sciences in Finland for work done in Finland. However, treaty rules concerning teachers and researchers may also restrict Finland’s taxing rights. For more information on treaty provisions directed toward teachers and researchers, see section 5 below.

4.1.2 Foreign key employees

As a rule, the earned income of residents is taxed under the progressive schedule.  Despite becoming a resident taxpayer in Finland, in certain cases, individuals arriving in Finland from other countries may be liable for paying source tax on their earnings at the 32-percent rate.  Provisions on the tax withheld at source (lähdevero; källskatt) from foreign key employees’ pay are laid down in the act on the taxation of key employees’ income (Avainhenkilölaki (1551/1995)).

The Act on the taxation of key employees’ income also applies to teachers and researchers working for a Finnish university or university of applied sciences when the scientific research is done for the common good, provided that the teacher is not a Finnish citizen and has not been a resident taxpayer (i.e. generally liable for taxes) in Finland during the five calendar years prior to the start year of employment. The Act on key employees is only applied upon request; the application must be submitted before, or no later than 90 days from, the start of employment.

For more information, see Taxation of key employees.

4.2 Period of stay in Finland maximum six months

4.2.1 Earnings in Finland

People arriving from other countries are treated as tax nonresidents if they stay in this country for max. 6 months.  Nonresidents are liable for paying tax in Finland only on income sourced to Finland (§ 9, subsection 1(2) of the act on income tax).  Wage income paid by a Finnish university or university of applied sciences to a nonresident (person liable to tax, but with restrictions) is Finnish-source income if the work, task or service is solely or primarily carried out in Finland (§ 10, subsection 4 of the act).

To determine whether the nonresident who worked had mainly done his or her work in Finland, the period that must be focused on in all situations is one pay period, as specified in the Supreme Administrative Court’s ruling no. KHO 1994-B-556. In some circumstances, the amount of work to be done in Finland may have been agreed upon, for a period of one year, or for a longer time.  However, for tax purposes, the period to focus on is the pay period, even if such an agreement were made, when we examine the question of whether or not the income was sourced to Finland.

Tax treaties generally do not prevent the taxing of wage income paid by a university or university of applied sciences in Finland in so far as the work was performed in Finland. The treaty's 183-day rule (OECD Model Tax Treaty, Article 15, Paragraph 2) does not take away Finland’s taxing right because the wage income is paid by an employer domiciled in Finland.  On the other hand, the tax treaty's rules concerning teachers and researchers may lay down restrictions on Finland’s taxing rights also in the above situations. For more information on treaty pro-visions directed toward teachers and researchers, see section 5 below.

Nonresidents are taxed according to the Act on the taxation of non-residents' income (627/1978, ”the tax-at-source act”). Tax is withheld at source on the income at a flat rate of 35 percent, a rate that does not vary in step with the size of the income.  Alternatively, the income may be taxed progressively, by means of a similar tax assessment as is normally done for Finnish residents under the Act on assessment procedure (1558/1995). More detailed information can be found in Taxation of employees from other countries. 

4.2.2 Lecture fee

As a rule, in Finland, a fee paid for giving a lecture in an event organised by a university or university of applied sciences is considered wage income. This is due to section 13, subsection 1, Paragraph 2 of the Prepayment Act (1118/1996), according to which wage income also refers to personal lecture and presentation fees.

In practice, a lecture or presentation is always given by a natural person. The fee is seen as the individual’s taxable earned income, regardless of whether or not the individual has an employment contract with the payor.  The matter is treated similarly in both domestic and international situations. More detailed information can be found in Pay and nonwage compensation for tax purposes (in Finnish and Swedish, link to Finnish). 

According to § 10 of the Act on income tax, a fee paid by a university or university of applied sciences for a lecture or presentation given in Finland is income sourced in Finland also when the lecture or presentation is prepared in the person’s country of residence. The fee is generally paid for giving the lecture or presentation, and therefore the work is considered to take place mainly in Finland also when the lecture is prepared abroad. However, according to the provisions of § 10 of the Act on income tax, a fee paid for a remote lecture given by a person who is in a foreign country is not income-sourced in Finland, because in such a case the work is performed abroad.

The treaty does not prevent the imposition of tax on a lecture fee that is subject to tax in Finland, because the work is performed in Finland for an employer domiciled here. Notwithstanding this, the rules concerning teachers and scientific researchers may restrict Finland’s taxing rights in these situations as well. For more information on treaty provisions directed toward teachers and researchers, see section 5 below. 

The tax exemption of allowances for travel expenses to non-resident wage earners is conditional on the wage earner being in Finland on a work-related trip to a special place of work.  Whether or not this condition is fulfilled is determined on the basis of the same principles that apply to resident wage earners. Where the general conditions are fulfilled, the travel allowance paid to a visiting lecturer on top of their wage income is exempt from tax. The matter is discussed in more detail in Tax Administration guidance Allowances for travel expenses for tax purposes (in Finnish and Swedish, link to Finnish).  

As a general rule, a university or university of applied sciences is treated as being a ”special place of work” for a visiting lecturer arriving from a foreign country.  As a result, where the general conditions are fulfilled, the travel allowance paid to a visiting lecturer is exempt from tax. Allowances for travel expenses are exempt from tax also when the lecturer does not charge a fee for giving the lecture.  Under established practice of tax assessment, the guideline has been that only regular provision of lectures or teaching work, taking place in the same location, is a ”regular place of work”, in which case employer-paid travel becomes subject to tax.

Where the lecture is given by someone from a well-known enterprise with widespread operations in the provision of education and lectures, however, the fees paid to such an enterprise by a university or university of applied sciences are ”trade income” for the enterprise concerned. More detailed information can be found in Pay and nonwage compensation for tax purposes (in Finnish and Swedish, link to Finnish).  Notwithstanding the above, tax-exempt allowances for travel expenses cannot be paid to recipients of trade income.  However, this is irrelevant in most cross-border circum-stances because the fees, etc., paid to the enterprise are generally not subject to tax in Finland unless the enterprise has a permanent establishment in Finland.

4.2.3 Expert fees for work performed abroad

Where a non-resident taxpayer living abroad performs the work for which they are paid a fee mainly abroad, the fee is not income sourced in Finland under § 10 of the Act on income tax. Such fees based on work performed abroad include fees paid to dissertation pre-examiners or licentiate thesis examiners, or expert fees related to filling a post of professor or docent.

In general, the duties of opponents who live abroad also include work that needs to be performed in Finland. Most of the opponent's duties (examination of dissertation and statement) can be performed abroad. Attending the public examination of the dissertation in Finland is only a small part of the opponent’s duties. For this reason, the opponent's fee is not deemed income sourced to Finland in § 10 of the Act on income tax either on the account of the fee being paid to a non-resident taxpayer who lives abroad and the work being mainly performed abroad.

Allowances for travel expenses paid to a non-resident taxpayer are exempt from tax if the work is performed within a pay period mainly outside Finland. In such a case, the salary or other allowances paid to the person are not income sourced in Finland. It may also be agreed with the opponent that the opponent’s fee be waived and the only payment for the opponent’s duties be allowance for travel expenses. In such a case, the allowance for travel expenses may be deemed exempt from tax.

4.2.4 Withholding of tax at source on expert fees

Tax must be withheld by the payer at source when paying a non-resident taxpayer wage income or a fee that is subject to tax in Finland. The tax must be withheld at source at a 35-percent rate, or in accordance with the rate in the tax at source card issued by the Tax Administration.

Where a non-resident taxpayer living abroad performs the work for which they are paid a fee abroad, the fee is not income sourced in Finland under § 10 of the Act on income taxes, and therefore not subject to tax in Finland. In such a case, the university can waive withholding the tax at source, even if the employee does not present a tax at source card.

If the income is sourced in Finland but Finland’s taxing rights are restricted by a tax treaty, the payor may apply the tax treaty’s rules on the wage income without a tax-at-source card, in accordance with section 10 of the Act on the Taxation of Non-resident's Income, provided that the payee presents an account of their domicile and reports their name, date of birth, and any other official identifying information, as well as their address in their home country.

Where it cannot be ascertained whether the income is subject to tax in Finland or how the tax treaty should be applied, the income earner or payor must submit an application for a tax at source card.

The university must report the wage income to the Incomes Register; for this, the university must have the income earner’s identifying information. If the income earner does not have a Finnish Personal Identification Number, his/her name, date of birth, gender and address details must be reported. Both the address in Finland and the address in the country of residence can be reported to the Incomes Register. For an income earner who is a non-resident taxpayer, the country of residence, the Tax Identification Number (TIN) of the country of residence if the identifier is in use in the non-resident taxpayer's country of residence, and contact information in the country of residence must always be reported. For more detailed information, see the Incomes Register’s instructions Reporting data to the Incomes Register: international situations.

5 Tax treaty tax relief for teachers and scientific researchers

Some tax treaties contain rules concerning teachers and scientific researchers under which the pay for teaching or scientific research work is exempt from tax in the country of work if certain conditions are fulfilled. For example, this may have an effect on the pay received by a person who works abroad being tax-exempt under the six-month rule as, among other conditions, the application of the rule is conditional on the taxing rights of the country of work (section 3). Furthermore, the pay of a teacher or scientific researcher arriving in Finland from a foreign country may not be subject to tax in Finland, even if Finland’s internal legislation were to allow it.

National definitions of law regarding the role of 'researcher' and 'student' may vary from country to country, making it difficult to draw the line for graduate students.  For example, the country where a Finnish academic researcher works may treat him or her as a student although the researcher is writing a doctoral thesis. In this case, priority is accorded to the interpretation made in the country where work is done.

The rules of the tax agreements concluded with Egypt, Japan and France concern both teachers and scientific researchers, whereas in the tax agreement concluded with United Kingdom, the rules only concern teachers, and with Morocco, only scientific researchers. The conditions for tax exemption vary between tax agreements, but for the rules to be in force, the person must first of all be a resident in the Contracting State, as defined in the tax agreement, before the start of the period of stay in the other Contracting State. For example, a teacher or scientific researcher arriving in Finland from France must be a resident in France, as defined in the tax agreement between Finland and France, before the start of their period of stay in Finland.

Notwithstanding this, for the duration of the work, the teacher’s or scientific researcher’s country of work may be their country of residence under the tax agreement. An exception to this rule is the tax agreement between Finland and Egypt, according to which the person must be a resident in the country of departure under the tax agreement for the entire duration of the work. 

The tax relief for a teacher or scientific researcher applies to a person who resides in the other Contracting State for a certain maximum period of time with the intention of teaching or doing scientific research work at an institute of higher education or at another educational institution of that country. Whether or not the purpose of stay is teaching or research is evaluated in Finland on the basis of the circumstances at the start of the stay. However, in all cases, the tax relief may be granted more than once, provided that the person has clearly moved back to his/her home country after the maximum period of stay.   

The maximum period for the exemption is 2 years in all the five treaties discussed above. The provisions of the treaties with Egypt, the UK, Japan and Morocco set a threshold of 2 years of presence, making the person lose the entire tax exemption if he or she is present in the other Contract¬ing State for longer than 2 years. However, according to the treaty between Finland and France, the exemption is granted for the first two years, even if the person’s presence in the Contracting State where work is done were to last longer.

Under the provisions of the treaties signed with Japan, Morocco and France, the Finnish tax authority can include the amounts of income that are exempted in Finland in the calculation that affects the income-tax rate of the person’s other items of income that are subject to tax in Finland. According to the treaty with France, the income in the hands of a teacher or researcher, who is a tax resident for treaty purposes in either one of the Contracting States, can become included in the calculation that affects the income-tax rate of the person’s other items of income both in France and in Finland.  According to the treaties with Japan and Morocco, inclusion in the calculation is only possible in the case of persons who, for treaty purposes, are tax residents of Finland.

In the treaties with Egypt and Morocco, exemption from tax is conditional on the person having been invited to work in the country of work. In this context, being invited means agreeing with the teacher or scientific researcher before they arrive in the country of work that they will be teaching or doing scientific research work there, or that the work is based on a staff exchange program established between educational institutions of the Contracting States. 

In Finland’s treaties with Japan, Morocco and France, exemption from tax is also conditional on the teaching and scientific research work being done to serve the public interest and not the interests of a private party or parties. The legal form of the higher education institution is not relevant in evaluating whether the teaching or scientific research work is done to serve the public interest. What is relevant, however, are the activities with which the teaching or scientific research work is affiliated.

Teaching and research, which are regarded as the basic missions of universities and universities of applied sciences, may be deemed to serve the public interest. Where the teaching or scientific research activities are performed in connection with the higher education institution’s business activities, they may be deemed to serve the interests of a private party or parties. The taxation of higher education institutions is discussed in Tax guidance for higher education institutions (in Finnish and Swedish).

Summary of conditions for tax exemption in Finland's tax agreements:

Summary of conditions for tax exemption in Finland's tax agreements

Tax agreement and article	Conditions for tax exemption in the country of work
Egypt (in Finnish) Article 21	teaching or scientific research activities in a university or other higher education institution, or in a scientific research institute in the country of work the exemption from tax is conditional on a scientific research institute or institute of higher education in the country where work is done having invited the person to that Contracting State. The exemption only applies to the job specified in the invitation the maximum period of stay in the country of work is two year the person must be a resident of the Contracting State of departure under the tax agreement also for the duration of their stay in the other Contracting State
United Kingdom (in Finnish) Article 22	a professor or teacher, who resides in the country of work to teach in a university, higher education institution, school, or other educational institution the requirements include submitting a certificate of tax liability in the home country. The certificate may be submitted, for example, by filling in the following form: British teachers/Certificate of residence and tax liability for the use of Finnish tax authorities tax liability is required for the pay in the country of departure (e.g. a teacher arriving in Finland must have a certificate of the pay being taxed in the United Kingdom) the maximum period of stay in the country of work is two years lives, or immediately prior to the period of stay in the country of work lived, in the country of departure
Japan (in Finnish) Article 20	a professor or teacher, who resides in the country of work to teach or do scientific research in a university, higher education institution, school, or other educational institution the rule does not apply if the scientific research work is done mainly to serve the interests of a private party or parties the maximum period of stay in the country of work is two years resides or immediately prior to the period of stay in the country of work resided in the country of departure
Morocco (in Finnish) Article 21	scientific research activities (and occasional teaching duties related to the research) in the country of work, with the person being invited by the state, a university, an educational institution, or other non-profit cultural organisation the pay is required to be earned from sources in the country of departure (not in the country of work) the rule is not in force if the scientific research work is performed mainly to serve the interest of a private party or parties, rather than the public interest the maximum period of stay in the country of work is two years resides or immediately prior to the period of stay in the country of work resided in the country of departure
France (in Finnish) Article 20	teaching or scientific research activities in the country of work the rule does not apply if the activities did not serve the public interest tax exemption is granted for the first two years, even if the period of stay in the country of work was longer lives in a Contracting State when the period of stay in the country of work starts

6 Scholarship or other grant for scientific research

6.1 Finland’s internal legislation

Provisions on the taxation of scholarships and other grants are laid down in section 82 of the Act on income taxes. According to the above provision, scholarships and other grants paid by a Finnish public entity or the Nordic Council are fully exempt from tax when awarded for use in scientific research, whereas scholarships and other grants paid by a university, university of applied sciences or other private party, such as a foundation, represent income only partially exempt from tax.

The amount of taxable income is calculated by combining the amount of scholarships and other grants awarded by the above private parties with the amount of scholarships, grants, study grants, and awards from Finnish public entities and the Nordic Council, and subtracting from the total amount the expenses incurred in acquiring and maintaining the income. Of the remaining amount, an amount corresponding to the annual artist grant awarded by the state is exempt from tax. The rest is taxable earned income.

More detailed information on the taxation of scholarships and grants can be found in Taxation of grants, scholarships and awards for merit. The maximum tax-exempt amounts of grants awarded (the annual artist grant awarded by the state) for each year are presented in the guidance.

The above also applies to scholarships and other grants that a foreign country or public entity pays to a person who is a resident taxpayer in Finland. Finnish residents pay tax to Finland on income earned both in Finland and in other countries.

Non-residents, on the other hand, are only liable for paying tax on income earned in Finland. Though not expressly specified as such in section 10 of the Act on income tax, scholarships and other grants awarded to a non-resident by a Finnish payor are consistently considered income sourced in Finland, whereas scholarships or other grants awarded by a foreign payor are not income sourced to Finland.

6.2       Effect of tax treaties

A tax treaty may restrict Finland's taxing rights also when the income is taxable under Finnish tax laws. As a general rule, tax treaties do not contain rules on scholarships or other grants. As a result, taxing rights are determined on the basis of the tax treaty's article concerning other income (OECD Model Tax Treaty, Article 21).

According to the ‘Other income’ article, income is generally only taxed in the person’s country of residence under the tax treaty.  There are exceptions to this rule. According to the tax agreements concluded with the following countries, other income can also be taxed in the country where the income is sourced:

Argentina, Australia, Azerbaijan, Barbados, Brasilia, Canada, China, Estonia, Indonesia, India, Latvia, Lithuania, Malaysia, Morocco, Mexico, New Zealand, Pakistan, the Philippines, Singapore, Thailand, Turkey, Uruguay, Vietnam, and Zambia.

As a general rule, for the country of source to have taxing rights, the income should be earned in the country of source.

Under the treaty with Egypt, income classified as other income is only subject to tax in the Contracting State of source. This is a derogation from the treatment that applies on other categories of income.

In addition to the above information, the article concerning students and trainees included in the tax agreements that Finland has concluded with Egypt, Malaysia, the Republic of Korea, Thailand, the United Arab Emirates, and the United Kingdom contain a rule that concerns, for example, scholarships, grants and awards for doing scientific research. According to the rule, a scholarship, grant or award for doing scientific research is, under certain conditions, exempt from tax in the country of work that would otherwise be imposed on scholarships, grants and awards.

The exemption from tax is conditional on the person residing, or having resided, in the other Contracting State immediately prior to being present in the country where he or she works.  Also, the sole purpose of the stay in the country of work must be to do scientific research as a recipient of a scholarship, grant or award from a non-profit or an educational, scientific or religious organisation.

In addition, the exemption from tax may apply to a scholarship, grant or award received from the country where work is done or from another public entity.  On the other hand, the exemption from tax may be limited or restricted in such a way that it only applies to scholarships, grants and awards received from outside the country where the person works; it may also be that the exemption only extends to the first 2 years.  – The conditions for exemption from tax in various treaties vary considerably. For this reason, we recommend that they always be checked from the currently valid treaty.

A Finnish university or university of applied sciences cannot be considered the type of educational or scientific organisation that could award the types of scholarships or other grants or awards for doing scientific research that would represent tax-exempt income on the above grounds.

6.3 Responsibilities of grant payors and recipients

Grant payors are not under obligation to withhold tax on the grants paid. However, grant payors are required to submit reports to the Tax Administration, to give details on any scholarships and other grants whose recipient is a natural person, if the amount of scholarship or grant payment is €1,000 or more during one calendar year. This report, on grants paid to resident taxpayers, must be submitted electronically.

Annual information on grants paid to nonresident taxpayers are to be submitted using the annual notification for payments to persons with limited tax liability in Finland, form 7809e (payment type D1).

Provisions on the information-reporting requirement and on relief from the general withholding obligation can be found in the following official decisions of the Finnish Tax Administration:

• Tax Administration decision on relief from withholding obligation (in Finnish and Swedish, link to Finnish)
• Decision on the general information-reporting requirement (in Finnish and Swedish, link to Finnish)

The grant recipient is personally liable for paying any taxes imposed on the grant, due to the payor being relieved from the withholding obligation.

Resident taxpayers can submit an application for a tax-prepayment calculation online in MyTax, on paper by post, or by calling the Tax Administration's telephone service.

Nonresident taxpayers can submit an application for income-tax prepayment to the Tax Administration in order to receive a calculation of advance taxes. If a nonresident receives an academic grant, the Finnish income taxes to be imposed on it are based on the act on assessment procedure (Verotusmenettelylaki (1558/1995)) (as provided in § 3, subsection 1 and § 13, subsection 1 of the act on the taxation of non-residents' income). In addition, in the case of grants received from a Finnish payor, nonresidents are required to file an income tax return on which they must provide a report on the grant.