Tax treatment of employer-provided relocation services for workers sent to other countries

The English translation below is unofficial. It has been made for the purpose of facilitating the understanding of the Finnish tax system and legislation. The original guidance text is released on our website in Finnish and Swedish, the official languages of Finland.

Background

In cross-border circumstances, employers often pay or reimburse their employees’ expenses in addition to paying them wages for their work. Examples of this include covering the additional expenses related to starting or ending a work period in another country and expenses incurred during the work period. This statement has been updated to be in line with the amendments made to the act on income tax (Tuloverolaki 1535/1992) that entered into force on 1 January 2025. Information on the provisions, case law and established tax assessment practice applied before 2025 is in the previous version of this statement. 

Travel expenses of the employees and their family members, freight costs for personal belongings and furniture, and fees that must be paid for work permits, residence permits, driving licenses, vaccinations and medical certificates are among typical expenses. The same goes for language training expenses, insurance premiums relating to special travel insurance contracts for posted employees, costs related to specific professional training, currency exchange fees, and daycare and school fees of children.

Some employers pay for services known as ‘relocation services’ that can lighten an individual employee’s burden of settling down in a new environment. Relocation services include opening a bank account in a local bank, registration as a taxpayer (and submitting the application for an employee’s withholding allowance certificate, helping with the income tax return, etc.), getting a personal identity code, handling any registrations required by local public authorities, obtaining coverage by the social security system, buying local public transport tickets, and helping the employees find housing and familiarise themselves with the neighbourhood and the local services.

This statement covers the taxation of relocation services and costs that employers pay for their employees or reimburse to them in cross-border situations. Reimbursement of costs in cross-border situations is discussed from the perspective of situations to which the six-month rule is not applicable. In addition, this statement discusses reimbursing expenses in situations where an employee arrives to work in Finland.

Some expenses paid by employers are tax-exempt under the act on income tax. However, some of the relocation expenses that employers have customarily paid on their employees’ behalf are not regulated by specific provisions of the act on income tax, and their tax treatment is instead based on the general provisions laid down in sections 29 and 61 of the act on income tax as well as case law and established tax assessment practice.

In general, if the wages that an employee receives for their work in another country are tax-exempt based on the six-month rule laid down in section 77, any reimbursements paid by the employer for expenses that otherwise would be subject to tax for the worker receiving them become tax-exempt by virtue of the six-month rule. For more information on how the six-month rule is applied, see the Finnish Tax Administration’s guidance Six-month rule for wage income earned abroad.

This statement does not discuss the taxation of housing costs paid by an employer. For more information on this topic, see the Finnish Tax Administration’s guidance Luontoisedut verotuksessa (‘Fringe benefits in taxation’, in Finnish and Swedish only) and Työmatkakustannusten korvaukset verotuksessa (‘Reimbursement of work-related travel expenses in taxation’, only in Finnish and Swedish).

Background information

Applicable legal provisions:

The concept of ‘income’ under the act on income tax is understood in a broad sense. Under section 29 of the act, taxable income comprises income received by a taxpayer in cash or as an in-kind benefit, with the exceptions specified in the act. Taxpayers have the right to deduct the expenses paid for the production of income or for the maintenance of income (often called ‘natural deductions’). Under section 61, subsection 2 of the act on income tax, earned income includes pay received based on employment and any income comparable to it. It is established practice to consider any employer-paid or -reimbursed living expenses of an employee or their family as taxable income.

Some employer-paid reimbursements of expenses are specifically exempted from tax in the act on income tax. Such expenses include the reimbursements relating to working outside Finland listed in section 76 of the act on income tax. Further legal provisions that may be applicable include section 69 on tax-exemptible fringe benefits; section 69b on training expenses; section 69c on moving expenses; section 69d on registrations, permits, licences, services and healthcare expenses; and sections 71 to 73 on the reimbursing expenses arising from work-related travel.

The specific provisions on tax-exemptible reimbursements related to working in another country are in section 76, subsection 5. According to the section, the employer-paid moving and travel expenses of an individual taxpayer and their family members, arising from working abroad, and the usual cost of private service staff and children’s school fees, paid by the employer for the duration of the work period abroad, are not income subject to tax. The provisions of section 76 only concern employees who leave Finland to work in another country, i.e. they do not apply to employees who arrive to work in Finland.

According to section 69b, subsection 1, it is not considered income subject to tax for the employee if the employer pays the expenses of arranging training to the employee if the training serves the employer’s interests or the interests of another company belonging to the same group as the employer company. At the start of 2025, a new subsection 3 became applicable, according to which cultural, language and other similar training related to cross-border employment paid by the employer for the employee is also considered training under subsection 1 on the same section.

The provisions in section 69c of the act on income tax state that the employer-paid moving and travel expenses of an employee and their family members are tax-exempt. From 2025 onwards, employer-paid moving expenses and move-related travel expenses incurred by the employee or and their family members are tax-exempt if the employee moves because of the location of their workplace. This provision applies to both relocations inside Finland and to other countries. According to section 69c, subsection 2, which became applicable at the start of 2025, any costs incurred because of a travel insurance policy taken out to cover the employee and their family during the work period abroad are also considered moving costs.

According to section 69d, reimbursements paid by an employer for expenses arising from acquiring a passport, a visa or a work or residence permit; registering a right of residence; acquiring a personal identity code and tax number; or any vaccinations, medicines and medical examinations, which are justified because of the circumstances of the destination country or required for entry in the country or for receiving a visa or a work or residence permit, are not considered taxable income. Any services purchased from third-party service providers and paid by the employer for handling registrations or acquiring documents, permits, licences or identifications are also not considered taxable income.

Some of the expenses that employers can reimburse when their employee works in another country can be considered fringe benefits as referred to in section 69, subsection 1. Under section 69, subsection 1 of the act, it is not an item of income subject to tax for the employee if the employer covers the expenses of a customary health plan provided to all employees or retired employees of the employer, unless the employer reimburses the employee costs that they have incurred because of healthcare or a medical condition. 

The provisions of sections 71 to 73 regulate the tax-exemption of reimbursements of expenses incurred because of temporary work-related travel, i.e. shorter business trips. The application of the provisions is discussed in more detail in the Finnish Tax Administration’s guidance Työmatkakustannusten korvaukset verotuksessa (‘Reimbursement of work-related travel expenses in taxation’, only in Finnish and Swedish).

Whenever employers pay out other reimbursement of expenses than those specifically mentioned in legislation, the tax treatment of the reimbursements depends on the general provisions of the act on income tax as well as case law and established tax assessment practices. If employers reimburse any expenses that are considered personal living expenses, this is treated as income subject to tax for the employee concerned. Among the non-exemptible taxable types of reimbursement are expenses for services such as the handling of personal matters and of tax affairs. Another example of an item subject to taxation is an arrangement where the employer pays for children’s daycare.

The Tax Administration’s statement

Based on the act on income tax, case-law and established tax assessment practice, we present the following statement in order to address the proper tax treatment of some employer-paid expenses in cross-border situations. For more information on the reimbursement of expenses during periods when employees work in another country, see the Finnish Tax Administration’s guidance Taxation of income earned abroad.

1. General on reimbursing expenses

If an employer reimburses expenses to an employee that the employer may reimburse as tax-exempt based on legislation, case law or established tax assessment practice, the employer must generally pay the expenses directly to the service provider that issued the invoice for the expense. All monetary payments made to an employee are considered wages. Situations where the employer reimburses a tax-exempt expense after the employee presents an invoice or payment receipt relating to the expense form an exception to this. Such documents must be entered in the employer company’s accounts.

If an employer pays an expense or service for an employee that is considered a taxable benefit of the employee, the time of the benefit’s taxation is determined according to section 110 of the act on income tax. Under section 110, the time of taxation of an employee’s taxable benefit is the time when the employer pays the expense that is considered a living expense for the employee. From this it follows that the coverage of service costs relating to assistance with housing, social security registrations, and various personal affairs as described below becomes a taxable event when the employer settles the invoice presented by the service provider. The amount of the taxable benefit is the fair market value of the service, or the amount paid for the service including VAT. Such a service is treated as a benefit subject to tax for the employee regardless of whether the employer has paid for each single service separately or bought an outsourced package of services.

If the employer settles the invoice after the date on which the employee left Finland and became a non-resident taxpayer, the income is regarded to have been received in Finland within the meaning of section 10 of the act on income tax, because it is related to work carried out in Finland. This also applies in situations where the employer pays an invoice before the employee arrives to work in Finland. If the employer does not pay monetary wages to the employee from which tax at source could be collected, the employee must report that income to the Finnish Tax Administration for collecting the tax at source.

2. Travel expenses of an employee and their family

Under section 76, subsection 1, paragraph 5 of the act on income tax, employers can cover the travel expenses of their employee and the employee’s family members with tax-exempt reimbursements when the work period in the other country begins or ends. Whether the employee’s work in the other country is performed at a primary place of work or at a special place has no effect. In the same way, no time limit has been set for the duration of the work period in the other country.

The provisions in section 76, subsection 1, paragraph 5 only concern employees who leave Finland in order to perform work in another country. In the case of an employee who comes to Finland in order to work here, employers are only entitled to cover the worker’s travel expenses as tax-exempt reimbursements if the employee is posted to a special place of work in Finland. The tax-exemption only concerns the travel expenses reimbursed to the employee and does not extend to family members.

In addition, under section 69c of the act on income tax, an employer may cover the moving expenses of an employee and their family with tax-exempt reimbursements if the move is due to the location of the employee’s place of work. More information on the circumstances where section 69c can be applied is provided below, in the section that discusses the reimbursement of employees’ moving expenses.

Employers cannot pay any type of tax-exempt reimbursements in relation to any vacation trips to Finland or elsewhere made while being posted abroad. If the employee performs their work at a primary place of work in the other country and travels to a special place of work in Finland from time to time, the employer may cover the employee’s travel expenses with tax-exempt reimbursements within the limits of the Finnish rules that govern reimbursement of business travel. In addition, trips to Finland can be reimbursed as tax-exempt if the employee works at a special place of work in the other country and their job assignment is interrupted for the time it takes to make the trip to Finland. However, even in this situation, the employer cannot pay the family members’ expenses tax-exempt.

More detailed information on covering expenses related to business travel is in the Finnish The Finnish Tax Administration’s guidance Työmatkakustannusten korvaukset verotuksessa (‘Reimbursement of work-related travel expenses in taxation’, only in Finnish and Swedish).

3. Moving expenses

In cross-border situations, employers often reimburse expenses arising from the employee and their family moving to another country. Such expenses include freight costs of furniture and added expenses caused by extra luggage. Under section 76, subsection 1, paragraph 5 of the act on income tax, an employer may reimburse tax-exempt the moving costs of both the employee moving to another country to work and their family members.

Under the amendments to section 69c that entered into force at the start of 2025, employers can reimburse tax-exempt the moving costs of an employee and their family if the move is due to the location of the employee’s workplace. The tax-exemption also applies to any travel expenses incurred during the move.

For the tax-exemption of moving costs and the related travel expenses it does not matter whether the employee is posted to Finland or if the employee has signed an employment contract with a Finnish employer directly. It is only required that the move is required because of the location of the employee’s workplace.

In the application of section 69c, a marital spouse or cohabiting partner and any children moving into the same household as the employee are considered as the employee’s family members. This means that the term ‘family’ has a broader definition in this provision than in the application of sections 7 and 8. 

More information on the reimbursement of the moving costs referred to in section 69c is in the Finnish Tax Administration’s guidance Työmatkakustannusten korvaukset verotuksessa (‘Reimbursement of work-related travel expenses in taxation’, only in Finnish and Swedish).

In the application of the above provisions, ‘moving costs’ refers only to costs directly arising from the move. However, as an exception to the above, in a ruling of the Central Tax Board (KVL 41/1996), an employer-paid reimbursement of the selling expenses of the employee’s home in the country of work was seen as part of the expenses eligible for tax-exemption under section 76, subsection 1, paragraph 5 of the act on income tax.

If the employer pays for the storage of an employee’s belongings in the country of departure during the period when the employee works in another country, it is not a tax-exempt moving expense under section 76, subsection 1, paragraph 5, or section 69c of the act on income tax. From this it follows that the employer-financed storage is treated as a taxable benefit of the employee.

4. Expenses for training in preparation for a work assignment in another country, including language courses

Employers can offer their employees training in preparation for working in another country, providing instruction in cultural differences, another language, and other matters. In general, the training is organised in order to serve the employer’s interests, in order to inform the employee of the demands and goals of their job assignment and to ensure a successful posting of the employee the other country. The training aims to help them to adjust to the everyday life there, including work and free time.

According to section 69b, subsection 1, it is not considered income subject to tax for the employee if the employer pays the expenses of arranging training to the employee if the training serves the employer’s interests or the interests of another company belonging to the same group as the employer company. Subsection 3 of the same section also states that cultural, language and other similar training related to a cross-border work situation is also considered training within the meaning of the provision.

Cultural, language and other similar training related to a cross-border work situation is specifically a case of preparing the employee to work and live in a country other than their country of departure that also serves the employer’s interests. In the provision, ‘training’ refers to learning about the work and leisure culture and customs of the destination country as well as language studies. The training may also provide support in adjusting to the new country and work environment and working in a multicultural team.

In contrast, providing assistance in taking care of personal matters such as opening a bank account, acquiring a library card or a public transport ticket, or finding housing are not considered training for the purposes of the provision. 

However, if training is also offered to the employee’s family members, the part of the expenses that concerns the family is regarded as a taxable benefit of the employee. If family members taking part in the training does not cause any additional expenses to the employer, no taxable benefit is considered to have been provided to the employee.

5. Expenses associated with the education of children

Under section 76, subsection 1, paragraph 5 of the act on income tax, the employer’s coverage of an employee’s children’s school fees does not give rise to a benefit taxable for the employee. The above only concerns employees who leave Finland to work in another country.

If an employer has an employee who arrives in Finland to work and school fees in Finland will be paid for (to an international school in Finland), the payment is considered a taxable benefit of the employee.

5. Children’s daycare expenses

Expenses caused by childcare are a typical example of living expenses. An employer cannot reimburse daycare fees paid during the employee’s work in the other country as tax exempt under section 76, subsection 1, paragraph 5 of the act on income tax. The same provision still allows employers to pay the cost of hiring private service staff without paying tax (including a nanny who takes care of children) in countries where it is customary to organise childcare this way.

However, for employees who arrive in Finland to work, any employer-provided reimbursement for childcare costs is a taxable benefit. The only exception from the above is the employee benefit for taking care of a sick child, which under section 69 of the act on income tax is an expense exempt from tax.

6. Permits, licences, passport, personal identity code and tax number related to entering a country

Employees may have to obtain visas and work or residence permits before they can begin their work in the destination country. Having the required permits is a requirement for working and the employer is often responsible for compliance with the requirements.

Section 69d provides for the tax-exemption of any reimbursements paid by the employer to the employee related to cross-border situations, such as expenses from making registrations and acquiring permits or licences for the employee or their family members or purchasing a service from a service provider for handling these. Under the provision, the employer may reimburse the costs of the following without paying tax:

• Passport
• Visa
• Work or residence permit
• Registration of a right of residence (e.g. EU registration)
• Personal identity code
• Tax number (or equivalent tax identifier)

Expenses covered by the provision include any fees collected by authorities for permits, licences or documents and the costs of having any appendices required for applications translated or notarised. Expenses from acquiring a passport, a permit or a licence, and travel expenses arising directly from acquiring these are also considered reimbursements that employers can reimburse as tax-exempt under the provision.

Services purchased by the employer from a third-party service provider for handling the above responsibilities are also tax-exempt. Here, ‘service’ refers to acquiring assistance for interacting with the authorities of the destination country or assistance in drawing up documents. A marital spouse or cohabiting partner and any children moving into the same household as the employee are considered as the employee’s family members in the application of the provision. 

The exemption also extends to a permit for exit, i.e. for leaving the country, or to a comparable de-registration expense that has to be paid when the period of work in the destination country ends.

8. Expenses for special insurance policies for the work period in the other country

Under section 69c, subsection 2 of the act on income tax, the costs of a travel insurance policy taken out by the employer to cover the work period the employee and their family spend in the destination country are also considered tax-exempt moving costs. This provision only applies to cross-border situations. A marital spouse or cohabiting partner and any children moving into the same household as the employee are considered as the employee’s family members in the application of the provision.

More information on the tax treatment of an insurance policy covering a posted employee’s work period are in the Finnish Tax Administration’s guidance Työnantajan ottamien vapaaehtoisten riskihenkilövakuutusten verotus (‘Taxation of voluntary personal risk insurance policies taken out by an employer’, only in Finnish and Swedish).

9. Vaccinations, medicines and medical examination fees

Entry into some countries is subject not only to a visa, work permit or residence permit but also to presenting proof that the person entering the country has taken certain vaccinations or undergone certain medical examinations. For other countries, there are recommendations for taking certain vaccinations or starting certain medication before arriving there.

Under section 69d of the act on income tax, vaccinations, medications and medical examinations paid by an employer for their employee and the employee’s family members are tax-exempt. According to the section, any vaccinations, medications and medical examinations paid by an employer for their employee and the employee’s family members are not taxable income of the employee if they are required for entry into the destination country or for a visa or a work or residence permit, or if they are justified because of the conditions in the destination country.

The tax exemption requires that the vaccinations, medicines and medical examinations are necessary for entry into the destination country or for permits, or that they are based on recommendations issued by the authorities of the country of departure or destination country, an occupational health physician or another healthcare professional. For example, a vaccination or a course of medication maybe required to ensure the employee’s safety in the destination country.

An employer can also pay expenses related to healthcare and treatment as part of occupational healthcare provided. More information on occupational healthcare expenses during periods of work outside Finland is in the Finnish Tax Administration’s guidance Henkilökuntaedut verotuksessa (‘Personnel benefits taxation’, in Finnish and Swedish only).

10. Currency exchange

Currency exchange fees incurred while working in another country are part of the employee’s living expenses that the employer cannot reimburse without paying tax. However, employers can reimburse tax-exempt currency exchange costs that are incurred during a business trip for the purpose of paying employer-reimbursed tax-exempt travel or accommodation costs (e.g. currency exchange fees that must be paid to acquire a travel ticket).

11. Handling various registrations and tax affairs

Many employers purchase a service from a third-party provider for the management of various obligations towards local public authorities. Such services can include making registrations or applications (e.g. making a registration or application related to social security) and handling tax affairs.

The costs of an employer-paid service for filing taxes are considered taxable income of the employee (Supreme Administrative Court ruling KHO 20 April 2016 record no 1508), as it amounts to paying some of the employee’s living expenses on their behalf. In addition, in ruling KHO 2020:155 it was considered that an employer-paid relocation package was taxable income of the employee. The package included management of various local registrations, social-security matters and taxes.

Based on the abovementioned decisions, employer-paid services that include management of an employee’s personal affairs with the authorities or similar are considered taxable benefits of the employee. This pertains to services that are not services exempted from tax under section 69d (application of permits, licences, personal identity codes and tax numbers). By extension, if the employer also pays for similar services for the employee’s family members, that part of the paid amount is also considered a taxable benefit of the employee.

12. Making various personal arrangements such as finding housing, opening a bank account, buying tickets for public transport, etc.

Some service providers not only deal with public authorities on the employee’s behalf but also give assistance in matters relating to their personal affairs. The assistance may consist of helping the newly arrived employee to find housing, make a rental contract, open a bank account, get a ticket for public transport, a library card, insurance, contracts (e.g. an energy contract), etc., and helping them to get to know the neighbourhood and the local services.

In the case of ruling KHO 2020:155, a service provider had sold an employer company a relocation package that contained similar help as described above – assistance with housing, rental contracts, bank and insurance matters, registration, social security and taxes. The Supreme Administrative Court ruled that when an employer reimburses the costs of such a package to an employee, this amounts to reimbursing some of the employee’s living expenses to the employee, making it a taxable benefit of the employee.

The service provider in the above case helped the employee find housing and make a rental agreement on the found apartment between the employee and the landlord. Conversely, if the apartment was rented by the employer, any expenses incurred from finding the apartment and making the rental agreement would be costs of the employer and not taxable benefits of the employee.