Benefits: recovery and recourse in international situations
- Date of issue
- 12/22/2023
- Record no.
- VH/6582/05.00.00/2023
- Validity
- 1/1/2024 - Until further notice
The instructions have been updated as follows:
- Changed ‘original earnings period’ given in additional repayment details to ‘original payment period’ in all Sections in which it is mentioned.
- Years updated.
1 Foreword
Both pensions and benefits income are reported using the benefits payment report submitted to the Incomes Register. In these instructions, the term “benefit” refers to both pensions and benefits, unless otherwise stated.
In certain situations, pensions and benefits may be recovered from benefit recipients, who are mainly referred to as “income earners” in these instructions. Instructions Benefits: Recovery and recourse define the application of section 112 a of the act on income tax (tuloverolaki 1535/1992) to recovery and the obligation of payers to report information about recovery to the Incomes Register. The aforementioned instructions and the procedures described therein also apply partly to recovery in international situations.
These instructions use examples to describe how information about recovery and recourse is reported to the Incomes Register in international situations. In international recovery situations, the income earner lives outside Finland or the payer of an earlier or later benefit is non-Finnish.
International situations feature special characteristics that payers need to take into account when reporting income to the Incomes Register. In recovery situations, a long time may have elapsed between the benefit payment date and the recovery date, during which the income earner’s tax liability may have changed. The payer must report the income earner to be a resident or non-resident taxpayer, according to the tax liability on the recovery date. However, if the payer does not know, on the recovery date, whether the income earner is a resident or non-resident taxpayer, the payer can report this information in accordance with the situation valid on the benefit payment date.
In situations where an income earner who is a resident taxpayer lives abroad and a pension or benefit is recovered from them, recovery must be reported in the same way as in domestic situations. However, if the pension of a resident taxpayer living abroad cannot be taxed in Finland due to a tax treaty between Finland and the income earner’s country of residence, “Taxability of benefit – Earned income, only health care contribution is collected” must be entered on the recovery report. In the case of the VILMA pension (the principle of the last pension payer), this “Taxability of benefit” entry must only be used when no pension paid by the payer in question can be taxed in Finland due to a tax treaty and only a health care contribution is imposed on pensions. For more information, see instructions Benefits: Reporting data to the Incomes Register (Section 5.7 Pension income of a non-resident taxpayer).
If the income to be recovered constitutes a pension and the income earner was a non-resident taxpayer when they received the pension and when repaying it, “Grounds for pension paid to a non-resident taxpayer” must be entered on reports on the pension payment and recovery. This information must be connected to the income type of the pension and withholding. In addition, “Non-resident taxpayer – Yes” must also be entered for an income earner who is a non-resident taxpayer.
If the income to be recovered constitutes a pension and the taxpayer became a non-resident taxpayer between the pension payment date and the recovery date, the payer must enter “Grounds for pension paid to a non-resident taxpayer” on the recovery report. This must be done even though the income earner was a resident taxpayer on the pension payment date.
These instructions use examples to describe the most common Incomes Register reporting situations. The examples do not take all data to be submitted into consideration, only data that is relevant to resolving the matter in question.
2 The income earner repays a payment
Section 112 a, paragraph 1 of the act on income tax lays down provisions on a procedure in which the income earner repays a benefit to the payer. The repayment date determines whether the recovery can be taken into consideration in taxation as a net recovery. The payer can always recover the payment as a gross amount.
For more information about the repayment date, see instructions Benefits: Recovery and recourse (Section 2 The income earner repays a payment).
2.1 The payer recovers a payment during the original payment year or at the beginning of the year following the payment year
2.1.1 Net recovery
If the income earner repays an overpayment during the payment year of the original payment or at the beginning of the year following the payment year by the due date confirmed in the Finnish Tax Administration’s decision, the income earner can return the net amount of the benefit received from the payer, i.e. the amount from which withholding or tax at source was deducted. The Finnish Tax Administration confirms the due date with two separate decisions: the decision on the due date of recovered benefits income in the benefit recipient's taxation and the decision on the repayment due date of recovered income in the payer’s taxation.
If recovery is carried out as net recovery, the benefit payer must report the gross amount recovered from the income earner and the withholding or tax at source associated with it. If withholding has been levied on the benefit, it must be reported under “Withholding from the repayment”. If tax at source has been levied on the benefit, it must be reported under “Tax at source from the repayment”. The Finnish Tax Administration does not credit withholding or tax at source from the recovered amount to the income earner in the taxation for the payment year. Instead, it is taken into consideration in the payer’s withholding obligations based on the additional repayment details.
The same additional information about the income earner must be reported on the recovery report as was reported on the original benefits payment report if the income earner’s tax liability has not changed between the benefit payment date and the recovery date.
Example 1. A sickness allowance of EUR 1,500 per month was paid to an income earner who is a non-resident taxpayer during 2023. The benefit was paid retroactively on a monthly basis between 1 March and 31 August 2023. After deducting tax at source (EUR 510 per month), the payer collected tax at source at the rate of 35% (EUR 346.50 per month).
In November, the payer sends an invoice to the income earner to collect sickness allowances paid in July and August of the same year, totalling EUR 3,000. On the recovery date, the income earner is still a non-resident taxpayer. The income earner pays the invoice on 15 November 2023. The payment is registered in the benefit payer’s systems on 19 November 2023. The payer submits a replacement report and reports the payments paid in July and August as an unjust enrichment.
The example report (Table 1) presents the payer’s replacement report for the benefits payment report submitted on 2 July 2023. In the replacement report, the payer reports an unjust enrichment. Both the original report and the replacement report indicate that the income earner is a non-resident taxpayer. A similar replacement report must also be submitted for the benefit paid in August.
| Record data | Values |
|---|---|
|
Payment date or other reporting date |
02.07.2023 |
| Report details | |
|
Service details |
|
|
Type of action |
Replacement report |
|
The payer’s report reference |
00XYZ3312121322 |
|
Income earner details |
|
|
Type of identifier |
Personal identity code |
|
Identifier |
ddmmyy-1234 |
|
Income earner details |
|
|
Type of identifier |
Tax Identification Number (TIN) |
|
Identifier |
(foreign TIN) |
|
Country code |
(country code) |
|
The income earner’s address |
(non-Finnish address) |
|
International situations |
|
|
Non-resident taxpayer |
Yes |
|
Country code of the country of residence |
(country code) |
|
General income type details |
|
|
Income type code |
Sickness allowance |
|
Amount |
1500.00 |
|
Unjust enrichment |
Yes |
|
Earnings period |
|
|
Start date |
01.06.2023 |
|
End date |
30.06.2023 |
|
General income type details |
|
|
Income type code |
Tax at source deduction |
|
Amount |
510.00 |
|
General income type details |
|
|
Income type code |
Tax at source |
|
Amount |
346.50 |
| Record data | Values |
|---|---|
|
Payment date or other reporting date |
19.11.2023 |
| Report details | |
|
Service details |
|
|
Type of action |
New report |
|
The payer’s report reference |
00XYZ3312121333 |
|
Income earner details |
|
|
Type of identifier |
Personal identity code |
|
Identifier |
ddmmyy-1234 |
|
Income earner details |
|
|
Type of identifier |
Tax Identification Number (TIN) |
|
Identifier |
(foreign TIN) |
|
Country code |
(country code) |
|
The income earner’s address |
(non-Finnish address) |
|
International situations |
|
|
Non-resident taxpayer |
Yes |
|
Country code of the country of residence |
(country code) |
|
General income type details |
|
|
Income type code |
Sickness allowance |
|
Amount |
3000.00 |
|
Recovery |
Yes |
|
Additional repayment details |
|
|
Repayment date |
15.11.2023 |
|
Tax at source from the repayment |
693.00 |
|
Original payment period |
|
|
Start date |
01.07.2023 |
|
End date |
31.08.2023 |
If the income earner’s tax liability changes from a resident taxpayer to a non-resident taxpayer, or the other way round, between the benefit payment date and the recovery date, the payer must report this information on the recovery report according to the income earner’s tax liability on the recovery date. However, if the payer does not have this information on the recovery date, the payer can report the income earner’s tax liability as it was on the benefit payment date.
If the payer recovers the payment during the year following the payment year by the due date confirmed by the Finnish Tax Administration, the information must be reported to the Incomes Register as in a situation where the payer recovers the payment during the payment year.
Example 2. A basic unemployment allowance of EUR 648 per month has been granted for an unemployed jobseeker who is a resident taxpayer between 1 June and 30 November 2023, and the allowance was paid retroactively on a monthly basis. A tax of 20% is withheld from the daily allowance (EUR 129.60 per month). In January 2024, the benefit payer notices that the daily allowance for November paid in December was paid erroneously because the income earner was employed. The payer recovers the payment as a net amount.
The income earner repays the net amount of EUR 518.40 on 3 March 2024, and the payment is registered in the benefit payer’s system on 8 March 2024. The income earner lives abroad and is a non-resident taxpayer in Finland from the beginning of 2024.
The example report (Table 1) presents a replacement report for the report submitted on 4 December 2023. In the replacement report, the payer reports an unjust enrichment. Because the income earner was a resident taxpayer in December 2023, “Non-resident taxpayer – Yes” is not entered on the report.
| Record data | Values |
|---|---|
|
Payment date or other reporting date |
04.12.2023 |
| Report details | |
|
Service details |
|
|
Type of action |
Replacement report |
|
The payer’s report reference |
00XYZ3522121141 |
|
Income earner details |
|
|
Type of identifier |
Personal identity code |
|
Identifier |
ddmmyy-1234 |
|
General income type details |
|
|
Income type code |
Basic unemployment allowance |
|
Amount |
648.00 |
|
Unjust enrichment |
Yes |
|
Earnings period |
|
|
Start date |
01.11.2023 |
|
End date |
30.11.2023 |
|
General income type details |
|
|
Income type code |
Withholding tax |
|
Amount |
129.60 |
| Record data | Values |
|---|---|
|
Payment date or other reporting date |
08.03.2024 |
| Report details | |
|
Service details |
|
|
Type of action |
New report |
|
The payer’s report reference |
00XYZ3312121333 |
|
Income earner details |
|
|
Type of identifier |
Personal identity code |
|
Identifier |
ddmmyy-1234 |
|
Income earner details |
|
|
Type of identifier |
Tax Identification Number (TIN) |
|
Identifier |
(foreign TIN) |
|
Country code |
(country code) |
|
The income earner’s address |
(non-Finnish address) |
|
International situations |
|
|
Non-resident taxpayer |
Yes |
|
Country code of the country of residence |
(country code) |
|
General income type details |
|
|
Income type code |
Basic unemployment allowance |
|
Amount |
648.00 |
|
Recovery |
Yes |
|
Additional repayment details |
|
|
Repayment date |
03.03.2024 |
|
Withholding from the repayment |
129.60 |
|
Original payment period |
|
|
Start date |
01.12.2023 |
|
End date |
31.12.2023 |
In certain international situations, information must be reported in the same way as in domestic situations. If an income earner who lives abroad and is a resident taxpayer receives the VILMA pension, part of which is taxed in Finland and part of which is only subject to the health care contribution, the Finnish Tax Administration will only calculate one average tax rate for the pension. The information must be reported to the Incomes Register as in a situation where the income earner lives in Finland. In this case, the payer does not report the Taxability of benefit data ”Earned income, only health care contribution is collected”. However, this must be entered in a situation where a tax treaty prevents all pensions of a single pension payer from being taxed and where a health care contribution is only collected from pensions.
Example 3. An income earner who lives in France and is a resident taxpayer received a pension of EUR 2,500 per month from 1 September 2021. The income earner earned EUR 1,500 of the pension working in the private sector and EUR 1,000 of the person working in a public organisation.
The tax treaty between France and Finland prevents the earnings-related pension earned when working in the private sector from being taxed in Finland. As Finland is responsible for the income earner’s medical expenses, a health care contribution is, however, imposed on the income. The pension paid by the public organisation is taxed in Finland. The benefit payer has received the income earner’s tax card, in which the average withholding rate (20%) applies to both pension components.
In December, the payer noticed that they had paid EUR 80 per month too much of pension earned when working in the private sector for the period between 1 September and 31 December 2021. The income earner repays the overpayment of EUR 320 on 17 January 2022, and the payment is registered in the payer’s system on 20 January 2022.
The example report (Table 1) presents a replacement report for the report submitted on 3 September 2021. In the replacement report, the payer reports an unjust enrichment. Corresponding replacement reports must also be provided for months when too much pension was paid.
| Record data | Values |
|---|---|
|
Payment date or other reporting date |
03.09.2021 |
| Report details | |
|
Service details |
|
|
Type of action |
Replacement report |
|
The payer’s report reference |
00XYZ3522121543 |
|
Income earner details |
|
|
Type of identifier |
Personal identity code |
|
Identifier |
ddmmyy-1234 |
|
General income type details |
|
|
Income type code |
Old-age pension |
|
Amount |
2420.00 |
|
Earnings period |
|
|
Start date |
01.09.2021 |
|
End date |
30.09.2021 |
|
General income type details |
|
|
Income type code |
Old-age pension |
|
Amount |
80.00 |
|
Unjust enrichment |
Yes |
|
Earnings period |
|
|
Start date |
01.09.2021 |
|
End date |
30.09.2021 |
|
General income type details |
|
|
Income type code |
Withholding tax |
|
Amount |
500.00 |
The following example report (Table 2) presents a report to be submitted on recovery.
| Record data | Values |
|---|---|
|
Payment date or other reporting date |
20.01.2022 |
| Report details | |
|
Service details |
|
|
Type of action |
New report |
|
The payer’s report reference |
00XYZ3712121672 |
|
Income earner details |
|
|
Type of identifier |
Personal identity code |
|
Identifier |
ddmmyy-1234 |
|
General income type details |
|
|
Income type code |
Old-age pension |
|
Amount |
320.00 |
|
Recovery |
Yes |
|
Additional repayment details |
|
|
Repayment date |
17.01.2022 |
|
Withholding from the repayment |
64.00 |
|
Original payment period |
|
|
Start date |
01.09.2021 |
|
End date |
31.12.2021 |
Example 4. A Finnish citizen who is a non-resident taxpayer but lives in France has earned their statutory earnings-related pension in the private sector (TyEL portion) and by working as an official in a Finnish public organisation (JuEL portion). The total pension paid is EUR 3,000 (EUR 2,000 + EUR 1,000) per month. As a non-resident taxpayer, the person has received two tax cards for the pension income. One tax card applies to the pension earned by working in the public organisation (withholding 10%, EUR 200) and the other applies to the other earnings-related pension (withholding 5%, EUR 50).
The benefit payer submits the benefits payment report for October 2023 to the Incomes Register as follows (Table 1):
|
Record data |
Values |
|
|
Date of payment or other reporting date |
15.10.2023 |
|
|
Report data |
||
|
Type of action |
New report |
|
|
Payer’s report reference |
123400005 |
|
|
Income earner details |
|
|
|
Type of identifier |
Personal identity code |
|
|
Identifier |
ddmmyy-1234 |
|
| International situations | ||
|
Non-resident taxpayer |
Yes |
|
|
Country code of the country of residence |
FR |
|
|
General income type details |
||
|
Income type code |
Old-age pension |
|
|
Amount |
1000.00 |
|
| Earnings period | ||
|
Start date |
01.10.2023 |
|
|
End date |
31.10.2023 |
|
| Grounds for pension paid to a non-resident tax-payer | Other payment based on social security legislation | |
|
General income type details |
||
|
Income type code |
Old-age pension |
|
|
Amount |
2000.00 |
|
| Earnings period | ||
|
Start date |
01.10.2023 |
|
|
End date |
31.10.2023 |
|
| Grounds for pension paid to a non-resident tax-payer | Earnings-related pension paid by a public sector organisation not earned from business activities | |
| General income type details | ||
|
Income type code |
Withholding tax |
|
|
Amount |
50.00 |
|
| Earnings period | ||
|
Start date |
15.10.2023 |
|
|
End date |
15.10.2023 |
|
| Grounds for pension paid to a non-resident tax-payer | Other payment based on social security legislation | |
| General income type details | ||
|
Income type code |
Withholding tax |
|
|
Amount |
200.00 |
|
| Earnings period | ||
|
Start date |
15.10.2023 |
|
|
End date |
15.10.2023 |
|
| Grounds for pension paid to a non-resident tax-payer | Earnings-related pension paid by a public sector organisation not earned from business activities | |
The income earner dies in September 2023, and the previously paid pension for October becomes an unjust enrichment. The payer submits a replacement report, indicating information about an unjust enrichment related to both pension portions.
|
Record data |
Values |
|
|
Date of payment or other reporting date |
15.10.2023 |
|
|
Report data |
||
|
Type of action |
Replacement report |
|
| Version number | n | |
|
Payer’s report reference |
123400005 |
|
|
Income earner details |
|
|
|
Type of identifier |
Personal identity code |
|
|
Identifier |
ddmmyy-1234 |
|
| International situations | ||
|
Non-resident taxpayer |
Yes |
|
|
Country code of the country of residence |
FR |
|
|
General income type details |
||
|
Income type code |
Old-age pension |
|
|
Amount |
1000.00 |
|
| Earnings period | ||
|
Start date |
01.10.2023 |
|
|
End date |
31.10.2023 |
|
| Unjust enrichment | Yes | |
| Grounds for pension paid to a non-resident tax-payer | Other payment based on social security legislation | |
|
General income type details |
||
|
Income type code |
Old-age pension |
|
|
Amount |
2000.00 |
|
| Earnings period | ||
|
Start date |
01.10.2023 |
|
|
End date |
31.10.2023 |
|
| Unjust enrichment | Yes | |
| Grounds for pension paid to a non-resident tax-payer | Earnings-related pension paid by a public sector organisation not earned from business activities | |
| General income type details | ||
|
Income type code |
Withholding tax |
|
|
Amount |
50.00 |
|
| Earnings period | ||
|
Start date |
15.10.2023 |
|
|
End date |
15.10.2023 |
|
| Grounds for pension paid to a non-resident tax-payer | Other payment based on social security legislation | |
| General income type details | ||
|
Income type code |
Withholding tax |
|
|
Amount |
200.00 |
|
| Earnings period | ||
|
Start date |
15.10.2023 |
|
|
End date |
15.10.2023 |
|
| Grounds for pension paid to a non-resident tax-payer | Earnings-related pension paid by a public sector organisation not earned from business activities | |
The overpayment of pension is returned to the payer. The payer submits a recovery report to the Incomes Register (Table 3).
|
Record data |
Values |
|
|
Date of payment or other reporting date |
15.11.2023 |
|
|
Report data |
||
|
Type of action |
New report |
|
|
Payer’s report reference |
123400006 |
|
|
Income earner details |
|
|
|
Type of identifier |
Personal identity code |
|
|
Identifier |
ddmmyy-1234 |
|
| International situations | ||
|
Non-resident taxpayer |
Yes |
|
|
Country code of the country of residence |
FR |
|
|
General income type details |
||
|
Income type code |
Old-age pension |
|
|
Amount |
1000.00 |
|
| Earnings period | ||
|
Start date |
01.10.2023 |
|
|
End date |
31.10.2023 |
|
| Recovery | Yes | |
| Grounds for pension paid to a non-resident tax-payer | Other payment based on social security legislation | |
| Additional repayment details | ||
| Repayment date | 29.10.2023 | |
| Withholding from the repayment | 50.00 | |
| Original payment period | ||
| Start date | 01.10.2023 | |
| End date | 31.10.2023 | |
|
General income type details |
||
|
Income type code |
Old-age pension |
|
|
Amount |
2000.00 |
|
| Earnings period | ||
|
Start date |
01.10.2023 |
|
|
End date |
31.10.2023 |
|
| Recovery | Yes | |
| Grounds for pension paid to a non-resident tax-payer | Earnings-related pension paid by a public sector organisation not earned from business activities | |
| Additional repayment details | ||
| Repayment date | 29.10.2023 | |
| Withholding from the repayment | 200.00 | |
| Original payment period | ||
| Start date | 01.10.2023 | |
| End date | 31.10.2023 | |
| Grounds for pension paid to a non-resident tax-payer | Earnings-related pension paid by a public sector organisation not earned from business activities | |
2.1.2 Gross recovery
If the benefit payer recovers an overpayment from the income earner as a gross amount, the recovery must be reported to the Incomes Register as net recovery (see Section 2.1.1 Net recovery). However, “Withholding from the repayment” or “Tax at source from the repayment” is not entered on the recovery report. In gross recovery, the payer can report the earnings period at the accuracy of the tax year.
2.2 The payer recovers a payment after the original payment year
If the payer recovers a payment at the beginning of the year following the payment year by the due date confirmed in the Finnish Tax Administration’s decision, the Finnish Tax Administration will apply the same procedure it applies to situations where the payer recovers a payment during the payment year.
However, if the payer recovers the payment after the due date confirmed in the Finnish Tax Administration’s decision during the year following the original payment year (or during years after that), the amount repaid will be deducted in the income earner’s taxation for the repayment year as a recovery deduction. According to the act on assessment procedure (verotusmenettelylaki 1558/1995), a recovered benefit will be taxed as the income earner’s income and withholding or tax at source will be credited to the income earner in taxation. The benefit payer must, therefore, recover an overpayment from the income earner as a gross amount. The payer must also recover any previously carried out withholding or previously collected tax at source from the income earner.
If the income earner is a non-resident taxpayer, the aforementioned procedure will only apply to income subject to tax at source in certain situations:
- The tax liability of the income earner has retroactively changed from a non-resident taxpayer to a resident taxpayer during the repayment year. The tax liability may change retroactively, for example, if the income earner moves back to Finland from abroad, while the payer obtains information about this afterwards.
- Tax at source collected from the benefit has been taken into consideration in the income earner’s taxation.
This procedure does not apply to that part of the year, during which the income earner was taxed as a non-resident taxpayer.
This procedure also applies to situations where the taxation of an income earner who is a non-resident taxpayer has been carried out in accordance with the act on assessment procedure, and tax at source has, therefore, been taken into consideration in the income earner’s taxation.
If the income earner’s tax liability changes between the benefit payment date and the recovery date, the payer must report this information on the recovery report according to the income earner’s tax liability on the recovery date. However, if the payer does not have this information on the recovery date, the payer can report the income earner’s tax liability as it was on the benefit payment date.
Example 5. An income earner who is a resident taxpayer received a total of EUR 2,252.52 in study grants during 2023. No withholding has been carried out from the study grants. In January 2024, the income earner moves abroad. This means the income earner is a non-resident taxpayer in Finland from the beginning of 2024. The payer recovers the study grant of EUR 250.28 paid for December 2023 from the income earner during 2024. The income earner repays the payment on 1 July 2024, and the payment is registered in the benefit payer’s system on 6 July 2024.
The example report (Table 1) presents a replacement report submitted for the study grant paid for December 2023, indicating an unjust enrichment. As the income earner was a resident taxpayer in December, “Non-resident taxpayer – Yes” is not entered on the replacement report.
| Record data | Values |
|---|---|
|
Payment date or other reporting date |
01.12.2023 |
| Report details | |
|
Service details |
|
|
Type of action |
Replacement report |
|
The payer’s report reference |
00XYZ33333322 |
|
Report version number |
n |
|
Income earner details |
|
|
General income type details |
|
|
Income type code |
Study grant |
|
Amount |
250.28 |
|
Unjust enrichment |
Yes |
|
Earnings period |
|
|
Start date |
01.12.2023 |
|
End date |
31.12.2023 |
The example report (Table 2) presents a new report, on which the payer reports the recovery of the December study grant. The payer reports the income earner’s tax liability in accordance with the recovery date, if known. Therefore, the payer enters “Non-resident taxpayer – Yes”.
| Record data | Values |
|---|---|
|
Payment date or other reporting date |
06.07.2024 |
| Report details | |
|
Service details |
|
|
Type of action |
New report |
|
The payer’s report reference |
00XYZ33333333 |
|
Income earner details |
|
|
Type of identifier |
Personal identity code |
|
Identifier |
ddmmyy-1234 |
|
Income earner details |
|
|
Type of identifier |
Tax Identification Number (TIN) |
|
Identifier |
(foreign TIN) |
|
Country code |
(country code) |
|
The income earner’s address |
(non-Finnish address) |
|
International situations |
|
|
Non-resident taxpayer |
Yes |
|
Country code of the country of residence |
(country code) |
|
General income type details |
|
|
Income type code |
Study grant |
|
Amount |
250.28 |
|
Recovery |
Yes |
|
Additional repayment details |
|
|
Repayment date |
01.07.2024 |
|
Original payment period |
|
|
Start date |
01.12.2023 |
|
End date |
31.12.2023 |
“Grounds for pension paid to a non-resident taxpayer” must be reported for a pension paid to a non-resident taxpayer. This information must be connected to the income type of the pension and withholding in the recovery report.
Example 6. An income earner who is a non-resident taxpayer has received a disability pension of EUR 1,000 per month from a Finnish pension payer from 1 October 2023. A tax of 40% has been withheld from the pension. In July 2024, the payer recovers the pensions paid in 2023 because the income earner was not entitled to the pension. The payer collects the payments as a gross amount because the recovery is carried out after the due date confirmed in the Finnish Tax Administration’s decision.
The income earner repays the benefit on 16 July 2024, and the payment is registered in the benefit payer’s systems on 21 July 2024. The payer reports recovery information to the Incomes Register on 21 July 2024.
The example report (Table 1) presents a replacement report submitted for the payment made in December, indicating an unjust enrichment. The payer must also submit similar replacement reports for October and November.
| Record data | Values |
|---|---|
|
Payment date or other reporting date |
07.12.2023 |
| Report details | |
|
Service details |
|
|
Type of action |
Replacement report |
|
The payer’s report reference |
00XYZ3312121212 |
|
Income earner details |
|
|
Type of identifier |
Personal identity code |
|
Identifier |
ddmmyy-1234 |
|
Income earner details |
|
|
Type of identifier |
Tax Identification Number (TIN) |
|
Identifier |
(foreign TIN) |
|
Country code |
(country code) |
|
The income earner’s address |
(non-Finnish address) |
|
International situations |
|
|
Non-resident taxpayer |
Yes |
|
Country code of the country of residence |
(country code) |
|
General income type details |
|
|
Income type code |
Disability pension |
|
Amount |
1000.00 |
|
Unjust enrichment |
Yes |
|
Earnings period |
|
|
Start date |
01.12.2023 |
|
End date |
31.12.2023 |
|
General income type details |
|
|
Income type code |
Withholding tax |
|
Amount |
400.00 |
|
Grounds for pension paid to a non-resident taxpayer |
Other payment based on social security legislation |
The payer reports recovery information to the Incomes Register on 21 July 2024 (Table 2).
| Record data | Values |
|---|---|
|
Payment date or other reporting date |
21.07.2024 |
| Report details | |
|
Service details |
|
|
Type of action |
New report |
|
The payer’s report reference |
00XYZ3312121212 |
|
Income earner details |
|
|
Type of identifier |
Personal identity code |
|
Identifier |
ddmmyy-1234 |
|
Income earner details |
|
|
Type of identifier |
Tax Identification Number (TIN) |
|
Identifier |
(foreign TIN) |
|
Country code |
(country code) |
|
The income earner’s address |
(non-Finnish address) |
|
International situations |
|
|
Non-resident taxpayer |
Yes |
|
Country code of the country of residence |
(country code) |
|
General income type details |
|
|
Income type code |
Disability pension |
|
Amount |
3000.00 |
|
Grounds for pension paid to a non-resident taxpayer |
Other payment based on social security legislation |
|
Recovery |
Yes |
|
Additional repayment details |
|
|
Repayment date |
16.07.2024 |
|
Original payment period |
|
|
Start date |
01.10.2023 |
|
End date |
31.12.2023 |
The benefit payer can also report the payment date of the original payment as additional repayment information. In this case, the Finnish Tax Administration will adjust the payer’s withholding obligation for the month, during which the original payment was paid. If the payer does not report the original payment date, the Finnish Tax Administration will allocate the payment to the tax period pertaining to the end date of the original payment period.
On the recovery report, the payer must report the income earner’s tax liability on the basis of the recovery date. If the income earner is a non-resident taxpayer on the recovery date and the payer recovers a pension, the payer must also enter “Grounds for pension paid to a non-resident taxpayer”. However, if the payer does not have this information about the tax liability on the recovery date, the income earner’s tax liability can be reported as it was on the benefit payment date.
Example 7. A disability pension of EUR 2,000 per month has been paid in Finland between 1 October and 31 December 2023 to an income earner who is a resident taxpayer. The payer has carried out a withholding of 10% (EUR 200 per month).
In March 2024, the payer notices that EUR 200 has been overpaid every month. The payer recovers the overpaid pension in May. Between the payment date and the recovery date, the tax liability of the income earner has changed from a resident taxpayer to a non-resident taxpayer.
The income earner repays an overpayment of EUR 600 on 3 May 2024. The payment is registered in the benefit payer’s systems on 6 May 2024, and the payer reports information about the recovery on the same day.
The example report (Table 1) presents a replacement report for October. The payer must also submit similar replacement reports for November and December.
| Record data | Values |
|---|---|
|
Payment date or other reporting date |
05.10.2023 |
| Report details | |
|
Service details |
|
|
Type of action |
Replacement report |
|
The payer’s report reference |
00XYZ3312121212 |
|
Income earner details |
|
|
Type of identifier |
Personal identity code |
|
Identifier |
ddmmyy-1234 |
|
General income type details |
|
|
Income type code |
Disability pension |
|
Amount |
1800.00 |
|
Earnings period |
|
|
Start date |
01.10.2023 |
|
End date |
31.10.2023 |
|
General income type details |
|
|
Income type code |
Disability pension |
|
Amount |
200.00 |
|
Unjust enrichment |
Yes |
|
Earnings period |
|
|
Start date |
01.10.2023 |
|
End date |
31.10.2023 |
|
General income type details |
|
|
Income type code |
Withholding tax |
|
Amount |
200.00 |
The payer reports recovery information to the Incomes Register on 6 May 2024 (Table 2). As the income earner is a non-resident taxpayer on the recovery date, the payer enters “Non-resident taxpayer – Yes” on the recovery report.
| Record data | Values |
|---|---|
|
Payment date or other reporting date |
06.05.2024 |
| Report details | |
|
Service details |
|
|
Type of action |
New report |
|
The payer’s report reference |
00XYZ33333444 |
|
Income earner details |
|
|
Type of identifier |
Personal identity code |
|
Identifier |
ddmmyy-1234 |
|
Income earner details |
|
|
Type of identifier |
Tax Identification Number (TIN) |
|
Identifier |
(foreign TIN) |
|
Country code |
(country code) |
|
The income earner’s address |
(non-Finnish address) |
|
International situations |
|
|
Non-resident taxpayer |
Yes |
|
Country code of the country of residence |
(country code) |
|
General income type details |
|
|
Income type code |
Disability pension |
|
Amount |
600.00 |
|
Grounds for pension paid to a non-resident taxpayer |
Other payment based on social security legislation |
|
Recovery |
Yes |
|
Additional repayment details |
|
|
Repayment date |
03.05.2024 |
|
Original payment period |
|
|
Start date |
01.10.2023 |
|
End date |
31.12.2023 |
3 The payer offsets a benefit from a benefit paid later
Section 112 a, subsection 2 of the act on income tax lays down provisions on the offsetting procedure, in which a single benefit payer collects an erroneously paid benefit from a benefit the payer pays later. In offsetting situations, taxation follows the same principles as when an income earner independently repays a payment. For more information about the application of the provision, see instructions Benefits: Recovery and recourse (Section 3 Offsetting). In international offsetting situations, whether the income earner is a resident or non-resident taxpayer when the payer pays the previous benefit and when the payer offsets the benefit from a later benefit affects how the information is reported.
3.1 Offsetting and the original payment in the same year
If the payer of the earlier and later benefit is the same, and offsetting is carried out during the year in which the original payment was made, the payer can deduct the gross amount of the payment from the gross amount of the payment to be made later to the income earner. In this case, the payer does not need to adjust the amount of previously carried out withholding or previously collected tax at source. Instead, it is sufficient that the payer calculates the withholding or tax at source from the gross amount of the benefit paid.
Example 8. An income earner who is a resident taxpayer has received a national pension of EUR 660 a month from January 2023. A tax of 15% is withheld from the pension (EUR 99 per month). In September 2023, the payer notices that EUR 70 has been paid excessively every month between 1 January and 30 September. The total overpayment is EUR 630.
It is agreed with the income earner that the excessively paid pension will be offset in three instalments (EUR 210 per instalment). Two instalments are offset from the national pension paid during the same year (EUR 590). The payer offsets the first instalment in November and the second instalment in December. The third instalment is not offset until in the following year (see Example 8).
The income earner’s tax liability changes to a non-resident taxpayer from the beginning of November 2023. The income earner has provided the benefit payer with a new tax card of a non-resident taxpayer with a withholding rate of 10%. When offsetting the first two instalments, the income earner is, however, a resident taxpayer.
After noticing the error, the payer submits replacement reports in September. The example report (Table 1) presents a replacement report indicating an unjust enrichment for January. The payer must also submit corresponding replacement reports for the other months when the pension was paid excessively.
| Record data | Values |
|---|---|
|
Payment date or other reporting date |
05.01.2023 |
| Report details | |
|
Service details |
|
|
Type of action |
Replacement report |
|
The payer’s report reference |
20YY00023120 |
|
Report version number |
n |
|
Income earner details |
|
|
Type of identifier |
Personal identity code |
|
Identifier |
ddmmyy-1234 |
|
General income type details |
|
|
Income type code |
National pension |
|
Amount |
590.00 |
|
Earnings period |
|
|
Start date |
01.01.2023 |
|
End date |
31.01.2023 |
|
General income type details |
|
|
Income type code |
Disability pension |
|
Amount |
70.00 |
|
Unjust enrichment |
Yes |
|
Earnings period |
|
|
Start date |
01.01.2023 |
|
End date |
31.01.2023 |
|
General income type details |
|
|
Income type code |
Withholding tax |
|
Amount |
99.00 |
The payer recovers the payment in conjunction with the payment of the national pension in November by offsetting the first instalment of EUR 210 of the overpayment from the pension. Tax is withheld from the gross amount paid, i.e. EUR 380 (EUR 590-210).
The example report (Table 2) presents a report submitted in November, indicating the offsetting of income. Because the income earner has become a non-resident taxpayer between the original payment date and the offsetting date, “Non-resident taxpayer – Yes” and “Grounds for pension paid to a non-resident taxpayer” must also be entered for the income earner on the recovery report submitted in November.
| Record data | Values |
|---|---|
|
Payment date or other reporting date |
05.11.2023 |
| Report details | |
|
Service details |
|
|
Type of action |
New report |
|
The payer’s report reference |
20YY0009053820 |
|
Income earner details |
|
|
Type of identifier |
Personal identity code |
|
Identifier |
ddmmyy-1234 |
|
Income earner details |
|
|
Type of identifier |
Tax Identification Number (TIN) |
|
Identifier |
(foreign TIN) |
|
Country code |
(country code) |
|
The income earner’s address |
(non-Finnish address) |
|
International situations |
|
|
Non-resident taxpayer |
Yes |
|
Country code of the country of residence |
(country code) |
|
General income type details |
|
|
Income type code |
National pension |
|
Amount |
590.00 |
|
Recovery |
Yes |
|
Grounds for pension paid to a non-resident taxpayer |
Non-earnings-related pension paid by the Social Insurance Institution of Finland or the State Treasury |
|
Earnings period |
|
|
Start date |
01.11.2023 |
|
End date |
31.11.2023 |
|
General income type details |
|
|
Income type code |
National pension |
|
Amount |
210.00 |
|
Grounds for pension paid to a non-resident taxpayer |
Non-earnings-related pension paid by the Social Insurance Institution of Finland or the State Treasury |
|
Recovery |
Yes |
|
Additional repayment details |
|
|
Repayment date |
05.11.2023 |
|
Original payment period |
|
|
Start date |
01.01.2023 |
|
End date |
31.03.2023 |
|
General income type details |
|
|
Income type code |
Withholding tax |
|
Amount |
38.00 |
|
Grounds for pension paid to a non-resident taxpayer |
Non-earnings-related pension paid by the Social Insurance Institution of Finland or the State Treasury |
3.2 Offsetting at the beginning of the year following the payment year by the due date confirmed by the Finnish Tax Administration
When offsetting is carried out at the beginning of the year following the original benefit payment year by the due date confirmed in the Finnish Tax Administration’s decision, the recovered amount must be included in the amount from which tax is withheld when calculating the withholding of the new benefit. The benefit payer deducts the recovered amount from the amount paid to the income earner.
Example 9. An income earner who is a resident taxpayer has received a national pension of EUR 660 a month from January 2023. A tax of 15% is withheld from the pension (EUR 99 per month). In September, the payer notices that EUR 70 has been paid excessively every month between 1 January and 30 September. The total overpayment is EUR 630.
It is agreed with the income earner that the excessively paid pension will be offset in three instalments from the national pension paid to the income earner (EUR 590). Two instalments are offset during the same year in which the original payment was paid (see Example 7, including a replacement report on an unjust enrichment). The payer offsets the final instalment in January 2024. The final instalment concerns an overpayment made in July, August and September.
The income earner is a non-resident taxpayer in 2024. The income earner has provided the benefit payer with a tax card of a non-resident taxpayer with a withholding rate of 10%. The pension amount is EUR 590 in January 2024. The payer withholds tax from the gross amount because the total income comprises taxable income during the repayment year. Withholding from the income amounts to EUR 59. The payer deducts the net amount of the overpayment of EUR 178.50 (the gross amount of the overpayment is EUR 210, from which a withholding of EUR 31.50 has been deducted) from the amount of EUR 531 remaining after withholding and pays EUR 352.50 to the income earner.
“Non-resident taxpayer – Yes” and “Grounds for pension paid to a non-resident taxpayer” must be entered on the recovery report because the income earner is a non-resident taxpayer on the recovery date of the final instalment.
The example report presents a report submitted in January, indicating the offsetting of income.
| Record data | Values |
|---|---|
|
Payment date or other reporting date |
05.01.2024 |
| Report details | |
|
Service details |
|
|
Type of action |
New report |
|
The payer’s report reference |
20YY0009053850 |
|
Income earner details |
|
|
Type of identifier |
Personal identity code |
|
Identifier |
ddmmyy-1234 |
|
Income earner details |
|
|
Type of identifier |
Tax Identification Number (TIN) |
|
Identifier |
(foreign TIN) |
|
Country code |
(country code) |
|
The income earner’s address |
(non-Finnish address) |
|
International situations |
|
|
Non-resident taxpayer |
Yes |
|
Country code of the country of residence |
(country code) |
|
General income type details |
|
|
Income type code |
National pension |
|
Amount |
590.00 |
|
Grounds for pension paid to a non-resident taxpayer |
Non-earnings-related pension paid by the Social Insurance Institution of Finland or the State Treasury |
|
Earnings period |
|
|
Start date |
01.01.2024 |
|
End date |
31.01.2024 |
|
General income type details |
|
|
Income type code |
National pension |
|
Amount |
210.00 |
|
Grounds for pension paid to a non-resident taxpayer |
Non-earnings-related pension paid by the Social Insurance Institution of Finland or the State Treasury |
|
Recovery |
Yes |
|
Additional repayment details |
|
|
Repayment date |
05.01.2024 |
|
Withholding from the repayment |
31.50 |
|
Original payment period |
|
|
Start date |
01.07.2023 |
|
End date |
30.09.2023 |
|
General income type details |
|
|
Income type code |
Withholding tax |
|
Amount |
59.00 |
|
Grounds for pension paid to a non-resident taxpayer |
Non-earnings-related pension paid by the Social Insurance Institution of Finland or the State Treasury |
3.3 Offsetting after the original payment year
If a payment is recovered during the year following the payment year after the due date confirmed in the Finnish Tax Administration’s decision or during later years, the recovery can no longer be taken into consideration in the original payment year’s taxation. In this case, the recovered amount is deducted in the recovery year’s taxation as a recovery deduction.
If the income earner is a non-resident taxpayer, the aforementioned procedure only applies to income subject to tax at source if the tax liability of the income earner has later and retroactively changed from a non-resident taxpayer to a resident taxpayer during the year and tax at source collected from the benefit has been taken into consideration in the income earner’s taxation. This procedure does not apply to that part of the year, during which the income earner was taxed as a non-resident taxpayer.
This procedure also applies to situations where the taxation of an income earner who is a non-resident taxpayer has been carried out in accordance with the tax on assessment procedure, and tax at source has been taken into consideration in the income earner’s taxation.
The benefit payer should not take into consideration the recovered amount when withholding tax from the payment from which the previous payment is offset. Offsetting is made as a gross amount.
Example 10. The benefit payer has paid a pension from 1 August 2023 to an income earner who lives in France and is a non-resident taxpayer. For their statutory earnings-related pension, the income earner has earned EUR 1,300 per month (TyEL component) by working in the private sector and EUR 700 per month (JuEL component) by working as an official in a Finnish public organisation. The income earner receives total pensions of EUR 2,200 per month.
As the income earner is a non-resident taxpayer, they have received two tax cards for their pension income. One tax card applies to the pension earned by working in the public organisation (withholding 15%) and the other applies to the other earnings-related pension (withholding 1.5%). Withholding from the pension earned by working in the public organisation is EUR 105 and that from the other earnings-related pension is EUR 19.50.
In April 2024, the payer notices that EUR 100 per month has been paid excessively between 1 August and 31 December 2023 regarding the pension earned by working in the public organisation. In May 2024, the income earner receives EUR 1,900 in pensions. The overpayment of EUR 500 is offset from the pension paid in May.
After noticing the error, the benefit payer submits replacement reports. The example report (Table 1) presents a replacement report indicating an unjust enrichment for August. The payer must also submit corresponding replacement reports for the other months when the pension was paid excessively.
| Record data | Values |
|---|---|
|
Payment date or other reporting date |
01.08.2023 |
| Report details | |
|
Service details |
|
|
Type of action |
Replacement report |
|
The payer’s report reference |
20YY0009054752 |
|
Income earner details |
|
|
Type of identifier |
Personal identity code |
|
Identifier |
ddmmyy-1234 |
|
Income earner details |
|
|
Type of identifier |
Tax Identification Number (TIN) |
|
Identifier |
(foreign TIN) |
|
Country code |
(country code) |
|
The income earner’s address |
Address in France |
|
International situations |
|
|
Non-resident taxpayer |
Yes |
|
Country code of the country of residence |
FR |
|
General income type details |
|
|
Income type code |
Old-age pension |
|
Amount |
1300.00 |
|
Earnings period |
|
|
Start date |
01.08.2023 |
|
End date |
31.08.2023 |
|
Grounds for pension paid to a non-resident taxpayer |
Other payment based on social security legislation |
|
General income type details |
|
|
Income type code |
Old-age pension |
|
Amount |
600.00 |
|
Earnings period |
|
|
Start date |
01.08.2023 |
|
End date |
31.08.2023 |
|
Grounds for pension paid to a non-resident taxpayer |
Earnings-related pension paid by a public sector organisation not earned from business activities |
|
General income type details |
|
|
Income type code |
Old-age pension |
|
Amount |
100.00 |
|
Earnings period |
|
|
Start date |
01.08.2023 |
|
End date |
31.08.2023 |
|
Unjust enrichment |
Yes |
|
Grounds for pension paid to a non-resident taxpayer |
Earnings-related pension paid by a public sector organisation not earned from business activities |
|
General income type details |
|
|
Income type code |
Withholding tax |
|
Amount |
19.50 |
|
Grounds for pension paid to a non-resident taxpayer |
Other payment based on social security legislation |
|
General income type details |
|
|
Income type code |
Withholding tax |
|
Amount |
105.00 |
|
Grounds for pension paid to a non-resident taxpayer |
Earnings-related pension paid by a public sector organisation not earned from business activities |
| Record data | Values |
|---|---|
|
Payment date or other reporting date |
03.05.2024 |
| Report details | |
|
Service details |
|
|
Type of action |
New report |
|
The payer’s report reference |
123400001 |
|
Income earner details |
|
|
Type of identifier |
Personal identity code |
|
Identifier |
ddmmyy-1234 |
|
Income earner details |
|
|
Type of identifier |
Tax Identification Number (TIN) |
|
Identifier |
(foreign TIN) |
|
Country code |
(country code) |
|
The income earner’s address |
Address in France |
|
International situations |
|
|
Non-resident taxpayer |
Yes |
|
Country code of the country of residence |
FR |
|
General income type details |
|
|
Income type code |
Old-age pension |
|
Amount |
1300.00 |
|
Earnings period |
|
|
Start date |
01.05.2024 |
|
End date |
31.05.2024 |
|
Grounds for pension paid to a non-resident taxpayer |
Other payment based on social security legislation |
|
General income type details |
|
|
Income type code |
Old-age pension |
|
Amount |
600.00 |
|
Earnings period |
|
|
Start date |
01.05.2024 |
|
End date |
31.05.2024 |
|
Grounds for pension paid to a non-resident taxpayer |
Earnings-related pension paid by a public sector organisation not earned from business activities |
|
General income type details |
|
|
Income type code |
Old-age pension |
|
Amount |
500.00 |
|
Recovery |
Yes |
|
Grounds for pension paid to a non-resident taxpayer |
Earnings-related pension paid by a public sector organisation not earned from business activities |
|
Additional repayment details |
|
|
Repayment date |
03.05.2024 |
|
Original payment period |
|
|
Start date |
01.08.2023 |
|
End date |
31.12.2023 |
|
General income type details |
|
|
Income type code |
Withholding tax |
|
Amount |
19.50 |
|
Grounds for pension paid to a non-resident taxpayer |
Other payment based on social security legislation |
|
General income type details |
|
|
Income type code |
Withholding tax |
|
Amount |
90.00 |
|
Grounds for pension paid to a non-resident taxpayer |
Earnings-related pension paid by a public sector organisation not earned from business activities |
4 Recourse situations
Section 112 a, subsection 3 of the act on income tax lays down provisions on recourse situations where different benefits are paid simultaneously and the payer of the first (earlier) benefit recovers a benefit which is found to be secondary to another (later) benefit. This provision only applies to taxable income. For more information about the application of the provision, see instructions Benefits: Recovery and recourse (Section 4 Recourse situations).
In international recourse situations, information must be reported differently than in situations where both payers and the income earner are located in Finland. In international situations, the payer of an earlier or later benefit is usually non-Finnish. Alternatively, both payers are Finnish, while the income earner lives abroad.
Section 112 a, subsection 3 of the act on income tax is only applicable to certain international recourse situations:
- The provision cannot be applied if a Finnish payer pays a benefit as a recourse to a non-Finnish payer (Section 4.1).
- The provision can be applied if a non-Finnish payer pays a benefit as a recourse to a Finnish payer (Section 4.2).
- The provision cannot be applied if both payers are Finnish but the income earner lives abroad (Section 4.3).
So that all data users obtain the information required about recourse situations, the recourse must be reported to the Incomes Register using the “Deductions” data group. The payer of the earlier benefit must submit a replacement report to the Incomes Register, on which the payer must enter “Recourse – Yes” in addition to previously reported information. This indicates that the previously paid income has been received as a recourse from another payer on the basis of a recourse claim. However, if section 112 a, subsection 3 of the act on income tax cannot be applied to a recourse situation, the payer must report the “Recourse from tax-exempt income” deduction type.
4.1 A Finnish payer pays a benefit as a recourse to a non-Finnish payer
Recourse provisions laid down in section 112 a, subsection 3 of the act on income tax apply to taxable income. This provision cannot be applied to situations where a non-Finnish payer has paid an earlier benefit to an income earner and later a Finnish payer pays a retroactive benefit to the income earner over the same period.
The taxation of a benefit paid from outside Finland in Finland is affected by the provisions of the act on income tax and tax treaties. Therefore, the Finnish payer cannot know whether the original income has been taxed in Finland. The payer enters the “Recourse from tax-exempt income” deduction type on the report. The payer must carry out withholding or collect tax at source from the full amount of the retroactive benefit.
It should be noted that the non-Finnish benefit payer is not obligated to report information to the Incomes Register. Therefore, not all information about the recovery is transmitted to the Finnish Tax Administration, and the income earner must independently apply for a change to their taxation.
Example 11. A non-Finnish payer has paid a benefit of EUR 700 per month between 1 July 2023 and 30 April 2024 to an income earner who lives abroad and is a non-resident taxpayer. A Finnish payer makes a retroactive pension decision on a disability pension on 1 May 2024. A total of EUR 10,000 (EUR 1,000 per month) of the retroactive pension is paid over 1 July 2023 to 30 April 2024.
The proportion of the non-Finnish pension provider from the retroactive payment is the net amount of EUR 7,000 (EUR 7,777.80 (gross) - EUR 777.80 (tax)). The proportion of the income earner from the retroactive payment is the net amount of EUR 2,000 (EUR 2,222.20 (gross) - EUR 222.20 (tax)).
The pension of EUR 1,000 for May 2024 is paid to the income earner. The income earner has provided the pension payer with their tax card (withholding 10%).
The Finnish payer reports the full pension paid retroactively and the tax withheld from it to the Incomes Register. “Recourse from tax-exempt income” is selected as the deduction type.
| Record data | Values |
|---|---|
|
Payment date or other reporting date |
05.05.2024 |
| Report details | |
|
Service details |
|
|
Type of action |
New report |
|
The payer’s report reference |
00XYZ33333333 |
|
Income earner details |
|
|
Type of identifier |
Personal identity code |
|
Identifier |
ddmmyy-1234 |
|
Income earner details |
|
|
Type of identifier |
Tax Identification Number (TIN) |
|
Identifier |
(foreign TIN) |
|
Country code |
(country code) |
|
The income earner’s address |
(non-Finnish address) |
|
International situations |
|
|
Non-resident taxpayer |
Yes |
|
Country code of the country of residence |
(country code) |
|
General income type details |
|
|
Income type code |
Disability pension |
|
Amount |
1000.00 |
|
Earnings period |
|
|
Start date |
01.05.2024 |
|
End date |
31.05.2024 |
|
Grounds for pension paid to a non-resident taxpayer |
Other payment based on social security legislation |
|
General income type details |
|
|
Income type code |
Disability pension |
|
Amount |
4000.00 |
|
One-off remuneration |
|
|
Earnings period |
|
|
Start date |
01.01.2024 |
|
End date |
30.04.2024 |
|
Grounds for pension paid to a non-resident taxpayer |
Other payment based on social security legislation |
|
Deductions |
|
|
Deduction income type code |
Other benefit |
|
Type of deduction |
Recourse from tax-exempt income |
|
Amount of deduction |
2800.00 |
|
Original payment period |
|
|
Start date |
01.01.2024 |
|
End date |
30.04.2024 |
|
Substitute recipient details |
|
|
Type of identifier |
Foreign business registration number |
|
Identifier |
(foreign business registration number) |
|
Country code |
(country code) |
|
Company name |
(company name) |
|
Type of substitute recipient |
Foreign pension provider |
|
General income type details |
|
|
Income type code |
Disability pension |
|
Amount |
6000.00 |
|
One-off remuneration |
Yes |
|
Earnings period |
|
|
Start date |
01.07.2023 |
|
End date |
31.12.2023 |
|
Grounds for pension paid to a non-resident taxpayer |
Other payment based on social security legislation |
|
Deductions |
|
|
Deduction income type code |
Other benefit |
|
Type of deduction |
Recourse from tax-exempt income |
|
Amount of deduction |
4200.00 |
|
Original payment period |
|
|
Start date |
01.07.2023 |
|
End date |
31.12.2023 |
|
Substitute recipient details |
|
|
Type of identifier |
Foreign business registration number |
|
Identifier |
(foreign business registration number) |
|
Country code |
(country code) |
|
Company name |
(company name) |
|
Type of substitute recipient |
Foreign pension provider |
|
General income type details |
|
|
Income type code |
Withholding tax |
|
Grounds for pension paid to a non-resident taxpayer |
Other payment based on social security legislation |
|
Amount (10% from EUR 11,000) |
1100.00 |
If an income earner who lives in Finland receives a benefit from abroad, the payer of the later benefit cannot know for certain whether the benefit paid earlier has been taxable in Finland. Therefore, the “Recourse from tax-exempt income” deduction type must also be used on the recovery report in these situations.
Example 12. A non-Finnish payer has paid a benefit of EUR 1,000 per month between 1 May 2023 and 30 April 2024 to an income earner who lives in Finland and is a resident taxpayer. A Finnish payer makes a retroactive pension decision on a disability pension on 1 May 2024. A total of EUR 24,000 (EUR 2,000 per month) of the retroactive pension is paid over 1 May 2023 to 30 April 2024.
The Finnish payer pays EUR 12,000 (EUR 1,000 per month) from the retroactive pension to the non-Finnish pension payer over the same period, over which the earlier benefit was paid. The remaining retroactive pension (EUR 12,000) and the May pension of EUR 2,000 are paid to the income earner. The income earner has provided the pension payer with their tax card (withholding 22%).
The Finnish payer reports the full pension paid retroactively and the tax withheld from it to the Incomes Register. “Recourse from tax-exempt income” is selected as the deduction type.
| Record data | Values |
|---|---|
|
Payment date or other reporting date |
05.05.2024 |
| Report details | |
|
Service details |
|
|
Type of action |
New report |
|
The payer’s report reference |
00XYZ2222222222 |
|
Income earner details |
|
|
General income type details |
|
|
Income type code |
Disability pension |
|
Amount |
2000.00 |
|
Earnings period |
|
|
Start date |
01.05.2024 |
|
End date |
31.05.2024 |
|
General income type details |
|
|
Income type code |
Disability pension |
|
Amount |
8000.00 |
|
One-off remuneration |
Yes |
|
Earnings period |
|
|
Start date |
01.01.2024 |
|
End date |
30.04.2024 |
|
Grounds for pension paid to a non-resident taxpayer |
Other payment based on social security legislation |
|
Deductions |
|
|
Deduction income type code |
Other benefit |
|
Type of deduction |
Recourse from tax-exempt income |
|
Amount of deduction |
4000.00 |
|
Original payment period |
|
|
Start date |
01.01.2024 |
|
End date |
30.04.2024 |
|
Substitute recipient details |
|
|
Type of identifier |
Foreign business registration number |
|
Identifier |
(foreign business registration number) |
|
Country code |
(country code) |
|
Company name |
(company name) |
|
Type of substitute recipient |
Foreign pension provider |
|
General income type details |
|
|
Income type code |
Disability pension |
|
Amount |
16000.00 |
|
One-off remuneration |
Yes |
|
Earnings period |
|
|
Start date |
01.05.2023 |
|
End date |
31.12.2023 |
|
Deductions |
|
|
Deduction income type code |
Other benefit |
|
Type of deduction |
Recourse from tax-exempt income |
|
Amount of deduction |
8000.00 |
|
Original payment period |
|
|
Start date |
01.05.2023 |
|
End date |
31.12.2023 |
|
Substitute recipient details |
|
|
Type of identifier |
Foreign business registration number |
|
Identifier |
(foreign business registration number) |
|
Country code |
(country code) |
|
Company name |
(company name) |
|
Type of substitute recipient |
Foreign pension provider |
|
General income type details |
|
|
Income type code |
Withholding tax |
|
Amount (22% from EUR 26,000) |
5720.00 |
4.2 A non-Finnish payer pays a benefit as a recourse to a Finnish payer
The recourse provisions laid down in section 112 a, subsection 3 of the act on income tax cannot be applied to situations where a Finnish payer has paid an earlier benefit to an income earner and later a non-Finnish payer pays a retroactive benefit to the income earner over the same period.
When the non-Finnish benefit payer pays part of the benefit directly to the Finnish benefit payer, the Finnish payer must submit a replacement report for the months, over which they received a recourse payment from the non-Finnish payer. On the replacement report, the payer must enter “Recourse – Yes” in relation to the income type in addition to the previously reported information. This indicates that the previously paid income has been received as a recourse from another payer on the basis of a recourse claim.
It should be noted that the non-Finnish benefit payer is not obligated to report information to the Incomes Register. Therefore, not all information about the recovery is transmitted to the Finnish Tax Administration, and the income earner must independently apply for a change to their taxation.
Example 13. A Finnish payer has paid a sickness allowance of EUR 1,000 per month from 1 February 2023 to an income earner who lives in Finland and is a resident taxpayer. A tax of 25% is withheld from the income earner’s sickness allowance (EUR 250 per month). An Estonian pension provider makes a pension decision on 1 May 2024. The pension provider pays a retroactive pension of EUR 1,200 per month from 1 October 2023 from Estonia to the income earner.
A total of EUR 1,000 per month is paid to the Finnish sickness allowance payer over three months from the retroactive pension for 2023 (EUR 3,000 in total), and the remaining part of EUR 200 per month (EUR 600 in total) is paid to the income earner. A total of EUR 4,000 per month is paid to the Finnish sickness allowance payer and a total of EUR 800 per month is paid to the income earner from the retroactive pension for 2024.
When the Finnish benefit payer has received the recourse payment, the payer submits a replacement report to the Incomes Register. The payer enters “Recourse – Yes” on the replacement report. The example report presents a replacement report submitted by the payer of the earlier benefit for Octo-ber 2023. The payer must submit corresponding reports for all the months, over which the payer has received a recourse payment.
| Record data | Values |
|---|---|
|
Payment date or other reporting date |
30.10.2023 |
| Report details | |
|
Service details |
|
|
Type of action |
New report |
|
Report reference |
00XYZ272813665 |
|
Report version number |
n |
|
Income earner details |
|
|
General income type details |
|
|
Income type code |
Sickness allowance |
|
Amount |
1000.00 |
|
Recourse |
Yes |
|
Earnings period |
|
|
Start date |
01.10.2023 |
|
End date |
30.10.2023 |
|
General income type details |
|
|
Income type code |
Withholding tax |
|
Amount |
250.00 |
If the income earner is a non-resident taxpayer, the payer must, in recourse situations, enter “Non-resident taxpayer – Yes” and “Grounds for pension paid to a non-resident taxpayer” similarly as in the original benefits payment report.
Example 14. An income earner who lives abroad and is a non-resident taxpayer has received a national pension of EUR 600 per month in Finland from 1 May 2023. A non-Finnish payer makes a retroactive pension decision on 1 February 2024. The non-Finnish payer pays a retroactive pension of EUR 3,200 in total (EUR 800 per month) over 1 September to 31 December 2023. A total of EUR 2,400 is paid to the Finnish payer as a recourse and the remaining EUR 800 are paid to the income earner from the retroactive pension.
The pension paid to the non-resident taxpayer comprises income received from Finland. However, a tax treaty between Finland and the country of residence may have prevented the benefit from being taxed in Finland. Withholding has been carried out from the benefit in accordance with the tax card provided for the payer. The pension received from abroad does not comprise taxable income in Finland for the non-resident taxpayer.
When the Finnish benefit payer has received the recourse payment, the payer submits a replacement report to the Incomes Register. The payer enters “Recourse – Yes” on the report. The example report presents a replacement report submitted by the Finnish payer over September. The payer must submit corresponding reports for all the months, over which the payer has received a recourse payment.
| Record data | Values |
|---|---|
|
Payment date or other reporting date |
06.09.2023 |
| Report details | |
|
Service details |
|
|
Type of action |
Replacement report |
|
The payer’s report reference |
00XYZ33523443 |
|
Income earner details |
|
|
Type of identifier |
Personal identity code |
|
Identifier |
ddmmyy-1234 |
|
Income earner details |
|
|
Type of identifier |
Tax Identification Number (TIN) |
|
Identifier |
(foreign TIN) |
|
Country code |
(country code) |
|
The income earner’s address |
(non-Finnish address) |
|
International situations |
|
|
Non-resident taxpayer |
Yes |
|
Country code of the country of residence |
(country code) |
|
General income type details |
|
|
Income type code |
National pension |
|
Amount |
600.00 |
|
Recourse |
Yes |
|
Earnings period |
|
|
Start date |
01.09.2023 |
|
End date |
30.09.2023 |
|
Grounds for pension paid to a non-resident taxpayer |
Non-earnings-related pension paid by the Social Insurance Institution of Finland or the State Treasury |
|
General income type details |
|
|
Income type code |
Withholding tax |
|
Amount |
60.00 |
|
Grounds for pension paid to a non-resident taxpayer |
Non-earnings-related pension paid by the Social Insurance Institution of Finland or the State Treasury |
If tax at source has been collected from the benefit received by the income earner who is a non-resident taxpayer, information about the tax at source deduction and the collected tax at source must be provided on the replacement report on the recourse payment.
Example 15. A Finnish payer has paid a benefit of EUR 1,100 per month from 1 April 2023 to an income earner who lives abroad and is a non-resident taxpayer. Tax at source of 35% is collected from the benefit after the tax at source deduction. A non-Finnish benefit payer grants a retroactive pension for the income earner on 5 July 2024. The non-Finnish payer pays a retroactive pension of EUR 1,100 per month over 1 September 2023 to 30 June 2024 (EUR 11,000 in total). The retroactive pension is paid in full to the payer of the earlier benefit.
When the Finnish benefit payer has received the recourse payment, the payer submits a replacement report to the Incomes Register. The payer enters “Recourse – Yes” on the report and selects “Non-resident taxpayer – Yes” for the income earner. The example report presents a replacement report submitted by the Finnish payer over September. The payer must submit corresponding reports for all the months, over which the payer has received a recourse payment.
| Record data | Values |
|---|---|
|
Payment date or other reporting date |
05.09.2023 |
| Report details | |
|
Service details |
|
|
Type of action |
Replacement report |
|
Report reference |
00XYZ342991321 |
|
Report version number |
n |
|
Income earner details |
|
|
Type of identifier |
Personal identity code |
|
Identifier |
ddmmyy-1234 |
|
Income earner details |
|
|
Type of identifier |
Tax Identification Number (TIN) |
|
Identifier |
(foreign TIN) |
|
Country code |
(country code) |
|
The income earner’s address |
(non-Finnish address) |
|
International situations |
|
|
Non-resident taxpayer |
Yes |
|
Country code of the country of residence |
(country code) |
|
General income type details |
|
|
Income type code |
Sickness allowance |
|
Amount |
1100.00 |
|
Recourse |
Yes |
|
Earnings period |
|
|
Start date |
01.09.2023 |
|
End date |
30.09.2023 |
|
General income type details |
|
|
Income type code |
Tax at source deduction |
|
Amount |
510.00 |
|
General income type details |
|
|
Income type code |
Tax at source |
|
Amount |
206.50 |
4.3 Both payers are Finnish, the income earner lives abroad
Section 112 a, subsection 3 of the act on income tax does not apply to situations where a Finnish payer has paid an earlier benefit to an income earner and later another Finnish payer pays a retroactive benefit over the same period if the income earner lives abroad.
The taxation of a benefit in Finland is affected by the provisions of the act on income tax and tax treaties. If the income earner lives abroad, the payer of the later benefit cannot know whether the original income has been taxed in Finland. Therefore, the payer must enter the “Recourse from tax-exempt income” deduction type on the recovery report. The payer must carry out withholding or collect tax at source from the full amount of the retroactive benefit.
Example 16. An Estonian income earner has worked in Finland and been a resident taxpayer in Finland. A Finnish benefit payer has paid a sickness allowance of EUR 900 per month from 1 April 2023 to the income earner. After this, the income earner moved back to Estonia. The income earner is a non-resident taxpayer in Finland from the beginning of 2024. In January 2024, a Finnish pension insurance company grants a retroactive disability pension of EUR 1,100 per month to the income earner from 1 August 2023 (EUR 5,500 in total in 2023). The income earner has a tax card of a non-resident taxpayer with withholding of 10% from the pension.
The pension insurance company pays EUR 4,500 (5 × EUR 900) from the retroactive pension of EUR 5,500 paid over August to December 2023 directly to the sickness allowance payer as a recourse payment and the remaining EUR 1,000 to the income earner. Over January 2024, the pension insurance company pays the full pension of EUR 1,100 to the income earner.
The payer of the earlier benefit has reported the sickness allowance paid to the income earner who is a resident taxpayer every month to the Incomes Register. The example report (Table 1) presents a benefits payment report for August 2023, on which the payer reports the sickness allowance paid.
reports the sickness allowance paid.
| Record data | Values |
|---|---|
|
Payment date or other reporting date |
04.08.2023 |
| Report details | |
|
Service details |
|
|
Type of action |
New report |
|
The payer’s report reference |
00YX3492847502 |
|
Income earner details |
|
|
General income type details |
|
|
Income type code |
Sickness allowance |
|
Amount |
900.00 |
|
Earnings period |
|
|
Start date |
01.08.2023 |
|
End date |
31.08.2023 |
|
General income type details |
|
|
Income type code |
Withholding tax |
|
Amount |
180.00 |
The payer of the later benefit reports the full retroactively paid benefit and the tax withheld from it to the Incomes Register through the report for January 2024 (Table 2). The payer enters the “Recourse from tax-exempt income” deduction type on the report. As the income earner is a non-resident taxpayer on the pension payment date, the payer enters “Non-resident taxpayer – Yes” for the income earner and the additional “Grounds for pension paid to a non-resident taxpayer” income type information on the report.
| Record data | Values |
|---|---|
|
Payment date or other reporting date |
05.01.2024 |
| Report details | |
|
Service details |
|
|
Type of action |
New report |
|
The Incomes Register’s and/or the payer’s report reference |
00XYZ2257831123 |
|
Income earner details |
|
|
Type of identifier |
Personal identity code |
|
Identifier |
ddmmyy-1234 |
|
Income earner details |
|
|
Type of identifier |
Tax Identification Number (TIN) |
|
Identifier |
(foreign TIN) |
|
Country code |
(country code) |
|
The income earner’s address |
(non-Finnish address) |
|
International situations |
|
|
Non-resident taxpayer |
Yes |
|
Country code of the country of residence |
(country code) |
|
General income type details |
|
|
Income type code |
Disability pension |
|
Amount |
1100.00 |
|
Grounds for pension paid to a non-resident taxpayer |
Other payment based on social security legislation |
|
Earnings period |
|
|
Start date |
01.01.2024 |
|
End date |
31.01.2024 |
|
General income type details |
|
|
Income type code |
Disability pension |
|
Amount |
5500.00 |
|
Grounds for pension paid to a non-resident taxpayer |
Other payment based on social security legislation |
|
One-off remuneration |
Yes |
|
Earnings period |
|
|
Start date |
01.08.2023 |
|
End date |
31.12.2023 |
|
Deductions |
|
|
Deduction income type code |
Sickness allowance |
|
Type of deduction |
Recourse from tax-exempt income |
|
Amount of deduction |
4500.00 |
|
Original payment period |
|
|
Start date |
01.08.2023 |
|
End date |
31.12.2023 |
|
Substitute recipient details |
|
|
Period of calculation |
|
|
Start date |
01.08.2023 |
|
End date |
31.12.2023 |
|
General income type details |
|
|
Income type code |
Withholding tax |
|
Amount (10% from EUR 6,000) |
660.00 |
|
Grounds for pension paid to a non-resident taxpayer |
Other payment based on social security legislation |
When the payer of the sickness allowance has received the recourse payment, the payer submits a replacement report to the Incomes Register (Table 3). The payer enters “Recourse – Yes” on the replacement report. The payer must submit corresponding reports for all the months, over which the payer has received a recourse payment.
| Record data | Values |
|---|---|
|
Payment date or other reporting date |
04.08.2023 |
| Report details | |
|
Service details |
|
|
Type of action |
Replacement report |
|
The payer’s report reference |
00YX3492847502 |
|
Income earner details |
|
|
General income type details |
|
|
Income type code |
Sickness allowance |
|
Amount |
900.00 |
|
Recourse |
Yes |
|
Earnings period |
|
|
Start date |
01.08.2023 |
|
End date |
31.08.2023 |
|
General income type details |
|
|
Income type code |
Withholding tax |
|
Amount |
180.00 |