February 2024
The Finnish Tax Administration’s most recent guidelines governing the taxation of non-resident employees
Any non-Finnish individual coming to work in Finland shall be deemed a tax resident of Finland if said individual has a permanent home in Finland, or if the individual’s stay in Finland exceeds six consecutive months. In this regard it should be noted that temporary absences from Finland (those lasting for no more than two months) do not derogate from this condition – i.e. the stay in Finland shall still be deemed as continuous. Therefore, even rather occasional visits to Finland during a period of over six months may trigger Finnish tax residency.
Finnish domestic tax legislation or double taxation treaties may limit Finland’s taxation right. However, if Finland has the right to tax income from employment performed in Finland and received by a non-resident individual, salary income will primarily be subject to a non-resident’s fixed 35% tax at source – although a lower tax rate of 15% may be applied to non-resident artists and sports persons. If the employee has received a tax at source card, EUR 510 per month or EUR 17 per day may be deducted from the total gross income before the 35% tax is imposed. Under these circumstances, the taxpayer must present the tax at source card to the Finnish or non-Finnish employer that is primarily responsible for deducting the correct tax at source, and that would be subject to penalties from a failure to do so, unless exemptions from this tax deduction obligation are applicable.
In lieu of the 35% tax at source, a non-resident employee may request that the salary income is taxed progressively in Finland. Progressive tax on earned income is calculated on the basis of Finnish income tax rates and the average municipal tax rate, while also taking personal deductions into account. This option is available for employees who reside in an EEA member state or in a country governed either by the convention on mutual administrative assistance in tax matters or by a tax information exchange agreement. While only the salary income for work actually performed in Finland may be subject to progressive taxation, other earned income (i.e. salaries, pensions, social security payments) received from abroad or from Finland will affect the tax percentage of the Finland-sourced salary income. Some exemptions may apply, however. For example, if an individual lives in an EEA country, and if the net taxable salary income in Finland is at least 75% of the total amount of income earned, this other income will not be taken into account in the tax progression.
If an employee has not applied for progressive taxation, and if a flat-rate 35% tax has been deducted from the salary income instead, the employee will still be able to claim progressive taxation in the annual tax return. In an opposite situation, i.e. when an employee has claimed progressive taxation in the preliminary tax withholding, the Tax Administration deems that this claim remains binding, and that any tax at source of 35% may no longer be claimed in the final taxation. Therefore, those employees who arrive in Finland for a work assignment lasting less than six months should carefully consider, in advance, whether a 35% tax or progressive tax will be more favorable for them, and whether they should apply for progressive taxation in the annual tax return.
Finnish domestic tax legislation or double taxation treaties may limit Finland’s taxation right. However, if Finland has the right to tax income from employment performed in Finland and received by a non-resident individual, salary income will primarily be subject to a non-resident’s fixed 35% tax at source – although a lower tax rate of 15% may be applied to non-resident artists and sports persons. If the employee has received a tax at source card, EUR 510 per month or EUR 17 per day may be deducted from the total gross income before the 35% tax is imposed. Under these circumstances, the taxpayer must present the tax at source card to the Finnish or non-Finnish employer that is primarily responsible for deducting the correct tax at source, and that would be subject to penalties from a failure to do so, unless exemptions from this tax deduction obligation are applicable.
In lieu of the 35% tax at source, a non-resident employee may request that the salary income is taxed progressively in Finland. Progressive tax on earned income is calculated on the basis of Finnish income tax rates and the average municipal tax rate, while also taking personal deductions into account. This option is available for employees who reside in an EEA member state or in a country governed either by the convention on mutual administrative assistance in tax matters or by a tax information exchange agreement. While only the salary income for work actually performed in Finland may be subject to progressive taxation, other earned income (i.e. salaries, pensions, social security payments) received from abroad or from Finland will affect the tax percentage of the Finland-sourced salary income. Some exemptions may apply, however. For example, if an individual lives in an EEA country, and if the net taxable salary income in Finland is at least 75% of the total amount of income earned, this other income will not be taken into account in the tax progression.
If an employee has not applied for progressive taxation, and if a flat-rate 35% tax has been deducted from the salary income instead, the employee will still be able to claim progressive taxation in the annual tax return. In an opposite situation, i.e. when an employee has claimed progressive taxation in the preliminary tax withholding, the Tax Administration deems that this claim remains binding, and that any tax at source of 35% may no longer be claimed in the final taxation. Therefore, those employees who arrive in Finland for a work assignment lasting less than six months should carefully consider, in advance, whether a 35% tax or progressive tax will be more favorable for them, and whether they should apply for progressive taxation in the annual tax return.
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The information in this site has been prepared for general informational purposes only and it should not be used as a substitute for consultation with a professional tax, legal or other competent advisor. While we have made every attempt to ensure that the information contained in this site has been obtained from reliable sources, Effektiivi Oy is not responsible for any errors or omissions, or for the results obtained from the use of this information.
The information in this site has been prepared for general informational purposes only and it should not be used as a substitute for consultation with a professional tax, legal or other competent advisor. While we have made every attempt to ensure that the information contained in this site has been obtained from reliable sources, Effektiivi Oy is not responsible for any errors or omissions, or for the results obtained from the use of this information.
