Expatriate tax ebook - Finland

Basis of taxation

Charge to tax
Residence
Income from employment
Source of employment
Benefits (in kind)
Expatriate concessions
Relief for foreign taxes
Deductions against income

Charge to tax
A charge to Finnish tax is dependent on whether the income arises in Finland and the extent of the charge will be determined by an individual’s tax residency status.

Residence
Individuals, corporate bodies and estates resident in Finland are liable to tax on their entire income, whether derived from Finland or abroad (unlimited tax liability). Non resident individuals and corporate bodies are liable to tax on their income derived from Finland (limited tax liability).

Tax residence
Tax residence in Finland is determined by the expatriate's actual presence in the country and is not associated with the calendar year.

Persons staying in Finland for a maximum of 6 months are considered non-residents and taxed at a flat rate of 35% on income earned in Finland.

Persons staying in Finland for more than 6 months continuously are considered residents and taxed according to the same rates as the permanent residents of Finland. The stay is considered continuous when absence during the stay is of a temporary nature.

With regards to residents, tax exemption or entitlement to deductions can only be based on tax agreements.

Income from employment
A Finnish tax charge arises on earned income derived from duties performed in Finland. The state income tax is imposed at progressive rates. The municipal, church and social taxes are imposed at flat rates on the earned income. Personal earned income subject to tax includes cash wages and salaries of all kinds as well as bonuses, incentives, commissions and the taxable value of benefits, pensions and annuities, allowances, etc.

Source of employment
As mentioned above, where duties are performed in Finland, any remuneration received in respect of these duties is treated as Finnish source income and subject to Finnish income tax regardless of the expatriate's tax residence status (subject to the relevant Double Taxation Agreement).

Benefits (in kind)
In general where the benefit is enjoyed in Finland, a Finnish income tax charge will arise. Therefore, housing, meal allowances, provision of a car and relocation allowances will come within the charge to Finnish income tax in addition to the individual's salary.

Expatriate concessions
Foreign key persons
Foreign ‘key employees’ staying in Finland for more than 6 months can pay a flat-rate of 35% tax on their earned income instead of progressive income tax. This can be applied to persons: a) working as teachers or researchers in an institution of higher education in Finland; or b) whose monthly cash salary is at least 5,800 euros throughout their stay in Finland and whose duties in the service of a Finnish employer require special skills. The application must be filed within three month after arriving to Finland. The benefit is granted for a maximum of 48 months. It is not granted to a person who has been a resident in Finland at any time during the five years preceding the beginning of the key person’s work assignment.

75% of worldwide yearly income
Persons coming from EU/EEA- states and paying the 35% tax can afterwards give a tax return and apply to be taxed progressively in Finland, if the income received from Finland is at least 75% of the person’s annual worldwide income.

Relief for foreign taxes
Where income has been subject to tax twice; in Finland and in a foreign jurisdiction, relief can be granted by the Finnish Revenue Authority where provided for in the relevant Double Taxation Agreement.

Deductions against income
An employee will be entitled to claim tax deductions for work-related costs and for payments of interest on any loan that he/ she has taken to finance his/ hers permanent owner-occupied home.

Information about Finland:

introduction

facts and figures

basis of taxation

what taxes?

tax planning opportunities