Top5 tax questions foreign employers ask in Finland
Question 1: Is a foreign company with employees working in Finland required to establish a Finnish subsidiary or a branch?
A foreign company may establish either a subsidiary or a branch in Finland, but neither is required for the company to operate in Finland. However, even in the absence of a Finnish subsidiary or branch, the company may be deemed to have a permanent establishment in Finland as a result of its employees’ activities there. Whether a permanent establishment exists depends on various factors, including the length of time the employees work in Finland and the nature of their duties and activities.
InterJuris assesses your company’s circumstances and helps you determine the most appropriate way to operate in Finland. We also identify the key regulatory obligations and tax considerations, enabling you to anticipate costs, plan effectively, and manage potential tax risks.
The existence of a permanent establishment in Finland gives rise to various obligations for a foreign company, including registration with the relevant registers maintained by the Finnish Tax Administration and an obligation to pay tax on the profits attributable to the permanent establishment.
Forms of Carrying on Business in Finland by Foreign Companies
| Situation | Measures to be taken | Key implications |
| Subsidiary | A foreign company establishes a Finnish company. | A separate legal entity operates in Finland and is subject to the applicable administrative and tax obligations under Finnish law. |
| Branch | A foreign company registers a branch in the Finnish Trade Register. | A branch generally constitutes a permanent establishment, resulting in tax and other related obligations in Finland. |
| Operating in Finland without a subsidiary or branch | A foreign company carries on business in Finland without establishing a separate Finnish entity or registering a branch. | The activities may give rise to a permanent establishment, resulting in tax and other related obligations in Finland. |
Question 2: As a foreign company, are we required to pay taxes in Finland?
If a foreign company has a permanent establishment in Finland, it is generally required to file a Finnish corporate income tax return and pay tax on the profits attributable to the permanent establishment.
InterJuris assesses whether your company may create a permanent establishment in Finland and identifies the key factors that determine whether one arises. This provides you with a clear understanding of the relevant considerations and enables you to assess in advance whether your operations can be structured in a way that avoids creating a permanent establishment.
Whether a foreign company has a permanent establishment in Finland is generally determined under the applicable tax treaty. The definition of a permanent establishment is broadly consistent across most of Finland’s tax treaties.
Under the general rule governing permanent establishments, a permanent establishment is a fixed place of business through which the business of a company is carried on, either wholly or partly. Under this rule, a permanent establishment arises only if all of the following conditions are met:
- The business activities must be carried out at a specific geographical location with a sufficient degree of permanence. For example, the activities may take place at particular premises, including a home office.
- The business activities must continue for a sufficiently long period. In practice, this means that the activities must continue for at least six months.
- The company must carry on its business through that fixed place of business.
The place of business need not be a clearly defined or delimited space. It is sufficient that the space is actually used to carry on the company’s business activities.
No permanent establishment arises where the activities carried on are of a preparatory or auxiliary nature.
A permanent establishment may also arise on a basis other than the general rule. Other grounds under Finland’s tax treaties include:
- Construction and installation projects: A project exceeds a time limit specified in the applicable tax treaty.
- Dependent agent: The agent has the authority to conclude contracts on behalf of the company or otherwise bind the company in Finland.
Note on dependent agents: Under Finnish tax practice, the existence of a permanent establishment does not require the agent to have formal signing authority in respect of contracts in Finland.
Permanent Establishment in Finland – Key Conditions
| Alternative Grounds for a Permanent Establishment | Conditions |
| General rule: A fixed place of business through which the company’s business is carried on, wholly or partly E.g. an office or branch | All of the following conditions must be met: A geographically identifiable and permanent presence A sufficient degree of permanence (in practice, at least six months) Activities carried on through the fixed place of business constitute business activities |
| Construction or installation project | The project must exceed a specified period, which varies between 6, 12 and 18 months depending on the applicable tax treaty. |
| Dependent agent An individual (e.g. an employee) or a legal entity acting on behalf of the enterprise | Authority to conclude binding contracts on the company’s behalf in Finland Formal signing authority is not required |
Key Facts on Finnish Corporate Taxation
| Finnish corporate income tax rate | 20% (18% from 2027 onwards) |
| Carry-forward period for confirmed tax losses | 25 years for losses incurred in 2026 and thereafter; 10 years for losses incurred earlier |
| Tax return filing deadline | Within 4 months of the end of the financial year |
| Prepayments | Generally paid in 12 instalments; the amount is based on an estimate of the taxable income for the financial year |
Question 3: Is an employee coming to Finland required to pay taxes in Finland?
Whether an employee of a foreign company coming to Finland is required to pay taxes in Finland depends on the length of their stay, the applicable tax treaty, and whether the foreign company has a permanent establishment in Finland. Almost all employees coming to Finland are covered by an applicable tax treaty.
InterJuris assesses the tax position of your employees coming to Finland and explains how their employment income will be taxed. We also advise on opportunities to optimize their tax position where applicable.
An employee is either a Finnish tax resident or a non-resident taxpayer. An individual is considered a Finnish tax resident if they reside in Finland continuously for at least six months. Otherwise, they are treated as a non-resident taxpayer.
If an employee is a Finnish tax resident, Finland has the right to tax income from work performed in Finland, unless an exceptional provision of the applicable tax treaty prevents Finland from exercising its taxing rights.
If an employee is a non-resident taxpayer and a tax treaty is in force between Finland and the employee’s country of tax residence, Finland may tax income from work performed in Finland only if the employee’s employer has a permanent establishment in Finland.
A Finnish tax resident is generally subject to progressive taxation in Finland. A non-resident taxpayer is generally subject to a flat tax rate of 35%. They may be entitled to a deduction of EUR 510 per month or, alternatively, EUR 17 per day. The deduction is made from the income before the tax is withheld.
Taxation of the Salary of an Employee Coming to Finland
| Employee’s situation | Finland’s taxing rights | Progressive tax or flat tax rate |
| The employee is a non-resident taxpayer in Finland (stays in Finland for less than six months) and is covered by a tax treaty | Finland has no taxing rights unless the foreign company has a permanent establishment in Finland. | A flat tax rate of 35% generally applies, with the possibility of making a deduction from the income before the tax is collected. |
| The employee is a non-resident taxpayer in Finland and is not covered by a tax treaty. | Finland has an unrestricted right to tax the salary, subject to certain limitations under Finnish domestic tax law. | A fixed tax rate of 35% applies, with the possibility of making a deduction from the income before the tax is collected. |
| The employee is a Finnish tax resident (stays in Finland continuously for more than six months) and is covered by a tax treaty. | Finland generally has the right to tax the salary, except where an exceptional provision of the applicable tax treaty limits Finland’s taxing rights. | The income is generally subject to progressive taxation. |
| The employee is a Finnish tax resident and is not covered by a tax treaty. | Finland has an unrestricted right to tax the salary. | The income is generally subject to progressive taxation. |
Question 4: What employment-related obligations apply to foreign companies with employees working in Finland?
A foreign company may have various obligations arising from employing individuals in Finland. These may include:
- an obligation to withhold tax from employees’ salaries;
- an obligation to register with the Employer Register;
- an obligation to report salary information to the Incomes Register; and
- an obligation to arrange social security coverage for its employees.
The employer’s obligations depend, in particular, on whether the foreign company has a permanent establishment in Finland.
InterJuris assesses your company’s employer obligations in Finland in respect of each of your employees. This provides you with a clear overview of your statutory obligations and a practical understanding of the steps required to ensure compliance.
If a company has a permanent establishment in Finland, it is always required to withhold tax from its employees’ salaries. The employer is also generally required to register with the Employer Register.
To enable the employer to withhold the correct amount of tax from an employee’s salary, the employee is responsible for applying to the Finnish Tax Administration for an official document called a tax card. The tax card specifies the amount of tax to be withheld from the employee’s salary.
If the employer does not have a permanent establishment in Finland, it is not required to withhold tax from employees’ salaries or to register with the Employer Register. The employee is therefore responsible for making their own tax prepayments. In such cases, the employee must apply to the Finnish Tax Administration for a tax prepayment decision. The decision will include instructions on how to make the tax prepayments.
Employer-related Obligations of a Foreign Company in Finland
| Obligation | No Permanent Establishment in Finland | Permanent Establishment in Finland |
| Obligation to register with the Employer Register | No obligation; voluntary registration is possible. | Registration is required if the company regularly pays wages to at least two employees or, alternatively, to at least six employees working simultaneously on a short-term basis. |
| Obligation to withhold tax from salaries | No obligation to withhold tax, unless the company has voluntarily registered with the Employer Register. | Tax must be withheld regardless of whether the company is registered with the Employer Register. |
| Incomes Register reporting | Salary information must be reported to the Incomes Register if the employee is liable to pay tax in Finland. | Salary information must be reported to the Incomes Register. |
| Employees’ Social Security | The company must arrange social security coverage for the employee in Finland, unless the employee has an A1 certificate or another certificate of coverage. | The company must arrange social security coverage for the employee in Finland, unless the employee has an A1 certificate or another certificate of coverage. |
Question 5: We have received a letter from the Finnish Tax Administration requesting information about our company’s activities in Finland. What steps do we need to take, and should we expect any penalties for not having previously complied with the relevant tax obligations?
When the Finnish Tax Administration becomes aware that a foreign company is operating in Finland, it will send the company a letter requesting information to determine whether the company should be regarded as having a permanent establishment in Finland. The letter should be addressed carefully, and the requested information should be submitted to the Finnish Tax Administration by the specified deadline.
InterJuris will assess your situation and prepare an appropriate response to the Finnish Tax Administration on your behalf. We will also assist in addressing any identified deficiencies and ensure that your tax obligations are properly managed and compliant in the future.
If the Finnish Tax Administration concludes that the company has a permanent establishment in Finland, the company will be subject to retroactive tax obligations. Accordingly, it will, among other things, be required to:
- File corporate income tax returns for all relevant tax years from the date on which the permanent establishment is deemed to have existed in Finland.
- Pay any corporate income tax due, together with late-payment interest and any applicable tax increases imposed by the Finnish Tax Administration.
Where the required withholding taxes have not been withheld from employees’ salaries, the Finnish Tax Administration may order the company to pay the outstanding amounts, together with late-payment interest and any applicable tax increases.
If the Finnish Tax Administration determines that the company also has a permanent establishment in Finland for VAT purposes, the company may be required to:
- Register for VAT retroactively.
- File any outstanding VAT returns for previous periods.
- Pay VAT on supplies of goods and services made in Finland, together with late-payment interest and any applicable penalties.
Author: Marja-Leena Gutiérrez
Marja-Leena Gutiérrez is the founder of InterJuris and an expert in international taxation, with nearly 30 years of experience advising companies and private clients on a wide range of international tax matters. Her career spans tax advisory roles at leading Big Four firms and legal experience in Spain and Belgium, providing a broad international perspective on cross-border taxation.