Taxation of non-resident employees’ salary and wage income in Finland

According to the Finnish Income Tax Act, non-residents are liable for pay taxes on their salary or wage income if more than half of the work has been carried out in Finland, in the name of an employer based in Finland, during a pay period. (In addition to a company registered in Finland, also a foreign company that has a permanent establishment in Finland, or whose place of effective management is located in Finland is regarded to be based in Finland.) The entire salary or wage of that period is considered to have been earned in Finland and is subject to taxation. Therefore, if the employee has also worked outside Finland during the pay period, it has in principle no effect. Nevertheless, according to the tax treaties on income, the source country may only tax the pay as far as it is earned on its territory.

If non-resident employees work in the name of a foreign employer in Finland, their salaries or wages are not subject to taxation in Finland except in the cases of leased employees from certain countries.

Salaries and wages of non-residents are subject to a flat tax rate of 35 percent. However, a standard deduction of EUR 510 per month or EUR 17 per day is granted if it is indicated in the employee’s tax-at-source card.

Non-residents may in most cases apply for a progressive tax rate. The progressive tax rate for non-residents is based on their worldwide income. However, the income received from abroad is not taken into account in the progression if the employee lives within the European Economic Area or holds a residence permit with a researcher status and the taxable earned income received from Finland is at least 75 per cent of the employee’s total earned income.