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Finland - Special considerations for short-term assignments

Special considerations for short-term assignments

Taxation of international executives

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Residency rules

Payroll considerations

Taxable income

Additional considerations

For the purposes of this publication, a short-term assignment is defined as an assignment that lasts for less than 1 year.

Residency Rules

Are there special residency considerations for short-term assignments?

A foreign employee is treated as a Finnish resident if they stay in Finland for a continuous period exceeding 6 months during 1 or 2 calendar years. It shall be noted that the stay in Finland may be regarded as continuous despite of a temporary absence from the country/jurisdiction.

Payroll considerations

Are there special payroll considerations for short-term assignments?

According to the general rule, all social security premiums shall be paid when a person is working in Finland, regardless of the length of the working period in Finland.

If a foreign employer assigns an employee, who does not belong to a pension scheme of an EU/EEA or a social security agreement country/jurisdiction, to Finland, they should not be insured for pension purposes if the length of the assignment does not exceed 2 years.

If the assignment will last for less than 6 months the assignee will be considered non-resident and a flat source tax will be withheld instead of normal progressive payroll tax.

Taxable income

What income will be taxed during short-term assignments?

Normally, during short-term assignments (lasting less than 6 months in total) only employment income (remuneration paid in-cash or in a form of fringe benefits) will be taxed in Finland.

The employment income related to a short-term assignment may be tax exempt on the basis of the relevant tax treaty.

Additional considerations

Are there any additional considerations that should be considered before initiating a short-term assignment in Finland?

If the assignment is deemed as a business trip as determined in the Finnish tax law, travel expenses, daily allowances and housing may be provided exempt of tax. Please note that the current tax practice regarding temporary business trips is unclear and these issues need case-by-case investigation.

Disclaimer

All income contained in this publication is summarized by KPMG Oy Ab, the Finnish member firm affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity, based on the Finnish Income Tax Act 1535/1992 and subsequent amendments, the Finnish Tax Administration’s web site, Kansainvälisen Verotuksen käsikrirja 2015 (Publication 284.15 of the Finnish Tax Administration), the Finnish Act on Inheritance and Gift Tax (378/1940) and subsequent amendments, the Value Added Tax Act (1501/1993) and subsequent Amendments, the Real Estate Tax Act (654/1992) and subsequent Amendments, the Health Insurance Act (911/2011) and subsequent amendments, the Prepayment Act (1118/1996) and subsequent amendments, Act on the Taxation of Business Profits and Income from Professional Activity (EVL, 360/1968) and subsequent amendments, the Convention implementing the Schengen Agreement on the gradual abolition of controls at common borders (Treaties of Finland 23/2001), the Aliens Act 301/2004 and subsequent amendments and the Finnish Immigration Service’s web site.

All income tax information is summarized by KPMG Oy Ab, the Finnish member firm affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.

© 2021 KPMG Oy Ab, a Finnish limited liability company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved.


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