Finland Payroll Information – Deel Global Payroll

Updated on: 2025/08/04 14:03 (UTC)

Overview

The Republic of Finland, which is located in northern Europe, is a parliamentary republic and a member country of the European Union. Finland is composed of 19 regions divided into 70 subregions, which are divided into more than 300 municipalities. Among Finland’s regions is one autonomous region, the Åland Islands located southwest of the country’s mainland, which generally has the same taxation and compensation requirements in effect regarding employment income as are in effect for Finland’s mainland. Finland is bordered to the west by Sweden, to the north by Norway, and to the east by Russia. In Finnish, the country of Finland’s name is Suomi.

Finland’s currency is the euro.

Employers are responsible for withholding at source employee income taxes and social contributions, as well as contributing their own social insurance taxes based on employee income. Taxes are levied at the national, county and municipal levels.

Employers also must provide mandated workplace protections, although many benefits like minimum wage and the regularity of wage payments generally are negotiated through collective bargaining agreements. Employees are guaranteed vacation time, maternity leave, sickness leave and termination pay, among other services, regardless of their job.

Foreign workers in Finland temporarily are taxed at a flat rate on earnings; certain special tax arrangements apply for employees leased to Finnish companies.

Finnish residents working in the United States are covered by U.S. tax law with possible treaty and work status exclusions applying. Work within the U.S. states and territories is covered by various labor laws.

CURRENCY DETAILS

The currency of Finland is the euro (€), which Finland uses because it is part of the euro area, also known as the eurozone, which is a group of countries that adopted the euro as their currency. The internationally recognized three-letter currency code for the euro is EUR, which also is one of the currency’s two commonly used currency symbols. The English plural form of euro officially recognized by the European Commission is the same as its singular form, although in common English parlance the plural form is euros. In Finnish, the plural form of euro is euroa or eurot, depending on context.

When an amount of euro is written using the currency symbol € in accordance with the European Commission’s standard placement treatment of the symbol, which is the placement treatment used for the English language, the symbol precedes the numerical value with no space between the numerical value and symbol. When an amount of euro is written in Finnish using the currency symbol €, the symbol follows the numerical value with a space between the numerical value and symbol.

When an amount of euro is written using the currency symbol EUR, the symbol precedes or follows the numerical value with a space or no space between the numerical value and symbol.

One hundredth ( ¹ ⁄ ₁₀₀ ) of a euro is referred to in English as a cent and the English plural form of cent officially recognized by the European Commission is the same as its singular form, although in common English parlance the plural form is cents. In Finnish, one hundredth of a euro is referred to as a sentti and has the plural forms of senttiä and sentit, with usage depending on context.

When amounts of euro are written in Finnish, the comma that in English separates the thousands place from the hundreds place instead is rendered as a space, and the dot (.) that in English separates the ones place from the tenths place instead is rendered as a comma.

Digital Currencies: Finland does not consider digital currencies to be a currency or a payment instrument, and instead considers digital currencies to be more comparable to a commodity.

Digital currency payments for services or to employees may be subject to capital gains tax. Other digital currency transactions may be subject to capital gains tax or income tax.

The European Banking Authority does not consider digital currencies to be legal currency. However, under a 2015 ruling by the European Court of Justice, bitcoin generally is considered a currency rather than a property for tax purposes in the European Union. Under the ruling, digital currency transactions are exempt from value-added tax (VAT) under a provision regarding transactions pertaining to currency, bank notes, and coins that are used as legal tender.

TAXES

Employers in Finland are responsible for withholding income taxes and social security contributions at source from employee wages and submitting them to the Tax Administration, known in Finnish as the Verohallinto (abbreviated as Vero or as VERO).

Finland does not have a combined maximum tax rate for residents or nonresidents.

The Social Insurance Institution (Kansaneläkelaitos), is the primary social security system for Finnish residents and requires a monthly contribution from wages. The name of the Social Insurance Institution is abbreviated as SII in English and as Kela in Finnish, and the institution is popularly referred to by the Finnish abbreviation of Kela. Employers also are responsible for arranging employee pensions and other insurance contracts. The program is provided for all residents, or foreign resident workers intending to remain permanently, although Kela generally determines whether a resident qualifies for social insurance benefits.

State and local income taxes also apply.

The tax year in Finland is a calendar year from Jan. 1 to Dec. 31.

Coronavirus (Covid-19) Guidance: Effective from May 1 to Dec. 31, 2020, employers’ pension contributions were reduced by 2.6 percentage points.

According to European Commission guidance, employees who normally work in one European Union member country and live in another are still considered to be insured by the social insurance system of the normal work country while working at home.

Income Taxes

The Income Tax Act (1992) contains provisions for withholding income taxes from Finnish workers. Taxation is administered by the Tax Administration, under the Ministry of Finance, and consists of a governing board and eight regional tax offices, including one that is dedicated to large corporations. The Prepayment Act of 1996 also governs the act of withholding at source, which in Finland also is referred to as prepayment.

Coverage: Employers paying regular wages to employees in Finland are required to withhold taxes and social security contributions from all taxable employee wages and remit them to the tax authorities. Employees are subject to taxation on all worldwide income. Taxpayers are classified as residents if they have a permanent home in Finland or if he/she stays in Finland for more than six continuous months in a 12-month period.

When residents leave Finland, residency ceases after three years unless connections are maintained. In some circumstances, Finnish residents working abroad are exempt from Finnish taxation on income earned abroad if the absence is at least six months.

Rates and Thresholds: Income tax rates are levied on a progressive scale, with rates ranging from zero to 31.25%.

Effective for 2021, Finland’s personal income tax rates and minimum and maximum amounts of annual income for each tax bracket for residents are as follows:

Range of Annual Income (Euro)	Income Tax Rate
Up to €18,600	Zero
More than €18,600 and up to €27,900	€8 plus 6% of the annual income exceeding €18,600
More than €27,900 and up to €45,900	€566 plus 17.25% of the annual income exceeding €27,900
More than €45,900 and up to €80,500	€3,671 plus 21.25% of the annual income exceeding €45,900
More than €80,500	€11,023.50 plus 31.25% of the annual income exceeding €80,500

Effective for 2020, Finland’s personal income tax rates and minimum and maximum amounts of annual income for each tax bracket for residents were as follows:

Range of Annual Income (Euro)	Income Tax Rate
Up to €18,100	Zero
More than €18,100 and up to €27,200	€8 plus 6% of the annual income exceeding €18,100
More than €27,200 and up to €44,800	€554 plus 17.25% of the annual income exceeding €27,200
More than €44,800 and up to €78,500	€3,590 plus 21.25% of the annual income exceeding €44,800
More than €78,500	€10,751.25 plus 31.25% of the annual income exceeding €78,500

Nonresidents who are employed in Finland generally are subject to a flat income tax withholding rate of 35%, although the applicable flat income tax rate for nonresident individuals employed as athletes or performing artists in Finland is 15%.

Registration: Employers with regular payroll obligations are required to register with the Tax Administration’s register of employers. Employers should register with the Tax Administration using Form Y1. Employers are classified as paying wages regularly if they pay two or more employees repeatedly on a schedule or at least six wage earners are simultaneously receiving wage income even though they are only temporarily employed.

If employers begin paying employees regularly and are registered for prepayment, then the Tax Administration should be notified. If wages are not paid regularly, then employers are casual employers and should file periodic tax returns to declare paid wages and contributions through normal withholding procedures.

Employees must be registered with the local tax office and, from that office, must have a tax card, which contains relevant withholding information, such as deductions and tax rates.

Taxable Amounts: All salary, bonuses, benefits and compensation incurred as a part of an employment or service relationship are taxable.

Employees earning wages in an employer/employee relationship are taxed on those earnings. Additionally, wages paid as personal fees for lectures or conference speeches, as well as fringe benefits—such as company cars, telephone access and/or accommodation—are subject to tax withholding and social security contributions.

A severance package received upon termination of employment is taxable earned income.

Nonwage compensation, such as payment for a single service or work, are not subject to tax withholding or social insurance contributions.

Nontaxable income also includes certain pension schemes, welfare benefits, alimony, inheritances or gifts, scholarships for academic study and other amounts determined by the Tax Administration.

Withholding Methods: Income taxes are withheld by employers at source for most employees. Every employee must have a tax card, which lists the applicable tax percentage to be withheld based on earnings and deductions. If nonresident employers without a permanent establishment employ Finnish workers, then the nonresident employers do not have to withhold tax. Therefore the resident employees are responsible for registering with the tax authorities at their local tax office.

If employees do not register and receive a tax-at-source card to give to their employer, then the employer is required to levy a withholding tax rate of 60%.

In some circumstances, employers are not required to withhold taxes or contributions for taxpayers if the latter are enrolled in the prepayment register and independently make tax prepayments to the Tax Administration. This only applies if employers are paying a provider of services and are not paying that entity regular wages. If regular wages exist at any time, then employers must withhold income taxes and social security contributions—even if the entity is registered with the prepayment register.

The National Board of Taxes is entitled to exempt any income from withholding.

Returns and Remittance: Finnish employers and foreign employers with permanent establishments in Finland are responsible for withholding income tax using the Pay-As-You-Earn (PAYE) system. Remittances of tax to the government must be transmitted electronically, and remittances of wage and tax data reports must be transmitted electronically.

The term employer’s contributions is used by the Finnish Tax Administration to refer to the combination of taxes withheld from employee wages by the employer for remittance to the government and the employer portions of social taxes that are remitted to the government.

The deadline for paying employer’s contributions to the government is the 12th day after the month when employees received compensation upon which the employer’s contributions were assessed. Employer’s contributions can be paid through the Tax Administration’s MyTax service.

Effective since Jan. 1, 2019, Finland employers are required to use an internet-based, real-time reporting system, the Tax Administration’s Incomes Register (Tulorekisteri), to electronically report data on wages paid to employees. Data regarding wages and other earned income paid to an employee must be reported through the Incomes Register on an Earnings Payment Report (Palkkatietoilmoituksella) for the employee, and an Earnings Payment Report must be provided for each payment to an employee. The Earnings Payment Report is designed to report details applicable for one employee, and so if multiple employees were paid on the same day, the employer would need to submit a distinct Earnings Payment Report for each employee. An Earnings Payment Report detailing a payment to an employee must be reported by the fifth day after the day the payment was made. Employers also must file through the Incomes Register a Separate Report (Erillisilmoituksen), also known as an Employer’s Separate Report (Työnantajan erillisilmoitus), on payroll-related data not specifically applicable to a sole employee, and the Separate Report is used to report health insurance contributions and deductions paid by an employer. The report also is used if an employer paid no wages during the reported month. An employer’s Separate Report detailing data for a month is due by the fifth day of the month following the reported month. Data regarding pension payments and benefit payments to employees or former employees are required to be electronically submitted to the Incomes Register effective starting Jan. 1, 2020. Effective until Dec. 31, 2018, Finland employers needed to submit monthly payroll-related reporting forms to the Finnish Tax Administration by the 12th day of the month following the reported month.

Among the data regarding wages that are reported to the Incomes Register are identity information of employees’ paid wages, applicable pay periods and paydays, wage totals, and taxes deducted from the wages.

To transmit data to the Finnish Tax Administration using the Incomes Register, employers must possess computer systems capable of interfacing with the Incomes Register. Employers must configure their electronic payroll systems to automatically report data to the Incomes Register, and applicable data regarding wages paid to employees on a pay date and employee and employer portions of taxes based on those payments must be sent to the Incomes Register by the fifth day following the pay date. Employers that by Jan. 1, 2019, did not have computer systems capable of interfacing with the Incomes Register will, as long as they did not have such systems, need to use the Incomes Register’s e-service to file data, with data filed through the e-service due by the fifth day following the applicable pay date for the data.

Effective until the report due in 2019 covering data from 2018, employers needed to file Form 7801e, Employer Payroll Report, with the Tax Administration on an annual basis. An Employer Payroll Report detailed data for a year and generally needed to be submitted by Jan. 31 of the following year. Among the data that needed to be included on the report were wages paid to employees, income and social taxes withheld at source from wages, and data related to amounts of social taxes paid by employers. The Employer Payroll Report needed be filed electronically by employers with at least five employees.

Employee Share Plans: Benefits that arise from employee share plans are taxable as ordinary income, even when a retired individual is gaining benefits from a share. Benefits that are taxable include the benefits gained upon exercising the option and selling of the option to a third party (defined as outside of the sphere of interest). If an option is sold to a person of interest (i.e., a family member), the option will not be taxable until that person exercises or sells the option. However, the option will be taxed as the original owner’s salary.

Taxable amounts from options are calculated as the difference between the fair market value at exercise and the price paid for the option at grant. Employers are responsible for withholding all taxes in regards to gain from employee share plans.

Gains from employee share plans are not subject to social insurance contributions.

Employees entering into employee share plans in Finland and then traveling abroad are exempt from paying taxes on gains as long as they are abroad at least six months and the following conditions are met: a tax treaty exists between Finland and the country of assignment, the country of assignment taxes benefits arising from share plans as income from employment and the taxpayer can show proof that the tax authorities in the country of assignment have been informed of the benefit arising from his Finnish share plan.

Nonresidents taking part in employee share plans in Finland are subject to the same taxation.

Recordkeeping: The Finnish Accounting Act requires that employers maintain accounting records on business activities, including payroll. Records should be maintained for at least 10 years.

Penalties: Employer late-filing entails a fine of 20% of total withholding not remitted on schedule. Fines can range between €5 and €15,000. Fines can be levied for unpaid taxes at all levels, including national, municipality, church, or Social Insurance Institution.

Employees who fail to register for the prepayment system of tax withholding may receive a fine of as much as €2,000.

Social Taxes

Coverage: Employers paying regular wages to employees in Finland are required to withhold taxes and make social security contributions from all taxable employee wages and remit them to the tax authorities. Employees are subject to social security contributions on all worldwide income. Taxpayers are classified as residents if they have a permanent home in Finland or if they stay in Finland for more than six continuous months in a 12-month period.

Rates and Thresholds: Employers are required to pay a percentage of employee payroll in social security contributions.

Health insurance contribution (Sairausvakuutusmaksu): Effective for 2022. the health insurance contribution rate for employers is 1.34% of income paid to employees. Effective for 2021, the health insurance contribution rate for employers was 1.53% of employment income paid to employees.

Effective starting Jan. 1, 2020, as had been in effect until Dec. 31, 2016, there are two health insurance contributions assessed on employees: the daily subsistence allowance contribution, which also is known as the contribution for cash, sickness, and maternity benefits, and the medical benefits contribution. Effective from Jan. 1, 2017, to Dec. 31, 2019, there was one health insurance contribution assessed on employees: the daily subsistence allowance contribution, which also was known as the contribution for cash, sickness, and maternity benefits.

Employees need to be paid at least the applicable annual income threshold to be assessed the daily subsistence allowance contribution. If an employee’s annual employment income is below the applicable income threshold, the daily subsistence allowance contribution is zero. For years when the medical benefits contribution is in effect, there is no maximum amount of income upon which it is assessed.

Effective for 2022, the applicable annual income threshold is €15,128. Effective for 2021, the applicable annual income threshold was €14,766.

Effective for 2022, the earned-income daily subsistence allowance contribution rate for employees is 1.18% of taxable income. Effective for 2021, the earned-income daily subsistence allowance contribution rate for employees was 1.36% of taxable income.

Effective for 2021, unchanged from 2020, employees are assessed a medical benefits contribution rate of 0.68%.

Unemployment insurance contribution (Työttömyysvakuutusmaksu): Effective for 2021, the unemployment insurance contribution rate for employers assessed on total annual wages paid of up to €2,169,000 is 0.5%, and the unemployment insurance contribution rate for employers assessed on total annual wages paid of more than €2,169,000 is 1.9%. Effective for 2020, the unemployment insurance contribution rate for employers assessed on total annual wages paid of up to €2,125,500 was 0.45%, and the unemployment insurance contribution rate for employers assessed on total annual wages paid of more than €2,125,500 was 1.7%.

Effective for 2021, the unemployment insurance contribution rate for employees is 1.4%. Effective for 2020, the unemployment insurance contribution rate for employees was 1.25%.

Unemployment insurance premiums are tax-deductible from gross income.

Effective since Jan. 1, 2019, the fund financed by unemployment insurance contributions is known as the Employment Fund. Effective until Dec. 31, 2018, the fund financed by unemployment insurance contributions was known as the Unemployment Insurance Fund.

Pension (TyEL): Employers and employees both are assessed taxes to fund pension insurance. In Finland, pension taxes pertaining to employees who are not self-employed, also are known as TyEL, which is an abbreviation of the Finnish name for the Employee’s Pension Act, Työntekijän eläkelaki, and which also is an abbreviation for the Finnish equivalent of earnings-related pension insurance contribution, työeläkevakuutusmaksu.

Effective for 2022, the average earnings-related pension insurance tax rate for private-sector employers is 17.40% of employment income paid to employees. Effective for 2021, unchanged from 2020, the average earnings-related pension insurance tax rate for private-sector employers was 16.95% of employment income paid to employees.

Effective for 2022, unchanged from 2021, the pension insurance tax rate for employees from 17 to 52 years of age is 7.15% of employment income; from 53 to 62 years of age, the pension insurance tax rate is 8.65% of employment income; and from 63 to 67 years of age, the pension insurance tax rate is 7.15% of employment income.

Employee premiums for funding pension insurance are tax-deductible from gross income.

Accident insurance contribution (Tapaturmavakuutusmaksu): Employers are required to pay premiums as a percentage of payroll for accident insurance, i.e. occupational injury and illness insurance, and premium rates vary among the companies through which the insurance may be acquired. Rates are varied among employers in part based on their industry sector and employers’ varying workplace health and safety records.

Group life insurance contribution (Ryhmähenkivakuutusmaksu): Employers are required to pay premiums as a percentage of payroll for group life insurance, and premium rates vary among the companies through which the insurance may be acquired.

Broadcasting tax (Yleisradiovero): Employees are assessed a tax that helps fund public broadcasting in Finland, and this tax must be deducted from their wages.

In general, the public broadcasting tax is assessed on annual income in excess of €14,000 at the rate of 2.5%, although the maximum amount of public broadcasting tax that may be assessed on an employee for the year is €163.

Effective starting Jan. 1, 2021, individuals who are residents of Finland’s autonomous region of the Åland Islands are assessed the public broadcasting tax, but unlike the rate assessed in general, the rate assessed on residents of the Åland Islands is a predetermined flat rate. Effective until Dec. 31, 2020, individuals who are residents of Finland’s autonomous region of the Åland Islands were not assessed the public broadcasting tax.

Effective starting Jan. 1, 2021, residents of the Åland Islands who have annual income in excess of €14,000 are assessed a flat-rate public broadcasting tax of €110.

The public broadcasting tax is not assessed on individuals younger than 18 years of age.

Employees must be registered with the local tax office and, from that office, must have a tax card, which contains relevant withholding information, such as insurance contributions to be make. The Social Insurance Institution, also known as Kela, has ultimate authority in determining whether a taxpayer is covered by the social insurance system.

Taxable Amounts: All salary, bonuses, benefits and compensation incurred as a part of an employment or service relationship are taxable, as defined at the municipal level.

Nonwage compensation, such as payment for a single service or work, are not subject to tax withholding or social insurance contributions.

Nontaxable income also includes certain pension schemes, welfare benefits, alimony, inheritances or gifts, scholarships for academic study and other amounts determined by the Tax Administration.

Withholding Methods: Social contributions, like income taxes, are withheld by employers at source for most employees. Every employee must have a tax card, which lists the applicable tax percentage to be withheld based on earnings and deductions. If nonresident employers without a permanent establishment employ Finnish workers, then the nonresident employers do not have to withhold tax. The resident employees are, therefore, responsible for registering with the tax authorities at their local tax office.

If employees do not register and receive a tax-at-source card to give to their employer, then the employer is required to levy a withholding tax rate of 60%.

The National Board of Taxes is entitled to exempt any income from withholding.

Returns and Remittance: Social taxes generally have the same reporting and remittance requirements as income taxes, with combined data reporting to the Finnish Tax Administration. More information regarding the requirements regarding returns and remittance is available in the Income Taxes section of this primer.

Reporting and remittance requirements pertaining to occupational injury and illness insurance and group life insurance vary among companies through which these types of insurance may be acquired.

Recordkeeping: The Finnish Accounting Act requires that employers maintain accounting records on business activities, including payroll. Records should be maintained for at least six years for accounting materials that confirm transactions.

Penalties: Failure to register for the prepayment system of tax withholding may entail a fine of as much as €2,000. Late filing entails a fine of 15% of total withholding not remitted on schedule. Fines can range between €5 and €15,000. Fines can be levied for unpaid taxes at all levels, including State, municipality, church or Social Insurance Institution.

Other Taxes

Finland’s national government does not assess any taxes on employment income other than those covered in the Income Taxes and Social Taxes sections of this primer.

State/Jurisdiction Taxes

Municipal taxes and church taxes, also known as municipal income tax (kunnan tuloveroprosentti) and parochial income tax (seurakunnan tuloveroprosentti), are determined by local governments or local parishes of churches, respectively, and are levied on employee wages. Both taxes are assessed as flat rates and do not change based on income, except through deductions. Each municipality has two separate church tax rates, one for members of the Evangelical Lutheran Church of Finland (Suomen evankelis-luterilainen kirkko, abbreviated as Ev.lut) and another for members of the Finnish Orthodox Church (Suomen ortodoksinen kirkko, abbreviated as Ortodoks). These two tax rates usually differ from each other. These two churches are Finland’s two national churches.

Finland’s Tax Administration released a 2021 chart and 2020 chart of each municipality’s applicable municipal income tax rate, tax rate assessed on members of the Evangelical Lutheran Church of Finland for financing church activities, and tax rate assessed on members of the Finnish Orthodox Church for funding church activities.

Effective for 2021, unchanged from 2020, municipal tax rates range from 16.5% for the municipality of Jomala to 23.5% for the municipality of Halsua.

Effective for 2021, church tax rates for funding the Evangelical Lutheran Church of Finland range from 1% for the municipalities of Espoo, Helsinki, Kauniainen, and Vantaa to 2% for the municipalities of Brändö, Eckerö, Föglö, Joutsa, Karijoki, Kemiönsaari, Kihniö, Kristiinankaupunki, Kruunupyy, Kumlinge, Kyyjärvi, Kökar, Lestijärvi, Luhanka, Sottunga, Sund, Toholampi, and Vårdö. Effective for 2020, church tax rates for funding the Evangelical Lutheran Church of Finland ranged from 1% for the municipalities of Espoo, Helsinki, Kauniainen, and Vantaa to 2% for the municipalities of Brändö, Eckerö, Föglö, Karijoki, Kemiönsaari, Kihniö, Kristiinankaupunki, Kruunupyy, Kumlinge, Kyyjärvi, Kökar, Lestijärvi, Sottunga, Sund, Toholampi, and Vårdö.

Effective for 2021, church tax rates for funding the Finnish Orthodox Church range from 1.75% for the municipalities of Aura, Brändö, Eckerö, Eura, Finström, Föglö, Geta, Hammarland, Harjavalta, Huittinen, Jomala, Kaarina, Kemiönsaari (Kimitoön), Kokemäki, Koski Tl, Kumlinge, Kustavi, Kökar, Laitila, Lemland, Lieto, Loimaa, Lumparland, Maarianhamina (Mariehamn), Marttila, Masku, Mynämäki, Naantali, Nousiainen, Oripää, Paimio, Parainen (Pargas), Punkalaidun, Pyhäranta, Pöytyä, Raisio, Rauma, Rusko, Säkylä, Salo, Saltvik, Sauvo, Sottunga, Sund, Taivassalo, Turku, Uusikaupunki, Vehmaa, and Vårdö to 2.2% for the municipalities of Enontekiö, Inari, Kemijärvi, Kittilä, Kolari, Muonio, Pelkosenniemi, Pello, Posio, Ranua, Rovaniemi, Salla, Savukoski, Sodankylä, Utsjoki, and Ylitornio. Effective for 2020, church tax rates for funding the Finnish Orthodox Church ranged from 1.75% for the municipalities of Aura, Brändö, Eckerö, Eura, Finström, Föglö, Geta, Hammarland, Harjavalta, Huittinen, Jomala, Kaarina, Kemiönsaari (Kimitoön), Kokemäki, Koski Tl, Kumlinge, Kustavi, Kökar, Laitila, Lemland, Lieto, Liperi, Loimaa, Lumparland, Maarianhamina (Mariehamn), Marttila, Masku, Mynämäki, Naantali, Nousiainen, Oripää, Outokumpu, Paimio, Parainen (Pargas), Polvijärvi, Punkalaidun, Pyhäranta, Pöytyä, Raisio, Rauma, Rusko, Säkylä, Salo, Saltvik, Sauvo, Sottunga, Sund, Taivassalo, Turku, Uusikaupunki, Vehmaa, and Vårdö to 2.2% for the municipalities of Enontekiö, Inari, Kemijärvi, Kittilä, Kolari, Muonio, Pelkosenniemi, Pello, Posio, Ranua, Rovaniemi, Salla, Savukoski, Sodankylä, Utsjoki, and Ylitornio.

All taxes are paid to the municipalities and the local communities through disbursement by the Tax Administration.

COMPENSATION AND BENEFITS

Finnish workers are highly dependent on collective bargaining agreements with trade unions and employers on issues such as minimum wage and compensation for injury. Holidays and vacation are provided for based on federal statute.

Parental leave and sick leave also are guaranteed.

Minimum Wage

No universal minimum wage exists in Finland. However, collective bargaining agreements determine much of the minimum employment terms of the workforce. Wages are typically dependent on employee skills and occupational category.

Overtime

Working hours exceeding regular working hours, or overtime hours, are compensated with wages increased by 50% for the first two hours and increased by 100% for all additional hours. Weekly overtime hours are increased by 50% for the first 12 hours in a two-week period and 100% during the first 18 hours of a three-week period.

Sunday hours always are compensated at 100% above normal wages. Collective bargaining agreements govern all other workday overtime arrangements.

Employees also are guaranteed at least one 30-minute break for every six hours of work, as well as 11 hours each day for rest between weekdays and 35 hours between workweeks.

Hours of Work

Working hours in Finland typically are eight hours per day and 40 hours per week. Weekly hours also may be averaged across many weeks by collective bargaining agreement, so long as they do not exceed 40 hours per week.

Employers are responsible for providing workers with a clear work schedule that establishes regular working hours, as well as beginning and ending times.

Holidays

Workers in Finland are entitled to 15 holidays during the year:

Jan. 1: New Year’s Day

Jan. 6: Epiphany

Good Friday

Easter Sunday

Easter Monday

May 1: May Day

Ascension

Pentecost

Midsummer Eve

Midsummer Day

All Saints’ Day

Dec. 6: Independence Day

Dec. 24: Christmas Eve

Dec. 25: Christmas

Dec. 26: St. Stephen’s Day

Leave

Annual Leave: A summer holiday of 24 weekdays must be granted to employees between May 2 and Sept. 30, although the timing and arrangement of such holiday is determined by employers in consultation with employees. A winter holiday, comprising the rest of the employee’s annual leave, must be taken between Oct. 1 and April 30.

Annual leave generally accumulates at a rate of two days per month for workers employed by their employer for less than one year and 2.5 days per month for all other employees, using a holiday year running from April 1 to March 31. Employees must meet one of two rules, known as 14-day rule and the 35-hour rule, to qualify for their annual leave entitlement for a month of employment. The 14-day rule applies to employees who work at least 14 days every month, regardless of the number of hours worked per day, while the 35-hour rule applies to employees who work at least 35 hours in one month, but do not meet the 14-day rule. Employees that meet the 14-day rule and employees that meet the 35-hour rule every month must receive their normal wages for periods of annual leave. Employees that meet the 35-hour rule only in some months, or that meet the rule and are paid on an hourly basis, instead receive a holiday allowance of 9% of their wages earned during the holiday year, or 11.5% if they have been employed by their employer for at least one year.

Employees that do not meet either the 14-day or the 35-hour rule instead receive two days of leave for each completed month of employment and the same holiday allowance as other employees who do not receive their normal wages for periods of leave.

Accrued leave cannot be exchanged for pay unless employment is terminated. A six-day week is used for the purpose of determining the length of periods of annual leave. The summer holiday may be divided into multiple parts, but one part must be at least 12 weekdays. The employee may also choose to take 18 weekdays of leave in a holiday year and carry the remaining portion over to a succeeding holiday year.

Employees that do not earn 24 weekdays of leave in a year because of illness- or injury-related absences from work are entitled to as many additional days of leave as required to make up an annual leave period of 24 days. This entitlement lasts for up to 12 months after the employee returns to work.

Employers must notify employees of their periods of leave at least one month before the period starts.

Sickness/Accident Leave: Employees are legally entitled to a total of ten days of sick leave with full compensation during each working year, or 50% of compensation if employed less than one month. The working year begins April 1 and ends March 31. After this period, the Finnish National Pension Institute, which is a part of Kela, Finland’s Social Insurance Institution, will pay for employee daily allowances for illness at approximately 70% of normal wages. Kela requires that all employees possess a Kela card for proper treatment.

Collective bargaining agreements may provide for additional employer responsibilities and extended periods of sick leave.

Foreign employees working for Finnish employers must be insured by them through mandatory accident insurance.

Family Leave: Employees are entitled to leave for family purposes, including maternity leave, paternity leave and parental leave, such as for child care. When leave causes the end of employment, employees are entitled to return to their former job, or similar work for their employer, depending on the occupation’s collective bargaining agreement.

Total maternity and parental leave is capped at 263 weekdays. Maternity leave alone is 105 days, with parents capable of dividing the remaining leave between themselves. Fathers are eligible for taking 54 days of paternity leave, and 18 of these days can be while the mother is also on leave.

Kela is responsible for covering the daily allowances, which are scaled to employee incomes. Most collective bargaining agreements cover leave at 100% of wages.

Wage Payment

Wage payments are negotiated through collective bargaining agreements per occupational category. However, payment and withholding at source by employers typically occurs monthly.

Bonuses and Special Benefits

Finland does not require employers to provide bonus payments to employees.

Termination Pay

Employment contracts are terminated by giving notice of termination. Both employers and employees have a responsibility to give notice. For employers, notice must only be given if there is a substantive and pressing reason and can vary between 14 days and six months. Employment contracts can only be cancelled by employers for gross negligence or other such factors. Employees must give employers two weeks of notice if employment is less than five years and one month if more than five years. If notice is not given, then employees risk forfeiting compensation.

Compensation from termination, or unemployment insurance, applies to Finnish workers between 17 years and 64 years of age and is about €30 per day. Unemployed workers should register with the Employment and Economic Development Office. Unemployment benefits, as a daily allowance, apply when the workers has been employed in Finland for 34 weeks during the 28 months preceding unemployment and whose working hours are at least 18 hours per week. Unemployment will be paid for a maximum of 500 days. Thereafter, Kela may pay unemployed workers a labor market subsidy for five days per week at slightly more than €30 per day. Child supplements also may apply.

A severance package received upon termination of employment is taxable earned income, but the recipient may allocate it over several years to mitigate the impact of the progressive tax.

Unemployment pay is liable to taxation at a 20% withholding rate.

Workers’ Compensation

Finnish employers are statutorily required to provide workers’ compensation insurance to protect them against workplace injuries. Employers solely pay the premiums. The insurance covers all injuries sustained at work or in circumstances related to work, as well as during a business trip. Medical expenses are covered that result in a loss of income. The precise compensation is determined by the insurance purchased by employers and the employment agreement, although it usually totals to 85% of wages.

Recordkeeping

Employers must retain ledgers that include information about employees’ hours worked for at least 10 years.

Employers also are responsible for keeping employment contracts, which note employee names, nature of work, starting dates, working hours and duration of employment. Employees should be capable of requesting this information for ten years following termination and should be able to receive an evaluation of their performance for up to five years following termination.

Employees must keep records related to employees’ annual leave, including the length and timing of periods of leave, the number and timing of days of additional leave, and the amount of wages or holiday allowances paid to employees on leave, for two years.

FOREIGN WORKERS

Nonresidents for tax purposes do not have a permanent establishment in Finland and are not working in Finland for more than six months. Additionally, Finnish citizens may be categorized as nonresidents if they leave Finland for work for more than three years or even earlier if they demonstrate that they no longer have close ties connecting them to Finland, such as family.

Employers also have obligations in the process, including advising employees on necessary processing and extensions of residence permits, since fines may be imposed for illegally employing foreign workers. Employers must verify that employment contracts have been extended to prospective employees prior to hiring.

Foreign workers are responsible for Finnish taxes at a flat rate when residing in Finland for less than six months.

Visas: Foreign workers traveling into Finland are subject to the Finnish Aliens Act and the Schengen Agreement. The Finnish Immigration Service and the Ministry of Foreign Affairs are responsible for foreign workers in Finland. Requirements for nonresidents vary based on country of origin, including between EU/EEA countries and non-EU/EEA countries. Foreign workers generally require both a visa and a residence permit to enter the Finnish workforce. Nonresidents requiring a visa should apply through the Finnish diplomatic mission in their home country.

Employee Obligations: Foreign workers should consult the Ministry of Foreign Affairs to determine whether they require a resident permit and/or a visa to enter Finland. Some foreign workers may be permitted to work in Finland without a residence permit. In this case, nonresidents must possess a valid visa or Schengen residence permit granted by another country. Finland has four types of visas: single-entry, double-entry, multiple-entry and airport transit visas. All visas are issued for 90 days or less with varying permitted visits in a six-month period. The multiple-entry visa may be extended for a maximum of five years.

Residence permits are divided into several categories and are granted for family, study, heritage, employment and other similar reasons. Nonresidents should apply for residence permits at Finnish embassies or consulates in-person in the worker’s home country, although applications can be submitted online in conjunction with a personal visit to the Finnish mission. Residence permits for workers can only be applied for following a job offer in Finland (verified by the employer). Residence permits for employed persons are categorized by professional group and applicants should apply for their employment group.

Residence permits are not required for some occupational categories, including interpreters, teachers, specialists, sailors and asylum-seekers. Permits may be extended through application to the municipal police using the same form of initial application.

Notably, residents of Nordic countries, including Sweden, Norway, Denmark and Iceland, can enter Finland without restrictions and remain without a residence permit. Moreover, EU and EEA residents do not require a residence permit or a visa, although they must register their stay with the district police department no later than three months after arrival.

Employer Obligations: Employers must confirm a job offer for employees seeking a residence permit through an employment contract and must file the TEM 054 form with the Immigration Service. The verification must note the nature of the position and employment relationship, as well as its duration and the employee’s salary. Some positions may be filled by employees on temporary, 90-day visas without a residence permit, but employers should seek the advice of the Immigration Service.

Employers cannot apply for residence permits on behalf of employees, but they can advise on which forms to complete and whether they are completed accurately. Applications should be submitted online, but hard-copy is available though may take several weeks longer. After application, employees are updated, though employers are given notice by the Employment and Economic Development Office regarding the labor availability for the hired employee.

Employers should keep records of their employees’ residence permits and remind them to apply for extensions. If employers hire or continue to employ foreign workers without residence permits, either intentionally or accidentally, then an Immigration Service fine of €1,000 or as much as €30,000 may apply.

Taxes: Foreign workers are subject to a flat-rate tax of 35%, as well as some social security withholding contributions. If foreign workers are leased to a Finnish company by a foreign company, then certain special tax arrangements apply, such as self-initiated prepayment instead of withholding at source.

Income Taxes: Nonresidents only are taxed on income derived from Finland. Nonresidents pay a flat-rate on Finnish income of 35%, though a lower rate applies to athletes and performers. Nonresidents also qualify for a standard €17 per day or €510 per month deduction, which employers may deduct prior to withholding the 35% tax rate. Nonresidents do not have to pay municipal or church taxes, if staying for less than six months.

Foreign employees from EU/EEA countries paying the 35% tax rate can later apply for a lower rate and receive an adjusted tax liability if their total salary received in Finland was at least 75% of their gross worldwide income during the taxable year. Additionally, foreign “key” employees under the Provisional Act staying for more than six months—such as teachers, researchers, or those with jobs requiring special skills—may qualify for the 35% flat rate tax.

Nonresidents do not have to file an income tax return in Finland, but may have to report their Finnish-based income to their home country.

Social Taxes: Finnish employers of foreign workers must withhold employment pension premiums and an occupational injury insurance premium from employee paychecks. These contributions are paid to insurance companies—not the Tax Administration. However, employers who stay for more than four months or have a certificate of a posted employee (form A1/E 101) also must pay a health insurance contribution to the local tax office similar to resident taxpayers. This withholding percentage amount is found on tax-at-source cards, or the tax card, of employees and included with other withholding amounts, such as income tax. For nonresident taxpayers who come to Finland for a maximum of six months, workers must file a Form 5057 to apply for a tax-at-source card or a nonresident’s tax card. Nonresident temporary workers can also use the 5057 form to apply for an income tax prepayment calculation.

Workers from an EU/EEA country retain their home country’s social insurance while working in Sweden for less than 24 months. Therefore, EU/EEA employers should continue to pay the employee’s home country social security contribution. Non-EU/EEA nonresidents must apply to Finland’s Social Insurance Institution, also known as Kela, for a decision on their eligibility for social insurance benefits, if seeking them.

Registration: Foreign workers are required to register with their local Finnish tax office in person after arrival. The foreign workers is assigned a Finnish identification number after completing an application for tax-at-source card, or form 6201e.

Foreign companies are required to submit employer payroll reports to the Finnish Tax Administration if they employ resident workers and pay them through their payroll system. If foreign companies have a permanent establishment in Finland and pay wages to employees, then they should be registered with the Tax Administration’s register of employers. Foreign employers in the official register are obligated to the same requirements as domestic employers, such as information reporting, payroll reporting and other requirements. Foreign employers must file an EPR form (7801e annual return summary), which notes all foreign employees working in Finland longer than six months and are tax residents. Failing to file an EPR may result in a maximum fine of €15,000.

Foreign employers without a permanent establishment in Finland who pay their Finnish employees through direct foreign bank transfer are not required to withhold taxes at source.

Leased Employment: Employee leasing, as opposed to subcontracting, is defined as employment in which an employee is leased from one company to work for another, such as a foreign company leasing an employee to work for a Finnish company. The employment contract is made with the foreign leasing company only, while the leasing agreement is made as a business contract between the two companies. Wages should be paid by the leasing company, although the supervision and direction is provided by the Finnish company.

Leased employees from Belarus, Bermuda, Cayman Islands, Denmark, Estonia, Georgia, Iceland, Isle of Man, Jersey, Kazakhstan, Latvia, Lithuania, Moldova, Norway, Poland, Sweden, or Turkey, or from a country with no tax treaty, then employee must register with the prepayment system since their employees will not be obligated to withhold taxes at source. Employees should register with their local tax office using form 6205e. If employees are leased to a Finnish company for less than six months, then they are considered tax nonresidents and will prepay at a 35% rate. If staying in Finland for more than six months, or purchasing property, then leased employees become residents and qualify for the progressive tax system on all earnings. The Finnish Tax Administration will provide leased employees with necessary documents to demonstrate to their home countries that they paid prepayments to Finland. Likewise, employers should give the government a full wage summary at the end of the year noting total wages paid to employees, even if they did not withhold taxes.

Leased employees, or prepayers generally, may be subject to a fine of €2,000 if they fail to register for the prepayment service.

Wages/Payments: Finland has no special requirements for wage payments.

WORKING IN THE UNITED STATES

Foreign workers from Finland must meet general visa requirements and be certified to be employed in the U.S. General visa requirements for the U.S. are included in the separate

Finland is eligible for the visa waiver program for business visitors, which allows Finnish citizens to travel to the U.S. for 90 days or less for business-specific purposes without having to obtain a B-1 business visa. Stays longer than 90 days will require a visa. Individuals may return to the U.S. under the visa waiver program if a “reasonable length of time” has passed. The determination for a reasonable length of time is at the discretion of the Department of Homeland Security.

U.S. employers also must check the names of all new-hires and employees against the Specially Designated Nationals and Blocked Persons List, administered by the Treasury Department’s Office of Foreign Assets Control (OFAC). Because OFAC prohibits financial transactions with individuals on the list, employers cannot employ them and may face fines for failing to comply.

For tax purposes, Finnish citizens are subject to U.S. employment-based taxation on income earned in the U.S. unless they can claim an exemption under certain tax treaty provisions or they work under specific visa types that exempt earnings from taxes. Finland has both a tax treaty and a social tax totalization agreement with the U.S.

State and local taxation of Finnish workers also can apply, although some states within the U.S. recognize international tax treaties that can eliminate that income tax liability for foreign workers.

The U.S. labor laws apply to all workers employed and providing services in the country.

Work eligibility as an employee is contingent upon Department of Homeland Security and Labor Department approval and the employee receiving a U.S. Social Security number from the Social Security Administration.

Tax Residency: In general, employees working in the U.S. on a temporary basis are considered nonresidents for tax purposes unless they qualify for resident status. Employees can be granted permanent resident status through the so-called green card test or if they meet the substantial presence test under the U.S. tax code. More information on these requirements is in the

Permanent residents are subject to U.S. tax requirements the same as U.S. citizens and are taxed under the U.S. system on their worldwide earnings.

Income Taxes: Generally, nonresidents in the U.S. who are from Finland and are working in the U.S. are subject to U.S. taxes based on their U.S.-sourced income. Income is taxed differently based on whether it is categorized as wage income or nonwage income, which includes interest and dividends.

A Form W-4, Employee’s Withholding Certificate, must be filed by each employee with their employer. All nonresidents in the U.S. who are from Finland and are working in the U.S. must claim “single” in Step 1c, regardless of marital status; write “Nonresident Alien” or “NRA” in the space under Step 4c of the form; and may not claim “exempt” in the space under Step 4c.

Nonresident alien employees may adjust withholding using Step 2b or 2c of the Form W-4; certain employees also may be able to use Steps 3, 4a, or 4b. More information about Form W-4 requirements for nonresident alien employees is available in the

Although the versions of Form W-4 issued in 2020 or later significantly differ from the versions issued in 2019 or earlier, nonresident employees that filed a valid version of Form W-4 from 2019 or earlier with their employer do not need to file another Form W-4 with the employer unless they need to implement a change for their withholding. On Forms W-4 issued in 2019 or earlier, nonresident alien employees were required to check the “single” box on line 3, regardless of marital status; write “Nonresident Alien” or “NRA” above the dotted line on line 6; and were not permitted to claim “exempt” on line 7 of the form.

An additional amount is added to a nonresident alien employee’s wages for calculating federal income tax withholding, with the amount based on pay period frequency and the date of the employee’s most recently filed Form W-4. The table of additional amounts applicable to Forms W-4 from 2020 or later and the table applicable to Forms W-4 issued before 2020 are available in the

Nonwage income and self-employed foreign workers can be subject to income tax withholding at a flat rate of 30%.

Additionally, foreign workers may be taxed differently based on the specific type of visa they hold.

Tax Treaties: Finland and the U.S. have a tax treaty with provisions addressing host country taxation of the nonresident workers. A summary of those benefits is listed in the Tax Treaty Exemption Comparison Chart. To claim the treaty benefit, the nonresident must file Form 8233, Exemption From Withholding on Compensation for Independent (and Certain Dependent) Personal Services of a Nonresident Alien Individual, with the employer.

Students and trainees in particular must include a statement with Form 8233 to claim a tax treaty exemption from withholding of tax on compensation for dependent personal services. This statement affirms that the student or trainee is temporarily in the U.S. for purposes of studying or has accepted an invitation by the U.S. government (or by a political subdivision or local authority) for the purpose of studying or engaging in research by a university or other recognized educational institution in the U.S. It also must affirm that the individual will receive compensation for services performed in the U.S. There is no limit is placed on the student and trainee compensation for Finnish residents.

Examples of the statements necessary to claim a treaty exemption from U.S. taxes are included in Internal Revenue Service Publication 519, U.S. Tax Guide for Aliens.

Social Taxes: Most foreign workers are subject to paying into the U.S. Social Security system. Foreign nationals who are exempt from paying income tax and who do not have the eligibility to receive a social security number may not be required to pay social taxes. Foreign workers contributing to Social Security for a certain time period may be eligible to receive benefits.

Generally, foreign workers in the U.S. that have specific visas as exchange visitors or students or who are temporarily in the U.S. for agricultural work are not subject to social taxes on income that is obtained from the purpose in which they originally entered the U.S.

Totalization Agreements: Social Security totalization agreements can allow foreign workers and U.S. nationals working abroad to avoid paying into two social security systems while being subjected to losing benefits for their home country system. Under totalization agreements, generally, foreign workers will only pay into one of the social security systems, either the home or the foreign system, but not both. Foreign nationals, utilizing a totalization agreement, also can count years of contributions paid to different social security systems to all of the systems they have contributed to in order to be eligible for benefits in one country.

Finland and the U.S. have entered into a totalization agreement and a summary of those provisions is included in

Wage Payment: Under certain visas for certain types of employment, employers are required to pay foreign workers the higher of either the prevailing wage or the actual wage that is paid to U.S. workers that have similar skills and qualifications.

There are no particular requirements that employees be paid in U.S. dollars.

TREATY ARRANGEMENTS

Finland has entered into more than 80 income tax treaties, including an income tax treaty with the United States. Finland also has more than 10 totalization agreements for social tax coverage purposes, including an agreement with the United States.

A multilateral income tax treaty, the Convention Between the Nordic Countries for the Avoidance of Double Taxation with Respect to Taxes on Income and on Capital, is in effect for Finland and five other jurisdictions. The treaty also is known as the Nordic Convention or Nordic Double Taxation Treaty (NDTT).

The Finland-U.S. totalization agreement establishes that employers with employees normally working in the U.S. will be required to withhold social security taxes only for the U.S. while employers with employees normally working in Finland only withhold social security taxes for Finland. However, if workers are seconded from one country to the other for less than five years, then the agreement maintains that employees are still covered by their original home country. If the transfer endures for more than five years, then employees are liable to the social security taxes of the country to which they are seconded.

RESOURCES

Websites are in English unless otherwise noted.

General

Government of Finland

Ministry of Finance

Ministry for Foreign Affairs

CIA World Factbook: Finland

U.S. State Department: U.S. Relations With Finland

Currency Details

Unicode Consortium: Currency Symbols

International Organization for Standardization: Currency Codes - ISO 4217

United Nations: United Nations Terminology Database: Finland

Taxes

Businesses and Organizations Overview (Tax Administration)

Income Tax Act (Finnish)

Obligations of a Foreign Employer in Finland (Finnish)

Finish Tax Administration - Employee Stock Options (Finnish)

Finish Tax Administration - Social Security Contributions (Finnish)

Law No. 195/2020, on a Temporary Reduction in Insurance Contributions in 2020 (Finnish)

Ministry of Social Affairs and Health, Earnings-Related Pension Insurance Contributions for 2021 and Health Insurance Contributions for 2021 (Finnish)

Finnish Tax Administration - Tax Changes in 2021 (Finnish)

Compensation and Benefits

Keva (Municipal Insurance Programs) (Finnish)

Ministry of Social Affairs and Health

Annual Holidays Act (Finnish)

Ministry of Economic Affairs and Employment: Brochure Regarding the Annual Holidays Act

Occupational Safety and Health Administration (Finnish)

Foreign Workers

Finnish Immigration Service, Working in Finland

Tax Administration, Foreign Business in Finland

Ministry for Foreign Affairs, Requirements for Travel to Finland

Working in the United States

U.S. Department of Labor:

Foreign Labor Certification
Hiring Foreign Workers

U.S. Internal Revenue Service:

IRS Notice 1392, Supplemental Form W-4 Instructions for Nonresident Aliens
IRS Publication 15, Circular E, Employer’s Tax Guide
IRS Publication 515, Withholding of Tax on Nonresident Aliens and Foreign Entities
IRS Publication 519, U.S. Tax Guide for Aliens
IRS Publication 901, U.S. Tax Treaties

U.S. Department of State, Visa Waiver Program

Treaty Arrangements

U.S.-Finland Totalization Agreement