Finland

General Information

• Full Name: Republic of Finland
• Population: 5.556 million (World Bank, 2022)
• Capital: Helsinki
• Major Languages: Finnish, Swedish
• Major Religion: Christianity
• Monetary Unit: Euro
• Main Exports: Machinery and electronics, paper and paper products, chemicals
• GNI per Capita: US $59,027 (World Bank, 2022)
• Internet Domain: .fi
• International Dialling Code: +358

How Do I Say in Finnish?

• Hello: Hei
• Good morning: hyvää huomenta
• Good evening: hyvää iltaa
• Do you speak English?: Puhutko Englantia?
• Good bye: Näkemiin
• Thank you: Kiitos
• See you later: Nähdään myöhemmin

Finland offers a highly conducive environment for businesses, marked by its robust economy, strategic location, and a reputation for innovation and technological advancement. Situated in Northern Europe and part of the EU, Finland serves as a gateway to European and Russian markets. The country's economy is known for its strong public sector, a competitive private sector, and a vibrant start-up scene, especially in technology, clean energy, and biotech industries.

The Finnish business culture values transparency, reliability, and efficiency, making it an attractive destination for international companies. The government supports businesses with favourable policies, including a straightforward tax system, investment in research and development, and various incentives for start-ups and established enterprises.

Finland's workforce is highly educated, skilled, and proficient in English, ensuring seamless integration for international businesses. The country's focus on sustainability, high quality of life, and well-developed infrastructure further enhance its appeal as a business destination. For those looking to navigate the Nordic markets or innovate in a supportive environment, Finland offers a stable, welcoming, and forward-thinking business landscape.

The Finnish operating environment is stable and predictable. Finland is a member of the European Union and is the only Nordic country with the Euro and has a low corporate tax rate, only 20%. Therefore, many foreign companies have established operations in Finland for the long-term and enjoy high return on investment. With access to top high-tech talent and a Silicon Valley inspired business culture, Finland is an R&D hotspot and a testing ground for companies looking for business transformation. Engineering and high technology industries are the leading branches of manufacturing.

International companies are warmly welcomed to Finland. They can access the same benefits and grants as Finnish companies. Finns themselves are highly internationally oriented and English is the common second language of the business community. Over 90% of Finns under thirty speak English.

Investors in Finland benefit from a transparent and efficient business environment, ranked among the best in the world for ease of doing business. The country's political stability, strong legal system, and commitment to protecting intellectual property rights further secure investment prospects. With a strong emphasis on environmental sustainability and technological innovation, Finland is an ideal destination for green investment and high-tech ventures.

Finland actively encourages foreign direct investment (FDI) as part of its economic strategy, offering a thriving ecosystem for businesses to innovate and grow. The Finnish government facilitates FDI through various channels, ensuring a smooth entry and successful operation for foreign companies.

FDI opportunities in Finland are diverse, covering a range of sectors:

• Greenfield Investments: Investors looking to establish new operations find Finland's business parks and industrial sites, equipped with world-class facilities, an ideal choice. Sectors such as clean technology, ICT, and bioeconomy are particularly receptive to new projects.

• Mergers and Acquisitions (M&A): Finland's stable economy and transparent business environment make it conducive for M&A activities. Foreign investors can acquire or merge with Finnish companies to gain market access and benefit from local expertise.

• Joint Ventures and Strategic Partnerships: Collaborating with Finnish companies can be a strategic move for foreign investors, leveraging the country's strong innovation ecosystem and technological prowess.

• Investment in Innovation: With a strong focus on R&D, Finland offers ample opportunities for investment in innovation. The government supports R&D activities through grants and tax incentives, fostering a culture of innovation across various sectors.

Business Finland, the Finnish government agency for innovation funding and trade, investment, and travel promotion, offers comprehensive services for foreign investors. These services include market opportunities assessment, advice on the Finnish business environment, and connections to potential partners and networks.

Finland's commitment to innovation, sustainability, and a high quality of life, combined with its strategic location and supportive business ecosystem, make it a prime destination for business operations, investment, and foreign direct investment. With its open economy and welcoming attitude towards international collaboration, Finland stands out as a compelling choice for companies and investors aiming for long-term growth and success in the global market.

It is not mandatory to make payments to employees or the authorities from an in-country bank account.

Salary and 3rd party payments can be made on the clients behalf provided that the client has their own bank account in Finland.

Payments can only be made using bank transfers to both the employee’s and the authorities, cash is not accepted.

Usually bank transfers will only take a day to complete but international transfers will take 3-4 working days.

There are five forms of business organisations in Finland: limited liability company, limited partnership, general partnership, cooperative or branch of a foreign company.

All organisations must be registered in the Trade Register and, depending on the type of business, also to the respective registers kept by the Tax Administration.

These registers are VAT Register, Prepayment Register, the Employer Register and the register of bodies liable for tax on insurance premiums. The Trade Register is a register for public use. All registration matters are handled by the Finnish Patent and Registration Office which is responsible for the Trade Register and works together with the Finnish Tax Administration.

As most of the Finnish authorities have digitalised their services and it is not possible to give filings or for example tax returns on paper, all entities need to either apply a Suomi.fi e-Authorization or give authorization electronically to an accounting company to do the filings electronically. The online identification works through your online banking credentials.

If you intend to work in Finland, you need a residence permit granted by the state of Finland. For Citizens of the EU, Iceland, Liechtenstein, Norway or Switzerland, a residence permit will not be required.

Foreign nationals must have a residence permit to stay in Finland for three months or longer. A residence permit may be granted on the grounds of family ties in Finland, employment/ studies, Finnish Descent, return migration, on humanitarian grounds or other exceptional reasons. It is issued to a foreign national for purposes other than tourism or short-term stays.

Residence permits may either be for a fixed term or permanent. The first fixed-term residence permit is generally issued for one year. The type of residence permit depends on the purpose of the stay. The residence permits are granted by the Finnish Immigration Service.

The permit can be completed online. The online application requires registration with the Finnish Immigration Service and a personal visit to the Finnish Embassy within the country of origin. Applications for a first residence permit can also be filled personally with the Finnish Embassy or Consulate in the country of origin. The Finnish Immigration Service will decide whether or not the permit can be granted. Applications may be submitted in Finnish, Swedish or English.

The tax year runs from January 1st to December 31st.

Income Tax

Personal income tax returns in Finland are due in May. The exact date that the tax return is due will be printed on the pre-completed tax return form, which each taxpayer will receive from the tax authorities. There are no joint assessments available.

Residents in Finland are taxed on their worldwide income, while non-residents are liable to pay tax at source on the income received from Finnish sources. An individual will be resident if he/she has a principal place of abode in Finland or he/she spends more than 6 months in Finland. Any temporary absence will not break the continuity of the 6 months period.

Finland has a dual income tax system for individuals, under which income is divided into earned income and capital income. Any earned income is subject to national income tax, municipal income tax, church tax and social security contributions. Employers are obliged to pay tax withheld at the source from all wages paid to employees. The national income tax rate is progressive up to 44% and the municipal tax rate is 4,4-10,8%. Capital income is taxed with a flat rate of 30% (up to EUR 30,000) or 34% (over EUR 30,000).

Income Tax Rates

Capital Income Tax Rates

• Standard Rate: 30%
• For annual taxable capital income over €30,000: 34%

Local Income Taxes

• Varies between 4.4% and 10.8% depending on the municipality.
• The average rate used for progressive taxation for non-tax residents is 7.50%.

Church Tax

• 1% to 2.25%, applicable only to members of certain churches.

Public Broadcasting Tax

• 5% on annual income exceeding €14,000, up to a maximum of €163.
  
  

For Non-Resident Individuals

• Employment Income: 35%
• Dividends, Interest, and Royalties: 30% (interest is normally not taxable for non-residents)
• Artist and Sportsmen Remuneration: 15%

Progressive Taxation Option:

• Non-residents from the EEA or countries with tax treaties can opt for progressive taxation instead of fixed tax at source.

• €17 per day or €510 per month from the taxable income.

All employers who have deducted tax need to make a monthly declaration. The declaration must be submitted electronically to the Incomes Register by the employer or a representative. Tax payment must be recorded in the Tax Office’s account no later than on the 12th of the following month after salary payments have been made.

The statutory social insurance contributions payable by private employers involve earnings related pension contribution, employment accident insurance contribution, unemployment insurance contribution and employees’ group life insurance contribution plus the social security contribution. The employer will withhold such contributions from an employee’s salary.

Employees will pay a pension contribution of 7,15% of their monthly salary if the employee is under 53. If the employee is over 53, the contribution rate increases to 8,65% and if the employee is over 63, the contribution rate is 7,15% again. The employer´s part of pension contribution is about 17,34 % depending on the discounts the company receives. The employer pays the pensions monthly to the pension company.

Unemployment insurance is collected from employees between the ages of 17 and 67 by the Unemployment Insurance Fund at the rate of 10,79 % of an employee’s monthly salary. The employer´s part of unemployment insurance is 0,27 %. The employer pays the unemployment insurances quarterly to the Employment Fund.

The employer also pays health insurance premium 1,16 %, group life insurance 0,06% and accident insurance about 0,3% - 7% depending on industry. According to Finnish Law, the employer is obliged to insure all employees working in Finland.

The employer must provide employees with statutory occupational health care. Every employee is entitled to occupational health care, regardless of the nature and duration of the employment relationship. Occupational health care must be provided and paid for by the employer.

Below is a summary of the 2024 percent

Employee contribution:

Employer contribution:

• Pension Insurance Contribution 17,34 %
• Unemployment insurance contribution 0,27 % up to 2 337 000€ and 1,09% beyond
• Employer's health insurance premium 1,16 %
• Accident insurance premium (percentage depends on salaries and the risk of accident at work) 0,3%-7%
• Group life insurance premium 0,06 %

Incomes Register

The Incomes Register Project is one of the key initiatives of the current government in the area of digital public services. The Incomes Register is a national online database. It contains comprehensive information on individuals' wages, pensions and benefits. Data providers report individuals' earnings to the Incomes Register in real time, whenever a payment is made.

Monthly Reports

There are two separate reports to be made to the incomes register. First, all wages and earnings must be reported to the incomes register within 5 days of the payment to the employee. If the salaries are paid twice a month, this report needs to be filed twice as well. Secondly the employer makes another report called the employer’s separate report. This must be filed even if there weren’t any wages paid during the reporting period by the 5th of the month after payment day. Neglecting the schedule causes late fees.

Data can be submitted via an interface, by uploading files in the Incomes Register's e-service or by entering the information in an online form. Information can only be submitted on paper in special circumstances. The Finnish Tax Administration's Incomes Register Unit will maintain the register and serve as the responsible authority. Representative requires a Suomi.fi authorization from client to be able to act on behalf.

Annual Reports

As the incomes register includes real time and more detailed data about wages, there aren’t any annual reports to be filed after tax year 2018.

When hiring a new employee, employer should include employee to statutory occupational health care services. Insurance companies will receive information of new employee through Incomes Register. Employer has no other obligation to register employee.

When employee’s employment is terminated, employer is required to pay any outstanding holiday balance in the final payroll, which should be paid in the last working day unless collective agreement applicable provides different information or something else has been agreed on employment contract.

Payroll requires a reason for termination (e.g. employee´s resignation, retirement, financial and production related grounds) and the last payroll´s salary notification to Incomes register includes this information as well as ending date of employment.

It is legally acceptable in Finland to provide employees with online payslips that the employees can access using their online banking credentials.

The information required from each employee for Finnish payroll purposes includes; full employee information (including an address), employment contract at least in English, tax card information and an A1 form if the employee is a posted employee.

Net based salaries are not typical in Finland and due to the progressive taxation nearly impossible to handle in payroll.

Reports

Payroll reports must be archived for at least ten years.

Finnish Payslip example

Holiday Accrual and the Annual Leave Act

The right to annual leave in Finland is covered by the Annual Holiday Act and exceptional situations are regulated by Collective Agreements.

For every full month worked, an employee is entitled to 2.5 days of holiday, totalling to 30 days per year. The entitlement is reduced to 2 days for each full month if the employment has lasted less than 12 months. To be entitled for holiday, employees must work for a minimum of 14 days or 35 hours during the month in question. The holiday accrual period is from April 1st – March 31st.

Typically, bonus holiday pay amounts to 50% of holiday pay salary and is triggered once the employee returns. Bonus holiday pay is based on collective bargaining, not legislation. There are no other additional holiday payment entitlements in Finland unless otherwise agreed. Finnish workers also enjoy 8-13 public holidays a year in addition to the annual holiday entitlement.

Employment Contracts Act - Maternity Leave, Paternity Leave and Parental Allowance

According to the Employment Contracts Act, employees are entitled to take leave from work for the period when they receive a maternity, paternity or parental allowance.

The purpose of family leave is usually to care for the employee’s own child. Family leave is also allowed in case of compelling reasons if the immediate presence of the employee is necessary because of an unforeseeable event suffered by their family.

According to the Employment Contracts Act, it is not required to pay wages for the duration of family leave. However, many collective agreements specify that wages must continue to be paid during maternity leave and short-term absences due to a child falling ill (temporary child-care leave). An employer who pays employees on leave wages and holiday pay or holiday compensation may apply to Kela for compensation.

Daily allowances for parents

Employer has no obligation to pay salary during parental leave by legislation. Many collective agreements, however, set demands for employer to pay full salary to employee on parental leave for a certain period (2-3 months is a common time).

Kela, the Social Insurance Institution of Finland, pays daily allowances for parents regardless of family structure. In some cases, payment of daily allowances for parents may be affected if the family structure is an adoptive family, a multiple-birth family, a rainbow family, a stepfamily or a one-parent family.

Pregnancy leave usually starts 30 working days before the estimated due date of the baby. When your pregnancy leave starts, you will get pregnancy allowance from Kela. Pregnancy allowance is paid for 40 working days.

If, at your workplace, you are exposed to radiation, chemical agents or infectious disease, and you cannot be reassigned to other duties, you can stay away from work as soon as your pregnancy has been confirmed. During that period, you will get special pregnancy allowance.

You can start taking out parental leave after the baby is born. Parental allowance is paid by Kela for a total of 320 working days. If a child has two parents, the days are divided equally between both parents. If you wish, you can give up some of your parental allowance days for the benefit of someone else. You and another person participating in the care of the child can get daily allowances for parents at the same time for a maximum of 18 days.

You can also work part-time and apply for partial parental allowance for that same period.

Sickness

 Employees who cannot work due to accident or illness are entitled to:

• Full salary for 10 days if employment has lasted for 1 month or more

• Half salary for 10 days if the employment lasted for less than half a month

• After 10 days, a national sickness allowance is based on the employee’s earned income and is payable by Kela (Social Insurance Institution) under the Sickness Insurance Act 2004. It is paid for a maximum of 300 days.

Employers cannot normally recover the salary they pay during the first 10 days, but if obliged by a collective agreement to pay a sickness allowance for more than that period, then they can be reimbursed the national sickness allowance by Kela for that period to the amount paid to the employee.

National Service

Every male Finnish citizen is liable for military service starting from the beginning of the year in which he turns 18 years old until he reaches 60 years old. A call up letter for military service will be sent to a male citizen that lives abroad. Employers are not required to pay salary during the military service by law, but it´s an obligation in some collective agreements. Law requires employers to continue any pre-existing contracts once the employee has completed the service.

The working week in Finland is from Monday to Friday. The normal opening hours of for example a governmental office is usually eight hours, typically from 8:00AM to 4:00PM.

Finland does not have a government-mandated national minimum wage. Instead, minimum wage levels are determined by collective bargaining agreements relevant to each sector or industry.

These agreements are negotiated between unions and employers, setting the minimum wages for different types of work. If a collective agreement does not exist in a specific sector, the employer and employee can agree on a reasonable salary. However, in general, wages must align with what is considered usual and reasonable for the work in question

There are multiple statutory holiday schedules within Finland. Below are the statutory national holidays in Finland for 2024.

Tax Free Benefits

All work-related general expenses such as travel costs can be compensated directly. Tax free to employees up to a limit confirmed by the tax authorities every year.

Work related car mileage of the employee’s own car can be compensated for €0,57 per km. Any car benefit must be considered and recorded when company cars are used. This is calculated by the tax authority. In addition, a daily allowance of €51 can be paid by the employer for each day when the employee has travelled for 10 hours or more within Finland. Different allowances apply abroad. The employer can pay €24 per day for travelling 6-10 hours.

Fringe Benefits

Generally, all benefits are taxable in Finland unless there is an exception in the law. Employers can, for example, provide employees with a company health care up to certain limits tax free.

The taxable amount is the value of the benefit, but for some benefits there are certain values defined regardless of the real usage or the monetary value of the benefit.

The Tax Administration valuates the fringe benefits annually. The most common benefits are:

• Telephone
• Company cars
• Meals
• Accommodation
• Garages

For Finland in 2024, there are several key updates in taxation and social security:

Changes to late-payment interest and credit interest: The rates of interest will increase in 2024. This means that if you have unpaid taxes, you will have to pay more interest on them starting from 1 January 2024. The late-payment interest is raised to 11% (excl. inheritance tax 7.5%). Correspondingly, you will receive a higher interest on your tax refunds: the credit interest is raised from 0.5% to 2%.

Changes for corporate taxpayers: For example, companies will be able to claim an extra additional deduction for research and development. The extra deduction is a continuation of previous deductions for R&D activities.

For multinational groups, a significant upcoming change is the introduction of the minimum tax rate (OECD Pillar Two). This change affects the income taxation of multinational enterprise groups, regardless of which countries the group companies are located in. The new tax raises the tax rate on all group companies to at least 15%.

Changes to MyTax: Prepayment instalments can be changed in MyTax so that the prepayments are distributed evenly for each month of the year.

Changes for individual taxpayers: For example, the deduction for commuting expenses will change. The deduction will decrease in 2024 because its threshold is raised from €750 to €900 and the temporary increases to the deduction will no longer be in effect. The maximum amount of the deduction will be €7,000 (compared to €8,400 in 2023). The Tax Administration has also published its official decisions on tax-exempt reimbursements of travel expenses in 2024 (daily allowance, meal allowance, kilometre allowance) and on fringe benefits (such as employer-provided accommodation, company car, meals, telephones).

The employer's social insurance contributions: https://www.vero.fi/en/businesses-and-corporations/taxes-and-charges/being-an-employer/social-insurance-contributions/

Further information on changes in taxation in 2024: https://www.vero.fi/en/About-us/newsroom/news/uutiset/2023/what-will-change-in-taxation-in-2024/

Please note that this document gives general guidance only and should not be regarded as an authoritative or complete statement of the law, regulations or tax position in any country. You should always seek specific advice for each specific situation. This document should not be relied upon as professional advice and activpayroll accepts no liability for reliance on its contents.