Finland

Registrations and Establishing an Entity

The most common forms of business organizations in Finland include limited liability company, foreign subsidiary, limited partnership, general partnership, and cooperative or branch of a foreign company. For a foreign organization, a registration as a foreign entity can in many situations be sufficient.

Depending on the type of business, a registration in the Trade Register and also to the respective registers kept by the Tax Administration might be necessary. These registers are VAT Register, Prepayment Register and the Employer Register. 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 digitalized 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.

Banking

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.

Working Week

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.

National minimum wage

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.

Employment Law / 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

According to the Employment Contracts Act, employees are entitled to take leave from work for the period when they receive 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.

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.

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 31,25% and the municipal tax rate is 16,5%-23,5%. Capital income is taxed with a flat rate of 30% (up to EUR 30,000) or 34% (over EUR 30,000).

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.

Social Security

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 17,38 % 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 0,59 % of an employee’s monthly salary. The employer´s part of unemployment insurance is 0,20 %. Employer pays the unemployment insurances quarterly to the Employment Fund.

The employer pays also health insurance premium 1,87%, 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.

Summary of the 2025 percent:

Employee’s part:

• Pension: 7,15% (ages 17–52), 8,65% (ages 53–62), 7,15% (ages 63–68)
• Unemployment insurance: 0,59%
• Health insurance: 0,84% (included in payroll tax)

Employer’s part:

• Pension: ~17,38%
• Unemployment insurance: 0,20% up to €2,445,000; 0,8% above
• Health insurance: 1,87%
• Accident insurance: 1–7%
• Group life insurance: 0,06%

Payroll

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. Payroll reports must be archived for at least ten years.

Pay slip Example

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

Reporting

Incomes Register

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.
Data users include a wide array of government bodies including the Tax Administration, Kela, Employment Fund, municipalities, and more.

Monthly Reports

Two reports must be submitted: wage/earnings data within 5 days of payment, and the employer’s separate report (even if no wages were paid). These are submitted via electronic interfaces or online forms.

Annual Reports

Not required post-2018 due to real-time reporting through the Incomes Register.

New employees

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.

Leavers

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.

Employee Benefits

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 €0,59 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 €53 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 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.

Most common fringe benefits:

• Telephone
• Company cars
• Meals
• Accommodation
• Garages

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. The residence permit may be granted for employment, family, studies, etc. Work lasting over 90 days requires one. Applications are submitted online and finalized at an embassy or consulate.

Key updates in 2025

Tax cards 2025

Tax cards will now be valid from 1 January. Cards are delivered via MyTax and post in December 2024.

VAT Changes

Reduced VAT of 10% proposed to increase to 14%, excluding public broadcasting and newspapers.

New EU-aligned SME VAT rules will apply to all entity types.

Taxation of Earned Income

Tax rates in 2025 will be more progressive. A new child tax credit will aid low- to mid-income earners with dependents.

Further Information

For more information, or assistance with Finland tax enquiries please contact: gi@activpayroll.com

About This Payroll and Tax Overview

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.