An employer paying salaries is liable to pay the government a social security payment (approx. 2%). The employer is also liable take out pension insurance for all employees. The cost of this varies between 17 and 19% of paid salaries.
The employer must also take out mandatory accident insurance, life insurance and unemployment insurance, the cost of those together is approximately 3% of paid salaries.
The right to perform gainful employment in Finland is determined according to citizenship as follows:
Citizens of the European Union, Norway, Iceland, Liechtenstein and Switzerland may work in Finland without a worker’s residence permit.
The citizens of a member state of the European Economic Area (EEA) are entitled to move to another member state to work or to seek work. The free movement of workers is a basic right, which implies the right to work in some other EEA country on the same conditions that are applied to the host country’s own citizens.
Work in another EU country gives the citizens of the Union right to reside in the country in question. If you stay in Finland for over three months without a break, you should register your right of residence at the Finnish Immigration Service.
The decision concerning the approval of a worker is made by the employment office. A positive decision is made if no worker is available on the Finnish labour market within a reasonable time for the vacancy, and if the terms of employment are in compliance with Finnish laws and collective agreements.
The Transition Period Act includes several exceptions. The admittance to the labour market of those citizens of the new member countries who reside in Finland on a basis other than work is not restricted. These citizens include. tradesmen, the family members of workers, and students. Neither does the Transition Period Act apply to people who have resided and worked in Finland for more than 12 months, nor to those foreigners who would be entitled to gainful employment, if they were citizens of third countries. Due to the Treaty of Accession, the Transition Period Act does not apply to labour moving within the scope of the freedom of supply of services. Such are workers temporarily sent for work in Finland and employed by foreign employers. Yet, most of the provisions of the Aliens Act on the supervision of terms of employment and the employers’ obligations also apply to exceptional situations in compliance with the Transition Period Act.
The citizens of countries outside the EEA need a worker’s residence permit to work in Finland. The permit is either temporary or continuous. The permit includes the partial decision of the employment office and the residence permit decision of the Directorate of Immigration or the city police department of the population register district.
The application for the worker’s residence permit can be made by either the worker or by the employer. The application can be submitted either to the Finnish mission, the employment office or the city police department of the population register district.
The Aliens Act defines more specifically the tasks, branches and positions related to the right to work without a worker’s residence permit.
If the person concerned has a permit other than a worker’s residence permit, e.g. based on family ties or for humanitarian reasons, it often includes an unlimited or limited right to work. Additional information is available on the pages of the Directorate of Immigration.
Taxation of foreign employees staying in Finland for six months or less is collected by their Finnish employer at 35%. This is based on their gross income and they cannot claim any deductions. The employer will also withhold social security payments (approx. 7%) unless the person has the certificate E 101/A1 of a posted employee. For posted employees, social security insurance is sorted in country of origin. They are then not required to submit an income tax return in Finland.
If a person stays in Finland only for six months or less, and a company from another country than Finland is paying his salary, he will not have to pay tax on his wages in Finland.
If the person stays in Finland for longer than six months, he will be paying tax on his salaries in Finland. It does not make a difference if his employer is Finnish or foreign or if he receives a part of his salary from a Finnish employer and another part from a foreign employer.
Under the following circumstances Finland will not tax the wages of a person with a non-Finnish employer:
Finnish income tax includes state tax, municipal (local) tax, and church tax. Claims can be made for deductions on work-related costs, to pay interest on a loan for one’s permanent owner-occupied home, and for travel expenses to country of origin if one’s spouse and children have remained there (calculated according to the cheapest means of transportation). Deductions merely based on family circumstances are not possible. Premiums for obligatory pension and unemployment insurance are deductible. One may also deduct voluntary pension insurance contributions, if the insurance company is established in the European Union, and subject to other restrictions.
When paying salary in Finland the employer makes a tax withdrawal from the payment to the employee, according to the information on the tax notice of the employee.
Tax returns on income and net wealth are filed annually in May, the following year. However, instead of a traditional tax return, many taxpayers receive a tax proposal. The tax proposal is a precompleted and pre-populated form filled with information received directly from the payers of income and from other sources of information. If one does not wish to add anything or correct the tax proposal in any way, one does not have to file a separate tax return at all. The assessment will be completed by the end of October of the year following the tax year.