Finland

Employment income

Taxable personal income includes, inter alia, wages and salaries in money and in kind, director fees, employee stock option benefits, employer provided housing, pensions and annuities, living and housing allowances, car benefits, and unemployment benefits. Reimbursements for travelling expenses due to business trips (including per diems) are tax exempt in accordance with the conditions and limits set forth in the tax authorities' annual decision. The tax authorities also provide annually a decision of the taxable values of fringe benefits. Certain fringe benefits have deemed taxable values (e.g. company car, company provided housing, lunch benefit). Otherwise, fringe benefits are valued at the fair market value. Certain benefits provided to the whole staff are tax exempt if they can be regarded as reasonable and usual (e.g. health care, discounts on products and services produced by the employer, certain non-cash gifts, leisure activities).

According to the Income Tax Act, Finland may tax a leased employee's salary income paid for work performed in Finland even though the employee would remain non-resident in Finland (normally Finland cannot tax salary income paid abroad to a non-resident even though the individual would work in Finland, provided that the employee does not work for a foreign employer's permanent establishment [PE] located in Finland). The leased non-resident employee has an obligation to apply for an advance tax by the end of a calendar month following the commencement of working in Finland. Furthermore, the foreign entity that leases the employee or its representative in Finland and the Finnish ordering entity have certain reporting obligations towards the tax authorities. However, the aforementioned rules are applicable only if Finland has concluded with the home country a tax treaty that includes a specific provision regarding the leased employees or Finland has no double tax treaty (DTT) in force with the home country.

Capital income

Capital gains

Capital gains are basically fully taxable and included in the taxable capital income subject to 30% tax rate up to taxable capital income of EUR 30,000 and 34% tax rate on the excess.

A gain from sale of a home is tax exempt if the house or apartment has been used as the individual’s or their family's permanent home for a continuous period of at least two years during the individual's period of ownership. Capital gains are tax exempt if the total amount of sales prices of all taxable asset transfers during a tax year does not exceed EUR 1,000.

As a basic rule, repayments of capital are treated as dividends (see below). However, repayments of capital from non-quoted companies may be subject to capital gains taxation, under certain conditions.

Dividend income

85% of dividends from publicly quoted shares are taxed as capital income (at 30% tax rate up to taxable capital income of EUR 30,000 and 34% tax rate on the excess). 15% of the aforementioned dividends are tax-exempt.

As concern dividends from non-quoted shares, 25% of the dividend corresponding to an annual return of 8% calculated on the mathematical value of the share is regarded as taxable capital income up to a maximum limit of EUR 150,000. Within the aforementioned 8% cap, 85% of the dividend exceeding EUR 150,000 is considered as taxable capital income. With respect to the portion exceeding the 8% calculated on the mathematical value of the share, 75% of the dividend is considered as taxable earned income.

The aforementioned rules also apply to foreign dividends (except that the aforementioned 8% is calculated from the market value of the shares if the mathematical value of the shares is not available) if the company distributing the dividends is a company mentioned in article 2 of the Directive 2011/96/EU (as amended 2013/13/EU) on the common system of taxation applicable in case of parent companies and subsidiaries of different member states or the following conditions are met: the company pays at least 10% tax in its country of residence and the country of residence is within the European Economic Area or Finland and the company's country of residence has concluded a DTT that is applicable to the dividends. Otherwise, foreign dividends received by a resident individual are taxed as earned income without any exceptions.

If the distribution of dividends is based on work input or performance of the shareholders, not on their share ownership, the dividends are regarded as salary (or other remuneration for work) for tax purposes and are fully taxed as earned income subject to social security.

As concern dividends received from Finland, an individual residing in an EU/EEA country may claim taxation under the rules applicable to individuals resident in Finland if the individual can show that the Finnish tax at source (30% or a lower percentage provided by a tax treaty) cannot be fully credited in the individual's home country. A certificate from the home country tax authorities is needed.

Interest income

Interest income is fully taxable at capital income tax rates. Gross interest income received by resident individuals from deposits in Finnish bank accounts and Finnish bonds is subject to final tax at source at a flat rate of 30%.

Rental income

Net rental income is fully taxable at capital income tax rates.