Personal income tax rates for resident individuals
Finland taxes residents on their worldwide income. Earned income received by residents is taxed at progressive tax rates for national tax purposes and at a flat tax rate for municipal (and church and social security) tax purposes.
National tax rates
National tax rates for 2020 applicable to earned income are as follows:
|Taxable income (EUR*)||Tax on column 1 (EUR)||Tax on excess (%)|
Capital (investment) income is taxed at rates of 30% and 34% (the latter percentage is applicable when the annual taxable capital income exceeds EUR 30,000).
Local income taxes
Municipal tax is levied at flat rates on taxable income determined for municipal taxation. The rate varies between 16.50% and 23.50%, depending on the municipality.
Church tax is payable by members of the Evangelic Lutheran, Orthodox, and Finnish German church in Finland at flat rates on the taxable income determined for municipal taxation. Rates vary between 1% and 2.2%, depending on the parish concerned.
Public broadcasting tax
Public broadcasting tax is levied on taxable income. The rate of public broadcasting tax is 2.5% on annual income exceeding EUR 14,000; however, the maximum amount is EUR 163. Individuals are not liable to pay the tax if their annual income is EUR 14,000 or less, if the individual is under 18 years old, or if the individual lives in the Province of Åland.
Foreign expert tax regime
The foreign expert tax regime provides a flat tax rate of 32% (prior to 1 January 2020, a flat tax rate of 35% was applied) on Finnish-source salary income for those foreign employees whose work requires special knowledge and who would be otherwise taxed at the normal tax rates applicable to resident individuals. Other conditions are that the cash salary is at least EUR 5,800 in each month during the validity period of the regime. The regime cannot be applied if the person has been resident in Finland within the last five calendar years preceding the commencement of working in Finland or is a Finnish national.
The foreign expert tax regime is applicable for a maximum of 48 months from the commencement of working in Finland; after that period, the salary is taxed according to the normal rules. The application for the regime must be filed within 90 days from starting to work in Finland.
The foreign expert tax regime was based on a temporary law until 31 December 2019. As of 1 January 2020, the law has been permanent.
Personal income tax rates for non-resident individuals
A non-resident individual (e.g. occasionally working in Finland) is taxed on Finnish-source income only. Unless lower rates are provided in a tax treaty, tax rates are 35% on employment income and 30% on dividends, interest (however, interest income is normally not taxable for a non-resident) and royalties. In principle, no itemised deductions are allowed against the aforementioned income. However, a standard deduction of EUR 510 per month or, if the income is accrued from a time period of less than one month, EUR 17 per day is deducted from the income subject to the 35% tax at source (not applicable to director's fees). Finnish-source pension income is taxed at the progressive tax rate (if a tax treaty does not prevent Finland to tax the pension).
A non-resident may also request to be taxed on one's income earned in Finland through tax assessment (i.e. progressive taxation) instead of fixed tax at source. The regulations apply to non-residents who live in the European Economic Area (EEA) or in a country with which Finland has concluded an agreement on execution assistance and information exchange in tax matters, or those who hold a residence permit with a researcher status.
The provisions on tax at source on earned income remain to be valid for those non-residents who do not apply for a non-resident tax withholding card or express in any other way their will that taxation shall be carried out through assessment. In general, non-residents subject to tax at source do not have reporting liabilities in Finland as the entity paying the income takes care of the tax-at-source withholding as well as the reporting liabilities in Finland.
In progressive taxation of a non-resident's earned income, the non-resident's worldwide earned income (i.e. salary income, pension income, and social security benefits) is taken into account when calculating the tax on income earned in Finland (exemption with progression). However, the income received abroad or income received from Finland that is not taxable in Finland in accordance with provisions of an applicable tax treaty is not taken into account in the progression if the taxable earned income received from Finland is at least 75% of the individual's total earned income.
Remuneration to artists and sportsmen is subject to 15% tax at source (no deductions available). Tax is collected at source by withholding.
Finnish-source income other than mentioned above is subject to income tax at normal tax rates (earned income is taxed at a progressive tax rate and capital income at rates of 30% or 34%) unless a tax treaty provides otherwise. For example, rental income from property located in Finland is subject to assessment and the net rental income is taxed at 30% or 34%.