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Employing in Finland

At a glance

Employment in Finland

The Finnish labour market is characterized by highly organized relations between employee and employer, with a crucial role played by collective bargaining power in labour regulation. The core of Finnish employment legislation lies in comprehensiveness and detail of the legislation complemented by collective agreements. Around 80% of Finnish employees are covered by a collective bargaining agreement.

Due to the prevalence of collective agreements in the Finnish labour market, Finnish employers are obliged to provide their employees with more beneficial terms than they would receive under the statutory requirements. The power of Finnish trade unions therefore play a significant role in the Finnish employment environment

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Payroll & Tax in Finland

Finnish legislation on taxes for foreign employees are not as stringent, although are typically higher given the high levels of social security in the Finnish tax system. Salary earned abroad is exempt from tax in Finland if the Finnish resident works continuously abroad for at least six months, while non-resident employees are only subject to income taxes from Finnish sources. There are some notable consideration with Finnish tax laws that foreign employers must be aware of, such as the different social security contributions, the VAT and withholding tax.

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Immigration / Work Permits in Finland

Citizens from any EU or EEA country are free to reside and work in Finland for up to three months, and must register the right of residence at a local police station if extending their employment. Nationals who are from countries in the Schengen zone only require a valid passport and travel documents instead of a visa for stays up to three months.

Foreign nationals who are not from Nordic, EU or EEA countries require an employee’s residence permit or an ordinary residence permit when working with an employer based in Finland. For most cases of foreign employees wishing to enter and work in Finland, the relevant permits must be obtained under the Aliens’ Act. The process for a Finland-based company employing a foreign national is a comparatively simple process, where in many cases only a residence permit is required to legally employ a foreign employee.

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Incorporation

The process of incorporation is relatively straightforward in Finland, as the Finnish legislation on incorporation encourages foreign investors to do so with ease. The procedures are similar to most countries in the EU. The laws pertaining to incorporation in Finland is regulated by the Limited Liability Companies Act. There are broadly three categories of business entities that may be assumed by foreign companies:

  • Limited Liability Company
  • Limited Partnership
  • Branch, Subsidiary or Representative Office
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GEO Solutions or DIY Employment in Finland?

Companies entering Finland must make a decision whether to use their own resources for a Do-It-Yourself (DIY) approach, or to use a Global Employment Organization to handle payroll and employment responsibilities. A GEO or Finnish Employer of Record solution makes it faster, easier and cheaper to deploy staff if they don’t have a Finnish entity established that can run payroll.

A DIY approach will typically be delayed until there is a properly incorporated company ready to run payroll and may be a costly option. Shield GEO can deploy foreign staff in 4-6 weeks and local staff in 48 hours. Additionally Shield GEO is responsible for all compliance issues related to the employment.

Using Shield GEO Employer of Record Services in Finland

Payroll Finland
Management Fee for Employer of Record Services / Monthly Payroll Costs

Please contact us for a quote

Notes

Shield GEO pays the employee on a monthly basis, typically on the last working day of the month although we can adapt to your preferred schedule. Income tax and social security (where applicable) are deducted at source and paid to the local tax authorities.

 
Grossed income Tax Rate (%)
€0 - €16,300 0
€16,300 - €24,300 6.5 (€8)
€24,300 - €39,700 17.5 (€528)
€39,700 - €71,400 21.5 (€3,223)
€71,400 - €100,000 29.75 (€10,038)
€100-000+ 31.75 (€18,547)

Flat tax amount corresponding to each tax bracket shown in parentheses

Tax Returns Supplied

Yes

Employers Social Security and statutory contributions

Social security taxes are applied as a percentage of gross wages and salaries. The average total percentage of all contributions for private-sector employers is 23.60%, which consist of:

 

  • Employer’s social security premium: 2.14%
  • Group life insurance premium: 0.067%
  • Pension premiums: 17.75%
  • Accident insurance premium: 1%
  • Unemployment insurance premium: 0.75%
Employees Social Security and statutory contributions

Social security contribution for employees in Finland consists of a Medicare contribution and a per diem contribution.

 

  • Medicare contribution: 1.32% of municipal taxable income.
  • Per diem contribution: 0.84% of salary income.
  • Pension insurance premium: 5.55% (7.05% for employees over 53)
  • Unemployment insurance premium: 0.5%.
Corporate Income Tax Rate

The Corporate Income Tax Rate is currently 20.0%, lowered from 24.5% in January 2014.

Sales Tax

VAT (arvonlisävero): Applies to all individuals and companies importing goods into Finland.

VAT rate: 24% as the general rate.
VAT rate: 14% for the supply of foodstuffs, animal feed and restaurant/catering services.
VAT rate: 10% for the supply of books, pharmaceutical products, transportation, accommodation etc.

Withholding Tax

Finnish companies are required to apply a 20% or 15% withholding tax on payments to foreign corporations depending on the country, and a 30% withholding tax on payments to non-resident individuals.

 

No withholding tax is levied on dividend payments received by companies in the EU/EEA.

 

Reduced rates are applicable to certain countries engaging in double tax treaties with Finland.

Other Tax
  • Municipal Tax: Flat rate ranging from 16.5 – 22.5% of taxable income depending on municipality.
  • Church Tax: Levied for members of certain churches at a rate from 1 – 2.2%
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