Finland offers a tax regime that can make it easier for international professionals to work in the country. Eligible employees may apply to be taxed at a flat 32% rate on salary for up to seven years instead of normal progressive tax rates.
In April 2024, the Finnish government announced plans to lower this rate from 32% to 25%, expected to take effect in 2026 (Valtioneuvosto.fi).
What is Finland’s key employee tax regime?
The regime allows certain foreign professionals to be taxed at a fixed 32% rate on salary, withheld directly by the employer. Vero must approve the application before the employer can apply this withholding. The 32% rate is a final tax. No deductions are allowed, and it applies only to salary – not to other income.
If the work is performed in the Åland Islands, the rate is 14.5% and municipal tax also applies.
Who can use the regime?
All of the following must apply at the start of employment:
- The person becomes a Finnish resident taxpayer when work begins
- Salary is at least EUR 5,800 per month
- The job requires special expertise
- The person is not a Finnish citizen and has not been a Finnish tax resident during the previous five years
Teachers and researchers at Finnish universities can qualify without the EUR 5,800 salary threshold.
Residency timing
The person must become resident at the start of the job. If they already became resident earlier – for example due to frequent travel – the regime cannot be applied.
Duration
The regime can apply for up to 84 months (seven years) from the start of employment.
The limit was increased from 48 months for work starting on or after 1 January 2024. Renewal must be filed within 30 days after the previous tax card expires.
Application
The employee – or the employer on their behalf – must apply for a key employee tax-at-source card before work begins or within 90 days of starting.
Typical documents include an employment contract, proof of salary level, and confirmation of expertise. If the employee remains under another country’s social security system, an A1 certificate is also needed. Once approved, the employer withholds the 32% tax and pays it to Vero.
Social security and insurance
No health insurance contribution is collected from the employee under the regime. The employer must still pay statutory Finnish contributions – such as pension, accident and unemployment insurance – unless an A1 certificate applies.
Employees, not contractors
The regime applies only to employees, not freelancers or independent contractors. It can be used through an Employer of Record arrangement when the person is formally employed by a Finnish entity that handles payroll and compliance.
Common pitfalls
- Missing the 90-day application deadline
- Salary dropping below EUR 5,800 per month
- Becoming resident before employment starts
- Assuming deductions or expenses can reduce the 32% tax
- Forgetting to renew the tax card in time
Failure to meet any condition means the person will be taxed under the normal progressive system.
Why the regime matters
For employees, the key benefit is predictability – a simple, fixed rate with no year-end adjustments. For employers and EOR providers, it ensures compliance and streamlines payroll for international professionals in Finland.
Sources
• Vero.fi (Taxation of key employees)
• Finlex (Act on Withholding Tax on Employees Coming from Abroad 1551/1995)
Disclaimer
The information in this article is provided for general guidance and informational purposes only. It does not constitute legal, tax, or financial advice, and should not be relied upon as such. Northern Partners does not provide legal or tax advisory services. Always verify the current rules with the Finnish Tax Administration (Vero.fi) or a qualified professional before making decisions related to employment, taxation, or compliance in Finland.
