Non‑residents; both individuals and corporate bodies.

Income from investments in Finland and on other income derived from Finland.

The following items, inter alia, are considered as income derived from Finland: income from real property situated in Finland; income from letting a flat held by virtue of shares in a Finnish residential housing company; capital gains on the sale of real property situated in Finland and on the sale of shares in a Finnish residential housing company or in any other company, if more than half of the company’s total assets consist of real property situated in Finland; profits from a business, agriculture and forestry carried on in Finland and income from professional activities performed in Finland; wages, salaries and pensions paid by the State, a Finnish municipality or any other domestic statutory body, including pensions based on work, duty or service for the State or such municipality or body as well as pensions which are based on pension or traffic insurance taken out in Finland; wages and salaries derived in respect of employment exercised solely or mainly in Finland for an employer in the private sector who is located in Finland, as well as pension paid in consideration of such employment; wages and salaries paid by a foreign employer in respect of employment exercised in Finland where a foreign hirer has hired the employee out to a person who is located in Finland and has the work done; remuneration paid on the basis of membership of a board of directors or another similar organ of a Finnish corporate body or partnership; income arising from the personal activities of a sportsman or artiste if the activities are exercised in Finland or on a board a Finnish vessel; dividends from Finnish limited companies and co-operative societies, and shares in the income of Finnish partnerships; interest in cases where the debtor is a resident individual or a Finnish corporate body, partnership or undistributed estate of a deceased person; royalties in cases where the property or right in respect of which the royalties are paid is used in a business carried on in Finland or where the person liable to pay the royalties is a resident individual or a Finnish corporate body, partnership or undistributed estate of a deceased person; distributions by investment funds and employee investment funds.

Exemptions:

• Interest derived by non‑residents on: Finnish bonds; debentures and other mass instruments of debt; loans from abroad not considered as capital investment assimilated to the debtor’s own capital; deposits in banks or other financial institutions; foreign trade credit accounts owned by non‑residents.
• Dividends paid to a company resident in a MemberState of the European Union if it directly owns at least 10 % of the capital of the distributing company. This rule applies only if the recipient of the dividend is a company mentioned in Article 2 of the Council directive on the common system of taxation applicable in the case of parent companies and subsidiaries of different Member States (2011/96/EU as amended by Council Directive 2013/13/EU).
• dividend paid to a non-resident corporate body that is similar to a corporate body mentioned in Article 33 d 4 of the Income Tax Act or Article 6 a of the Act on the Taxation of Business Profits and Income from Professional Activities on the condition that the dividend would be exempt according to these provisions when paid to domestic corporate body; surplus paid by a cooperative to a corporate body, distributions of assets that is considered to be dividend or surplus from unrestricted equity as mentioned in Article 33 a, 33 b and 33 f of the Income Tax Act and Article 6 a and 6 d of the Act on the Taxation of Business Profits, dividend and interest paid by a domestic savings bank to equity capital share and additional fund investment and interest paid by a mutual insurance company and insurance association to guaranteed capital if the payment is made to a corporate body; the corporate body must be resident inside the EEA and Council Directive 2011/16/EU on administrative cooperation in the field of taxation and repealing Directive 77/799/EEC or an agreement on mutual assistance and exchange of information in tax matters on EEA must be applicable to the State where the recipient of dividend is resident; a further requirement is that according to evidence provided by the recipient the withholding tax cannot in fact be entirely credited in the recipient’s State of residence on the basis of a Double Taxation Agreement between that State and Finland;
• Interest which belongs to scope of application of the EU Savings Directive (2003/48/EC)
• Interest and royalties when the beneficial owner of the interest or royalty is a company of another EU Member State or a permanent establishment situated in another Member State of a company of a Member State; the exemption is applied only if the company which is payer, or company whose permanent establishment is treated as the payer, of interest and royalties, is an associated company (direct ownership of at least 25 % of the capital is required) of the company which is the beneficial owner, or whose permanent establishment is treated as the beneficial owner, of the interest or royalties (the EU Interest and Royalty Directive 2003/49/EC as amended by Council Directive 2013/13/EU)

 Deductions:

In the case of income subject to 35 % withholding tax a deduction of 510 euros per month or 17 euros per day is granted.

Unless lower rates of tax are provided for in a double taxation agreement, the rates of withholding tax (which is accounted for to the State) are as follows:

1) 35 per cent for salary and wages, distribution from an employee investment fund, non-salary remuneration paid for work done or service provided by an individual (referred to in Article 25 of Prepayment Act), disguised dividend as well as any other payment, which according to the Income Tax Act is taxed as earned income; a 510 euros monthly or a 17 euros daily deduction (the maximum being the amount of income) is made from the total amount of all income subject to 35 per cent rate except distributions from employee investment funds and directors’ fees; in order to get the deduction a tax card must be presented to the payer of the income.

2) 20 per cent for dividend, interest and royalty paid to a corporation.

3) 15 per cent for dividend if the recipient' shares in the distributing (Finnish) company are part of the recipient's investment assets (only financial, insurance or pension institutions can have such shares), if:

a) the recipient is a corporate body and the recipient is not a company referred to in the EU Parent-Subsidiary Directive, which owns directly at least 10 per cent of the capital of the distributing company at the time of distribution;

b) the recipient is a foreign corporate body equivalent to a Finnish pension institution that is resident inside the EEA and the recipient is not a company referred to in the EU Parent-Subsidiary  Directive, which owns directly at least 10 per cent of the capital of the distributing company at the time of distribution; or

c) the recipient is a foreign corporate body equivalent to a Finnish pension institution that owns directly less than 10 per cent of the capital of the distributing company, Finland has an agreement on exchange of information in tax matters with the state where the recipient of the dividend is resident and adequate information for taxation is received from the state where the recipient of the dividend is resident.

d) the recipient company is a non-listed company which does not own directly at least 10 per cent of the share capital of the distributing company at the time of distribution.

4) 15 per cent for a remuneration paid on the basis of the activities of a sportsperson or artiste (if the remuneration is paid to a foreign corporate body or a non-resident person, only that corporate body or person is deemed to be liable to tax). However, on the demand of a non-resident the costs directly linked to the income derived from Finland are deducted, and the applicable tax rates are 26 % for companies and progressive scale (combination of progressive State tax and average municipal tax rate) for individuals. The possibility to deduct costs is available only to residents of EEA Member States.

5) 13 per cent for a non-salary remuneration (other than in 4) above) paid for work done or service provided by a corporate body, partnership or joint interest.

6) 30 per cent for dividend interes and royalty as well as insurance compensations and any other payment which according to the income act is taxed as investment income

The tax is always computed on the gross amount of the income in the case of dividends, interest, royalties and pensions.

In the case of corporate income subject to income tax on the basis of assessment the income tax rate is the ordinary 20 per cent.

The income of individuals taxed on basis of assessment is apportioned to investment income and to other (earned) income. Tax rate of investment income (e.g. capital gains from immovable property) is 30 per cent until 30,000 euros, and 33 per cent for the part of income exceeding 30,000 euros. Other income is subject to progressive tax rate.

Tax rate of pensions taxed on basis of assessment is progressive. Same applies to certain other cases if taxpayer is taxed on basis of assessment (see below Tax collector, part 3).

Final withholding tax in respect of dividends, distributions by investment funds, distributions by employee investment funds, interest, certain kinds of royalties and income from employment.Tax is withheld by the payer of the dividends, etc.

Dividends, interest and royalties effectively connected with a permanent establishment situated in Finland, as well as any income not subject to the withholding tax, earned by non‑resident taxpayers are taxed on the basis of assessment.

Income received by non-resident individual and subject to assessment procedure includes:

1.Pension (including annuities);

2.Dividend paid to an individual resident in a EEA Member State, on the individual’s demand, if:

a) Council Directive 2011/16/EU on administrative cooperation in the field of taxation and repealing Directive 77/799/EEC or an agreement on mutual assistance and exchange of information in tax matters on the EEA is applicable to the State where the recipient of dividend is resident; and

b)the withholding tax on dividend cannot in fact be entirely credited in the recipient’s State of residence on the basis of a Double Taxation Agreement between that State and Finland;

3.Also other earned income (e.g. salary or wages) received, if applied in preliminary taxation or on the non-resident individuals demand if he is resident in an EEA Member State, or in a state or area which is subject to an agreement on mutual assistance and exchange of information in tax matters, or if he is a holder of residence permit according to Council Directive 2005/71/EC on a specific procedure for admitting third-country nationals for the purposes of scientific research;

4.Income from forestry;

5.Income other than that subject to withholding.