You will personally be tax resident in Finland if (i) you have your main abode and home in Finland or (ii) if you stay in Finland for more than six months, in which case a temporary absence is not considered to interrupt the continuous stay. As a Finnish tax resident, you will be generally tax liable in Finland, and need to declare and pay tax on your worldwide income.
Moving to Finland may also affect the tax status of your company. Moving to Finland may create a taxable presence to Finland for a company you hold or are a director or manager of.
Corporate tax residency
Foreign corporate entities with a place of effective management in Finland are considered Finnish tax residents (as of 1 January 2021).
The place of effective management is the place where the corporation’s highest-level decisions concerning daily management are made. Generally, this is the place where the board of directors meets and makes decisions, but also other levels of corporate management may constitute de facto a “place of effective management”.
A tax resident foreign corporation is generally tax liable in Finland i.e. liable to declare and pay tax from worldwide income at the general corporate income tax rate of 20 %.
Permanent Establishment (“PE”)
Finland may also tax non-resident foreign companies on the income received from operations in Finland. In a tax treaty context this requires that the company has a fixed place of business or a dependent agent in Finland.
Place of management or another fixed place of business such as a branch or office can constitute a PE in Finland. Moreover, an employee of the company, broker, commission agent or other representative can be regarded as a dependent agent. A dependent agent can cause a foreign company to have a PE in Finland if the agent regularly enters contracts behalf of the foreign company in Finland. A dependent agent PE is usually triggered when a dependent individual or corporate entity conducts sales in or from Finland.
All income attributable to the PE is taxed in Finland at the general corporate income tax rate of 20 %.
Controlled Foreign Company (“CFC”)
Also, you as the shareholder or other beneficiary of a non-resident foreign company may in some cases be taxed personally for your share in the foreign companies’ income even before its distributed to you.
Finnish CFC rules are targeting companies located in low tax jurisdictions (effective tax rate less than 12%) and controlled by Finnish residents (at least 25% control or holding alone or together with Finnish or foreign related parties). Different rules apply to companies located within or outside the EEA as well as for companies located in so called blacklisted jurisdictions.
A Finnish tax resident is personally liable to declare and pay tax on the foreign CFC company’s income corresponding to their holding/control even if it is not distributed to them. Naturally, taxation of income derived from partnerships and passed through other foreign flow-through entities should also be analyzed irrespective of the CFC rules.
Key takeaways
Moving to Finland may, in addition to your personal taxation, affect also the tax status of your non-Finnish companies and businesses:
The Finnish tax presence can lead to double taxation, tax penalties and in the worst-case trigger exit-taxes in the company’s home jurisdiction.
Thus, if you are a business owner, director, manager or hold a sales position in a foreign company its highly recommendable to analyze the corporate tax implications related to your personal relocation to Finland.