Expat Taxes in Finland: What Americans Need to Know

Living as an American Expat in Finland

For plenty of Americans, Finland is the ideal place to call home. In fact, Finland consistently tops lists of countries with the highest standard of life. But before you pack your bags for Helsinki, you need to know what taxes you can expect.

Finnish Taxes at a Glance

What Are Expat Taxes like for Americans Living in Finland?

As an American living in Finland, you will still have US tax obligations. For example, every US citizen must file a tax return every year regardless of where they live in the world. (As an expat, you may have additional US reporting requirements.)

On top of that, you will probably also have to pay taxes to the Finnish government. Let’s take a closer look at expat taxes for Americans living in Finland.

Who Has to File Taxes in Finland?

Finland uses a residence-based taxation system. This means that residents are taxed on their worldwide income, while non-residents are taxed only on income that comes from a Finnish source.

Most residents and non-residents receive a completed tax return in March or April. If your return is accurate, you will not need to do anything further. If you have to amend the return, you must make any necessary changes and file it before a deadline in April or May.

Who Qualifies as a Tax Resident in Finland?

You will be considered a resident of Finland if you meet either of the following standards:

• You live in Finland for more than six months at a time. (A temporary absence from Finland will not interrupt this six-month timeline. For example, if you reside in Finland for four months, then visit Sweden for two weeks before returning, the six-month timeline will continue unabated.)
• You have a permanent or habitual home in Finland, regardless of the length of your stay.

Until you meet one of these qualifications, you will be considered a non-resident for tax purposes. Once you are considered a resident, you will continue to be a resident until you move out of the country. Even after you leave, the Finnish government will consider you a resident for three full calendar years unless you can prove that you have no further connections to Finland.

What Types of Taxation Does Finland Have?

Income Tax

Finland taxes residents’ worldwide income at progressive rates. The table below shows the 2022 rates for Finland’s income tax. (All amounts are given in EUR.)

Non-residents are taxed on only their Finnish-source income. The rates for non-resident taxation depend on the type of income you receive. For example:

• Finnish employment income is taxed at a flat rate of 35%
• Dividends are taxed at a flat rate of 30%
• Self-employment income is taxed at the same progressive rates as a resident’s income

In cases where a non-resident is taxed at progressive rates, the non-resident’s worldwide income is factored in when determining their tax bracket. However, that tax rate only applies to income earned from a Finnish source.

PRO TIP: If you are a resident of a country that is part of the European Economic Area (EEA), you can request to have your Finnish income taxed at progressive rates rather than the non-resident flat rate. Furthermore, your foreign income will not factor in determining your tax bracket.

Municipal Income Tax

Finnish municipalities may also impose an income tax on locals. The rate for this tax ranges from 16.5% to 23.5%, depending on the municipality.

Public Broadcasting Tax

Income in Finland is also subject to a public broadcasting tax. In most regions of Finland, the rate for this tax is 2.5% of annual income exceeding 14,000 EUR up to a maximum tax of 163 EUR.

Capital Gains Tax

Finland imposes a tax on capital gains. Capital gains of 30,000 EUR or less are taxed at a flat rate of 30%. Capital gains exceeding 30,000 EUR are taxed at 34%.

Social Security Tax

Much like the US, Finland maintains a social security system funded by contributions from employer payrolls. The required contributions from employers and employees vary based on a variety of factors. Consult a qualified tax professional to learn more.

Value-Added Tax

Finland levies a value-added tax (VAT) on certain goods and services. The standard rate for this tax is 24%. Some goods and services, such as food and books, are taxed at reduced rates of 14% or 10%. Others, such as insurance and educational services, are exempt.

Inheritance Tax

The Finnish inheritance tax is imposed on the recipient of the inheritance. This applies to movable and immovable property. The progressive scale for this tax depends on the value of the inherited property and the relation of the inheritor to the donor. For immediate family members, the rates range from 7% to 19% of the value of the inherited property.

Gift Tax

Like the inheritance tax, Finland’s gift tax applies to both movable and immovable property. The rate for this tax ranges from 8% to 17% based on the value of the gift.

Property Tax

Property located in Finland is taxed at the municipal level. This tax is payable by the person who owned the land at the start of the tax year. The rate varies depending on the municipality, ranging from 0.41% to 2% of the property’s value. Forested and agricultural land are exempt.

Transfer Tax

A tax applies to selling real property in Finland and Finnish securities. The rates for this tax are:

• 4% on transfers of real property
• 2% on transfers of share in an entity most comprise of real property assets
• 1.6% on transfers of other securities

These rates are assessed on the value of the sale. The following transfers are generally exempt from this tax:

• Transfers of listed company securities
• Transfers where both the transferor and transferee are non-residents
• Transfers where a person aged 18–39 acquires their first permanent home
• Transfers due to an inheritance, donation, or division of property subject to matrimonial right

Excise Tax

Certain goods and services are subject to an excise tax in Finland. This includes:

• Alcoholic beverages
• Tobacco products
• Liquid fuels
• Electricity
• Natural gas
• Coal
• Waste delivered to landfills
• Certain forms of oil
• Soft drinks

The rate for this tax depends on the good or service being taxed.

Corporate Tax

Finnish resident corporations are taxed on their worldwide income, while non-resident corporations are taxed on only their Finnish-source income. Non-resident corporations with a permanent establishment in Finland will be taxed on the worldwide income attributable to that permanent establishment. The corporate tax rate is a flat 20%.

When Are Taxes Due in Finland?

Just like in the US, the Finnish tax year is the same as the calendar year. It begins on January 1 and ends on December 31. Finnish taxpayers will usually receive a completed tax return in March or April. If you need to add or change anything in your return, you must file the amended version before a deadline in April or May.

Does the US Have a Tax Treaty with Finland?

Yes. The US-Finland tax treaty defines which country has the right to tax a given income stream, removing the risk of double taxation. In most cases, you will pay your taxes to the country where you are considered a resident.

Does the US Have a Totalization Agreement with Finland?

Yes. The US has signed a totalization agreement with Finland. This agreement establishes which country will impose social security taxes on a taxpayer. As with the US-Finland tax treaty, this is designed to ward off double taxation.

Get Help with Your Expat Taxes Today

What expat taxes do Americans living in Finland have to pay? Hopefully, this guide has helped answer that question. If you still have questions, we can answer those, too.