Expat Taxes in Finland: What Americans Need to Know
- Living as a US Expat in Finland
- Finland at a Glance
- What Are Expat Taxes like for Americans Living in Finland?
- Who Has to File Taxes in Finland?
- Who Qualifies as a Tax Resident in Finland?
- What Types of Taxation Does Finland Have?
- Essential Tax Forms for US Expats in Finland
- When Are Taxes Due in Finland?
- Does the US Have a Tax Treaty with Finland?
- Does the US Have a Totalization Agreement with Finland?
- Navigating Tax Compliance for US Expats in Finland
Living as a US Expat in Finland
Living as a US expat in Finland can be a unique and exciting experience. For six consecutive years, Finland has claimed the top spot as the happiest country in the world, according to the United Nations’ World Happiness Report. This Nordic nation’s exceptional social support, economic stability, and high quality of life make it a shining example of a happy and prosperous society. As an expat, you can enjoy a unique blend of Scandinavian and European lifestyles while enjoying an excellent work-life balance.
Finland is also known for its excellent healthcare and education systems, making it an ideal destination for families. The country has a vibrant startup culture and is home to several global tech giants, providing ample opportunities for career growth.
However, adjusting to life in Finland may take time, as the country has its own customs and traditions. Learning the Finnish language is also essential to fully immerse yourself in the culture.
If you’re an expat considering a move to Helsinki, it’s important to be aware of the tax system in Finland and how it may impact your finances. Understanding the ins and outs of Finland’s taxes for expats is crucial to making informed decisions about your financial future. Let’s take a closer look at what you need to know before you pack your bags for this Nordic country.
Finland at a Glance
- Primary Tax Form for Residents: Form 1 – Tax Return for Wage Earners and Pensioners.
- Tax Year: January 1–December 31
- Tax Deadline: April–May
- Currency: Euro (EUR)
- Population: 5.5 million
- Number of US Expats: Estimated 5,500+
- Capital City: Helsinki
- Primary Languages: Finnish and Swedish
- Tax Treaty: Yes
- Totalization Agreement: Yes
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.
Learn where the best tax havens are, common traps, and ways to save money on your US expat taxes.
Who Has to File Taxes in Finland?
In Finland, residents and non-residents who have income or assets in the country are required to file taxes. This includes individuals, partnerships, and corporations. Residents are those who have lived in Finland for more than six months, while non-residents are those who have lived in the country for less than six months.
It’s essential to note that taxes are progressive in Finland, meaning that the tax rate increases as income increases. However, Finland also offers various tax deductions and credits to lower the tax burden on taxpayers.
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, and 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?
Finland taxes residents’ worldwide income at progressive rates. The table below shows the 2023 tax year rates for Finland’s income tax. (All amounts are given in EUR.)
|up to €19,900
|0% tax on the first €19,900, then 12.64% on excess
|€19,900 to €29,700
|0% tax on the first €19,900, then 12.64% on the excess
|€29,700 to €49,000
|€4,377 tax on the first €29,700, then 30.25% on excess
|€49,000 to €85,800
|€4,377 tax on the first €29,700, then 30.25% on the excess
|€10,215 tax on the first €49,000, then 34% on the excess
|44% tax on income above €85,800
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.
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.
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.
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.
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 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.
A tax applies to selling real property and Finnish securities in Finland. 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
Certain goods and services are subject to an excise tax in Finland. This includes:
- Alcoholic beverages
- Tobacco products
- Liquid fuels
- Natural gas
- Waste delivered to landfills
- Certain forms of oil
- Soft drinks
The rate for this tax depends on the good or service being taxed.
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%.
Essential Tax Forms for US Expats in Finland
If you’re a US citizen living in Finland, you may still have to file US tax returns and pay taxes on your worldwide income. Here are some essential tax forms you may need:
- Form 1040 is the standard US tax return form you’ll need to file if you’re a US citizen or resident alien.
- Form 2555: If you’re eligible, this form allows you to exclude a certain amount of foreign-earned income from your US taxable income.
- Form 8938: If you have foreign financial assets that exceed certain thresholds, you may need to file this form to report them.
- FinCEN Form 114: If you have foreign bank accounts with an aggregate balance of $10,000 or more at any point during the year, you’ll need to file this form.
- Form 1116: If you pay taxes to Finland on income that is also taxed by the US, this form may allow you to claim a foreign tax credit to reduce your US tax liability.
It’s important to stay on top of your US tax obligations while living in Finland to avoid penalties and ensure compliance with the law.
When you live in the US, tax day is simple: April 15th! When you move abroad, it’s not so straightforward! Learn about all the expat deadlines and extensions you need to know to file.
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.
Under the treaty, residents of one country who earn income in the other country are generally subject to taxation only in their country of residence.
The treaty also provides for reduced withholding tax rates on certain types of income, such as dividends, interest, and royalties. Additionally, the treaty provides for a mutual agreement procedure to resolve disputes between the two countries regarding the interpretation and application of the treaty.
Does the US Have a Totalization Agreement with Finland?
Yes, the US has signed a totalization agreement with Finland. The agreement aims to eliminate dual social security taxation and ensure that workers are covered under only one country’s social security system. This benefits individuals who work in both countries and eliminates the need to pay social security taxes to both countries.
Under the Totalization Agreement, individuals who work in both countries are generally only required to pay social security taxes to their country of residence. Additionally, the agreement allows individuals to qualify for social security benefits based on their combined work credits from both countries.
Navigating Tax Compliance for US Expats in Finland
This guide aims to provide you with an answer to the question of what expat taxes Americans living in Finland must pay. We hope it has been helpful in this regard. However, if you still have questions or concerns, our team is available to provide you with further guidance and assistance.
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