Taxation in Finland. Fulbright Grantees. August 22, 2017

Size: px

Start display at page:

Download "Taxation in Finland. Fulbright Grantees. August 22, 2017"

Elwin Dean
6 years ago
Views:

1 Taxation in Finland Fulbright Grantees August 22, 2017

2 Contents Bullet points on the most important tax issues Case Study: 6 months or less in Finland (Student or Scholar) - Taxation of Fulbright Grant - Taxation of housing - Taxation of salary - When do I need to contact the Finnish tax authorities? Case Study: More than 6 months in Finland (Student or Scholar) - Taxation of Fulbright Grant - Taxation of housing - Taxation of salary - When do I need to contact the Finnish tax authorities? How to contact the tax authorities (Please note Social security issued will not be addressed in this presentation) 1

3 Bullet points Scholarships under 20, (2017) are tax exempt in Finland, i.e. students receiving in scholarships will not be taxed for them in Finland US-FIN tax treaty has a special provisions on students, however it is most likely not applicable The taxation of scholarships over the threshold, and other forms of income (e.g. salary) or benefits, depends on whether you are resident in Finland, the source of the income and the applicable tax treaty The tax liability depends on the length of stay: over or under 6 months. Residents are taxed for their global income Non-residents are only taxed for income sourced in Finland Even though your income may be taxed according to domestic law, the tax treaty may limit Finland s right to tax the income. 2

4 Case Study 6 months or less in Finland For Finnish tax purposes you may be either: Non-resident (limited tax liability to Finland), or Resident (unlimited tax liability to Finland) Non-resident: If you stay in Finland for 6 months or less, you are a non-resident for tax purposes in Finland Non-residents have an obligation to pay taxes only for the income received from Finnish sources (as determined in the Finnish Income Tax Act) How is a non-resident taxed? Fulbright grant not taxable in Finland (taxable only in your home country, i.e. USA) 3

5 Case Study 6 months or less in Finland Taxation of other income Housing provided in Finland: - Taxable unless the Finnish rules regarding temporary business trip or temporary secondary occupation can be applied. - Always depends on your personal circumstances and should be investigated case-by-case basis! - If housing is taxable, you need to report the housing to the tax authorities on a tax-return. In this case, please contact the tax authorities for further information. - Taxed at 35% flat tax after a deduction on 510 /month or 17 /day (requires a tax-atsource card stating the deduction) Housing was previously tax exempt if: - You have your main employment in your home country and you stay in Finland for a temporary project or otherwise temporarily. - You are not on leave of absence or leave without pay from the home country employment. - You handle the work tasks related to your main work also while staying in Finland. - If housing is tax exempt, no actions required. Please note, that the Tax Authorities have recently changed their guidelines on housing benefits, and the legal status is therefore somewhat unclear. 4

6 Case Study 6 months or less in Finland Taxation of other income Salary from a Finnish employer (e.g. lecture fees) Taxable in Finland, since earned in Finland Taxed at 35% flat tax - A deduction of 510 /month or 17 / day can be done by the payer of the salary if you have a tax-at-source card stating the deduction - Please contact the local tax office and apply for a tax-at-source card and present it to the payer of the salary before payment - Under certain circumstances also a progressive tax card can be applied for. 5

7 Case Study 6 months or less in Finland Summary what to do? As a main rule, non residents are not liable to file a Finnish tax return. There are a couple of exceptions (see below) You only receive your Fulbright grant, no other income - no actions required You only receive your Fulbright grant and tax exempt housing - no actions required You receive your Fulbright grant and taxable housing - file a tax return and report the housing to the tax authorities You also receive salary from a Finnish employer - apply for a tax-at-source card before the payment 6

8 Case Study More than 6 months in Finland For Finnish tax purposes you may become Resident depending on the length of stay and / or your personal circumstances Resident: Unlimited tax liability (tax resident) in Finland = worldwide tax liability to Finland An individual becomes tax resident in Finland when; - he/she has the permanent home in Finland, or - he/she continuously stays in Finland for more than 6 months (in practice a temporary absence of less than 2 months does not break the continuous stay) However, a tax treaty may limit Finland s right to tax worldwide income: - Finland USA tax treaty: Grants of scholars and students are taxed according to article 21, stating that other income (as for instance Fulbright scholarships) will only be taxed in the country of residence for tax treaty purposes (as determined in the tax treaty). 7

9 Case Study What is the country of residence? The country of residence needs to be solved based on the applicable tax treaty this needs to be analyzed if you stay in Finland for more than 6 months - The decision is based on your personal circumstances The tax treaty sets the conditions which determine the residency for tax treaty purposes (Article 4): - If you are a resident (based on internal tax law) in both countries (Finland and the US), the country of residence for tax treaty purposes is: - Country where your permanent home is; - If you have a home in both countries, the country with which you have closer personal and economic ties (centre of vital interests); - The most important factor is the location of your family - If the above mentioned does not solve the question, the habitual adobe, nationality or mutual negotiations between the authorities in Finland and the US may determine the country of residence. 8

10 Case Study - Taxation of Fulbright grant in Finland If you are considered as Finnish tax resident for tax treaty purposes, Finland will tax the Fulbright grant! - This may be the case if you do not have an house available in the US, your family has accompanied you to Finland, and you stay or a longer period. Taxation of a grant differs from taxation of salary income There is a tax exempt amount of 20, per year (in 2017, confirmed annually) - The amount of the grant which exceeds the above mentioned, is taxed as earned income in Finland - Deduction for certain costs related to the work done on the basis of the grant may be available before the taxable amount is set - These may include e.g. buying research material, travel costs, using assistant etc. 9

11 Case Study More than 6 months in Finland Taxation of other income Housing provided in Finland: Taxable unless the Finnish rules regarding temporary business trip or temporary secondary occupation can be applied. Always depends on your personal circumstances and should be investigated case-bycase basis! - If housing is taxable, you need to report the housing to the tax authorities on a tax-return. In this case, please contact the tax authorities for further information. Housing was previously tax exempt if: - You have your main employment in your home country and you stay in Finland for a temporary project or otherwise temporarily. - You are not on leave of absence or leave without pay from the home country employment. - You handle the work tasks related to your main work also while staying in Finland. - If housing is tax exempt, no actions required. Please note, that the Tax Authorities have recently changed their guidelines on housing benefits, and the legal status is therefore somewhat unclear. 10

12 Case Study More than 6 months in Finland Taxation of other income (cont.) Salary from a Finnish employer (e.g. lecture fees) Taxable in Finland Taxed at progressive tax rates - The Highest marginal tax rate in Helsinki in 2016 is 50.25% including state tax and municipal tax). - A tax card needs to be applied from the tax office for withholding purposes. - Please contact the local tax office and apply for a tax card and present it to the payer of the salary before payment (without tax card withholding is 60%). 11

13 Case Study more than 6 months in Finland Summary what to do? You only receive your Fulbright grant, no other income - File a tax return - If your country of residence for tax treaty purposes is US, make a claim that Finland cannot tax the grant You receive your Fulbright grant and tax exempt housing - File a tax return - If your country of residence for tax treaty purposes is US, make a claim that Finland cannot tax the grant - If you think the housing should be tax exempt, please make a claim for it You receive your Fulbright grant and taxable housing - File a tax return and report both the grant and the housing to the tax authorities (or check that the provider of the housing has reported the housing and it is stated in the pre-completed tax return form, if you have received one) - If your country of residence for tax treaty purposes is US, make a claim that Finland cannot tax the grant You also receive salary from a Finnish employer - Apply for a tax card before the payment - File a tax return, report the grant, possible housing (see above) as well as check that the salary paid by the Finnish employer is stated correctly in the pre-completed tax return form (if you have received one) 12

14 Tax rates in Finland Earned income for residents The state tax rate depends on the annual taxable income. The 2017 tax table is: Taxable income Tax on income below bracket Tax rate on income in bracket 16,900 25, ,300 41, ,200 73,100 3, ,100 10, The municipal tax rate depends on which municipality you live in. In Helsinki the municipal tax rate for 2017 is 18.50% In Espoo 18.00% In Vantaa 19% and Oulu 20.00% Church tax is payable only if you belong to the Finnish church. The tax rate depends on which municipality you live in. Church tax in Helsinki, Espoo and Vantaa is 1%. 13

15 Tax rates in Finland Earned income for non-residents: 35 % flat tax Tax-at-source deduction 510 /month or 17 /day if stated in the tax-at-source card Capital income: 30 % for capital income up to 30,000 and 34% for capital income exceeding 30,000 lower tax rates may apply due to tax treaty provisions (e.g. for dividends paid from Finland) 14

16 Tax return process Finnish residents are obliged to file a tax return in Finland non-residents only on Finnish-source income if no tax has been withheld Tax returns are filed in May following the tax year (calendar year). - Prefilled returns are sent out in March/April and need to be filed around 8 or 15 May (exact date to be confirmed by the tax authorities annually) - Tax returns are filed individually On Finnish tax return you need to report all the income including the capital income received from other countries. A claim for tax treaty exemption needs to be made - Final tax assessment is made in August October - Refund or additional payment due usually in December Additional tax can be paid voluntarily in advance by your own initiative to avoid interest if no taxes have been withheld during the year. Please contact tax authorities for further advice. No tax is withheld from the Fulbright grant in Finland (exempted from withholding liability) If the grant will be taxed in Finland, you will need to handle the tax payments yourself To check a rough estimate amount of tax due you can use the tax percentage calculator on the Tax Administration s website. Go to select the section Individuals and click the Shortcut called Tax percentage calculator 15

17 How to contact the tax authorities If you have any questions, the Tax Authorities can be contacted. The Tax Authorities (Verohallinto / Skatteförvaltningen) publishes extensive handbooks and instructions in Finnish and Swedish. Information in English is also available to an continuously increasing extent. The webpage is The English webpage is: The Tax Authorities also have an English hotline: / The Tax Authorities also has a Chat line on their website In to Finland servicepoint at Salomonkatu 17, A, 2 nd floor, Helsinki There are online services (MyTax) available at / e.g. You can file your tax return online Apply for tax cards You still need a Finnish bank account with e-banking codes 16

18 Thank you!

19 2017 KPMG Oy Ab, a Finnish limited liability company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ( KPMG International ), a Swiss entity. All rights reserved. The KPMG name and logo are registered trademarks or trademarks of KPMG International.

International Tax Finland Highlights 2018

International Tax Finland Highlights 2018 Investment basics: Currency Euro (EUR) Foreign exchange control No Accounting principles/financial statements Finnish GAAP/IFRS applies. Financial statements must