It is important that the choice is made before the beginning of the assignment, as the employee must apply for the special non-resident status from the local county tax office, either before the assignment begins or during the first 30 days of assignment. The application must be made in writing.
The expatriate regime applies only to expatriates with special skills. The cash salary must amount to a minimum of FIM 35 000 per each month of the assignment. No cash minimum applies to teachers in the Finnish Universities or scientists working on research for public interest (not a private company or private use).
It is also required that the expatriate has not been resident in Finland during the last five years before the assignment.
If the expatriate stays in Finland after 24 months, he shall be taxed according to ordinary tax rates after this period.
This law will apply to assignments that start during the period Jan 1, 1996 - Dec 31, 1997. After this it will be decided whether a permanent law will be enacted.
Tax rates rising
The corporate tax rate in Finland has increased from 25 % to 28 % from January 1, 1996. Also the capital income tax rate increased from 25 % to 28 %. Capital income tax rate applies to dividend income, interest income, rental income etc. For foreign investors it is worth notifying that withholding taxes for interest, dividend and royalties increased also to 28 %.
Tax rates in state taxation in Finland in 1996 , individual tax, earned income
taxable income tax on lower amount tax on part exceeding FIM FIM lower amount % 43 000 - 59 000 50 7 59 000 - 73 000 1 170 17 73 000 - 104 000 3 550 21 104 000 - 163 000 10 060 27 163 000 - 290 000 25 990 33 290 000 - 67 900 39
Municipal tax 14-20 %.
Church tax 1-2 %.
Wealth taxation, progressive rates, resident taxpayers 1996
Taxable property tax on lower amount tax on part exceeding FIM FIM lower amount % 1,100,000 500 0,9
The content of this article is intended to provide general information on the subject matter. It is therefore not a substitute for specialist advice.
For further information please contact Mrs. Tuula Helaniemi +358 0 1727 7406, Tilintarkastajien Oy - Ernst & Young, Kaivokatu 8, 00100 Helsinki, Finland or enter text search 'Ernst and Young' and 'Business Monitor'.