The Finnish Tax Administration updated its guidance on 6 May 2026, clarifying withholding tax obligations when paying non-wage compensation to non-resident foreign companies.  

RF Report

The Finnish Tax Administration has issued updated guidance on paying non-wage compensation to non-resident foreign companies on 6 May 2026. The guide outlines the rules and procedures for withholding tax at source on compensation paid for work and services performed in Finland.

The guide covers:

1. General information on the taxation of a non-resident company

Foreign-registered corporate entities are classified as non-resident taxpayers in Finland, except when their effective management operates from Finnish territory. Similarly, individuals living abroad qualify as non-residents if they remain in Finland for no more than six consecutive months without establishing a permanent residence there.

Non-resident taxpayers face tax obligations only on income generated within Finland, as outlined in the Income Tax Act (Tuloverolaki 1535/1992). However, existing bilateral tax agreements may further restrict Finland’s taxation authority.

Finland typically gains the right to tax foreign companies based in treaty partner countries when these entities maintain a permanent establishment within Finnish borders. Tax treaties determine whether such an establishment exists, with most agreements following the permanent establishment definition from Article 5 of the OECD Model Tax Convention. Specific treaty provisions may differ, creating variations in how permanent establishments are defined.

Certain tax agreements include special provisions for self-employed non-residents. Under treaties with Estonia, Latvia, Lithuania, and the Nordic Tax Convention, individuals conducting business in Finland become liable for taxation after spending more than 183 days in the country over any 12-month period, even without a traditional permanent establishment.

When no tax treaty exists between Finland and a foreign company’s home country, Finnish tax authorities retain broader powers. They can tax income from business operations or professional activities conducted in Finland, regardless of whether the company has established a permanent presence in the country.

2. The obligation to withhold tax at source

Finnish service recipients must withhold tax at source when paying nonwage compensation to nonresident foreign companies for work performed in Finland. This obligation extends to foreign companies with a permanent establishment in Finland, as they are treated equivalently to Finnish employers. Similarly, foreign entities qualify as service recipients if they are resident taxpayers due to having their place of effective management in Finland.

However, foreign companies without a permanent establishment or place of effective management in Finland are not required to withhold tax from payments to other nonresident foreign companies, even when the work occurs within Finnish territory.

Service recipients can avoid withholding tax in specific situations. No withholding is necessary when the foreign company appears in Finland’s prepayment register or provides a tax-at-source card indicating a 0% rate. Additionally, exemptions apply when the foreign company demonstrates that a tax treaty prevents Finland from collecting tax. Such treaties typically eliminate taxation on nonwage compensation when no permanent establishment exists in Finland.

Important exceptions exist for certain industries. Tax must always be withheld for construction work involving buildings, earthmoving, water engineering, assembly, installation, shipbuilding, transportation, cleaning, caregiving, nursing services, or leased workforce in these sectors. The only ways to avoid withholding in these cases are prepayment registration or a 0% tax-at-source card.

The withholding rate depends on the foreign company’s structure. Companies comparable to Finnish limited companies or partnerships face a 13% withholding rate. Self-employed individuals operating a trade or business are subject to a higher 35% rate.

Foreign companies should apply for prepayment registration or request a 0% tax-at-source card well before commencing work and invoicing in Finland. Timing matters significantly—if payment occurs before registration approval or card receipt, withholding becomes mandatory.

Prepayment registration availability depends on international agreements. The Tax Administration cannot grant registration to companies from non-EEA countries without tax treaties unless they maintain a permanent establishment in Finland.

3. Reporting to the Incomes Register

After paying non-wage compensation to natural persons who are nonresident taxpayers, the payer must always submit a report to the Incomes Register. The report must be submitted even if no tax has been withheld at source. Non-wage compensation for work paid to a non-resident corporate entity will only need to be reported if it had been required that the payer withhold tax at source. Additionally, payments of nonwage compensation must also be reported to the Incomes Register if no tax at source had been withheld, although it should have been withheld.

4. Withholding the tax at source upon payment, and paying it on to the Tax Administration

The payer is under a duty to withhold the tax at source when paying the non-wage compensation to the recipient. The payer must provide the recipient with a document itemising the compensation paid and the tax at source. After that, the payer – the service recipient – will need to pay the amount to the Tax Administration through MyTax (vero.fi/mytax).

5. Refunding excess tax at source withheld

5. 1. The preconditions for refunding, and alternative ways to carry out a refund

It may be that the payer had withheld tax erroneously on an item of income not subject to tax, or the payer might have withheld more tax at source than what is required in the relevant international treaty, or there may be other errors or mistakes. To remedy the error, the excessive amount can be refunded to the recipient of the non-wage compensation. There are two options for refunding the tax: the company that withheld the tax at source can, under certain conditions, refund it to the foreign company during the year of payment, or the foreign company can submit an application for refund to the Tax Administration.

5.2. The payer that withheld tax sends a refund to the foreign company

When tax has been withheld without proper grounds, the foreign company receiving payment can provide written proof to the Finnish service recipient showing that withholding was unnecessary. The Tax Administration must issue a retroactive 0% tax-at-source card covering the payment’s calendar year for this explanation to be valid. Simply demonstrating subsequent prepayment registration does not qualify as acceptable proof.

Service recipients who withheld excessive or groundless tax can correct the error through two methods, but only within the same calendar year. If additional payments are due to the same recipient later that year, the payer may deduct the excess amount from future tax withholdings. Alternatively, if no further payments are scheduled, the payer can directly refund the incorrectly withheld tax to the recipient before the year ends.

Once the payment year concludes, payers lose their ability to make corrections. The foreign company must then file a refund application directly with the Tax Administration.

Payers making corrections must issue a revised payment document showing the accurate tax-at-source amount. This corrected document must clearly reference the original documentation to maintain proper records.

5.3 The foreign company submits an application to the Tax Administration

A foreign corporate entity can use Form 6165e, Application for refund of Finnish withholding tax on other income than dividends, interest, and royalties (Non-individual applicant, e.g. a corporate entity) to submit an application for refund.

A nonresident taxpayer who is a natural person can use Form 6166e, Application for refund of Finnish withholding tax on other income than dividends, interest, and royalties; individual applicant.

The application must include the document from the Finnish payer itemising the compensation paid and the tax at source withheld, and a statement from the Finnish payer that confirms that no withheld tax at source amounts have been refunded to the applicant. The applicant is always required to complete the application form, as required in the instructions for the form, with sufficient information on the applicant’s business activity in Finland, and the applicant must attach a document equivalent to a Finnish excerpt of the Trade Register, and if relevant, a photocopy of the business contract showing the services or work performed relating to the compensation received.

However, no tax at source will be refunded with either of the above methods if Finland has the right to tax the income. The most common reasons for this are that the applicant’s activity gives rise to a permanent establishment in Finland and that the applicant stays here for longer than 183 days. In this case, the foreign company must submit an income tax return in Finland, and the tax that the payer had withheld at source will be credited to the company in connection with its tax assessment here. The foreign company is required to attach a document received from the payer proving that the payer had withheld tax at source when paying compensation to the foreign company.