Payroll in Finland: what foreign employers need to know

Finnish payroll is not difficult. It is unforgiving.

The rules are clear, the rates are published, the deadlines are short and the penalties are automatic. Get the setup right and payroll in Finland runs quietly for years. Get the setup wrong and you will find out within about five days.

We know this from the inside. Barona employs more than 30,000 people a year from 96 nationalities, and through our employer of record in Finland service we are also the employer for teams of foreign companies that hire here. This guide is the walk-through we give them: the registrations, the Finnish taxes an employer withholds and pays, the 2026 contribution rates and the reporting deadlines – in the order you need to decide them.

The short version

• First question: do you have a permanent establishment in Finland? It decides most of your payroll obligations.
• No tax card means 60 % withholding. Sort it out before the first payday.
• Statutory employer contributions are roughly 20–22 % on top of gross salary in 2026 – a floor, not the total cost.
• Wages are reported to the Incomes Register within five calendar days of payday. Late filing costs money automatically.
• The collective agreement adds pay items that many foreign employers only discover in an audit.
• You can build all this yourself, or let an employer of record run it for you. Each section below shows what changes if you do.

Start here: do you have a permanent establishment?

In short: almost every Finnish payroll obligation branches off this one question, so answer it before anything else.

A permanent establishment (kiinteä toimipaikka) is, in the Tax Administration’s terms, a fixed place of business through which the business of an enterprise is wholly or partly carried out. The test has three elements:

• a distinct geographical place,
• a degree of permanence, and
• business actually carried on there.

No fixed time threshold applies; rather, permanence is assessed based on all relevant facts and circumstances, and activities that are merely temporary or transitory will generally not satisfy this requirement.

A place of management, a branch, a construction project (6 to 18 months depending on the tax treaty) or a dependent agent can all constitute one, and it may be located at an employee’s home office. Two details foreign companies routinely miss: the premises need not be owned or exclusively rented, and the personnel involved “do not necessarily have to be employees” of the company – “it is sufficient if they are under its authority.”

Why it matters for payroll

• With a permanent establishment, you must register as an employer where the thresholds are met, withhold tax from wages, remit it monthly, and pay the employer’s health insurance contribution for employees not covered by an A1 or E 101 certificate.
• Without a permanent establishment for income tax purposes, you are not required to register in the employer register – though you may do so voluntarily – and the withholding obligation largely falls away. Reporting obligations to the Incomes Register do not fall away either way; a foreign employer without any registration obligation can still be required to file earnings payment reports in specific situations – see the Incomes Register section.

Note that a permanent establishment for income tax purposes (which drives employer registration) and a fixed establishment for VAT purposes are assessed independently of each other under separate tests, so having one does not automatically mean you have the other.

The health insurance contribution has a precise test of its own: a foreign employer owes it only if it has a fixed establishment in Finland for income tax purposes and the work in question is done for that establishment.

What you must register for

In short: four registrations, and only one of them is about employing people.

Register	When you need it
Employer register	Mandatory for a regular employer
Prepayment register	Voluntary, but with important practical consequences
VAT register	Where you make taxable supplies in Finland and are liable to account for Finnish VAT
Business ID	Via the Finnish Patent and Registration Office and the Business Information System

Employer register (työnantajarekisteri). Mandatory for a regular employer – a company that regularly pays wages to two or more employees, or to one permanent employee plus short-term staff, or that pays wages to at least six employees simultaneously even on temporary contracts. A casual employer – one regular employee, or one to five whose employment does not last the whole calendar year – need not register. A foreign company without a permanent establishment may always register voluntarily.

Prepayment register (ennakkoperintärekisteri). Registration is voluntary, but it has important practical consequences. If a service provider is not registered in the Finnish prepayment register, the Finnish customer may be required to withhold tax from the payment. As a general rule, withholding is 13 % on payments made to foreign entities comparable to Finnish limited liability companies or partnerships, unless the service provider presents a valid tax-at-source card authorising a lower rate or exemption. In sectors such as construction, cleaning, logistics, and care and nursing services, foreign contractors will always need either a tax-at-source card or registration in the prepayment register in Finland.

VAT register. Registration may be required where a foreign company makes taxable supplies in Finland for which it is liable to account for Finnish VAT. This may arise, for example, where the company has a fixed establishment in Finland that participates in the supply, or where the reverse charge mechanism is not available, such as in certain sales to private individuals (B2C). The standard VAT rate is 25.5 %.

You will also need a Business ID, via the Finnish Patent and Registration Office and the Business Information System.

Withholding tax on wages

In short: how much tax you withhold depends on whether the employee is a resident, whether they have a tax card, and who employs them.

Situation	Withholding
Resident employee with a tax card	Per the tax card
Employee presents no tax card	60 %
Non-resident, Finnish employer or employer with a Finnish permanent establishment	35 % tax at source, generally – subject to the tax-at-source card and treaty relief
Qualifying foreign key employee	25 % tax at source

Residents (yleisesti verovelvollinen). An individual whose permanent home is in Finland, or who stays in Finland continuously for more than six months, is generally considered as a resident taxpayer and is taxed progressively. However, where the individual is regarded as resident in another country, an applicable tax treaty may assign treaty residence to the other country. In such cases, Finland’s taxing rights are determined under the relevant treaty provisions. As a practical matter, where an individual works and remains in Finland for more than six months, Finland will typically retain the right to tax the employment income, even if the individual is treated as a treaty resident of another state.

The employee obtains a tax card and gives it to the employer; the card carries the withholding rate and an income ceiling specific to that employer. Tax cards are normally issued in one to three business days.

No tax card, no discretion. If the employee does not present one, the withholding rate is 60 %. This is the fastest way to make a new hire’s first payday memorable for the wrong reasons.

Non-residents. An individual staying in Finland for no more than six months is generally treated as a non-resident taxpayer. Salary relating to work physically performed in Finland is normally subject to Finnish tax if paid by a Finnish employer or by a foreign employer with a permanent establishment in Finland. In such cases, tax at source of 35 % generally applies, subject to any deduction shown on the tax-at-source card and any applicable tax treaty relief. Where the tax-at-source card so indicates, the payer first deducts a standard deduction of €510 per month, or €17 per day for shorter periods.

Where the employer is a foreign employer with no permanent establishment in Finland, Finnish tax may not arise, although important exceptions exist, including leased employee situations. Non-residents may in many cases elect progressive taxation instead of final source taxation. In addition, an applicable tax treaty may exempt employment income from Finnish taxation, for example where the treaty’s conditions for short-term employment are met, including the relevant 183-day threshold.

A terminology trap worth naming, because it appears in a great deal of published advice: Finland’s formal “six-month rule” (Income Tax Act, section 77) is an outbound rule about Finnish residents working abroad. The inbound six-month threshold is the residency test described above. Different rules.

Employer contributions in 2026

In short: budget roughly 20–22 % on top of gross salary – and then add holiday pay, the holiday bonus and occupational health care.

On top of gross salary, a Finnish employer pays the following. All rates below are 2026 figures confirmed by the Ministry of Social Affairs and Health unless noted.

Contribution	2026 rate	Notes
Health insurance contribution	1.91 %	Of total payroll. Not payable on wages to under-16s or persons aged 68+
Earnings-related pension, TyEL (employer’s average share)	17.10 %	Average total contribution including the employee’s share is 24.40 %
Unemployment insurance, lower rate	0.31 %	On payroll up to €2,509,500 a year
Unemployment insurance, higher rate	1.23 %	On the part exceeding €2,509,500
Accident and occupational disease insurance	≈0.5–1 % typical	Risk-based; the full range across sectors is 0.05–5.00 %
Group life insurance	≈0.06 %

In round terms: expect statutory employer contributions of roughly 20–22 % on top of gross salary for typical white-collar employment – rising towards 26 % for a large payroll in a high-risk industry.

Read that as a floor, not a total employment cost. It excludes annual holiday pay accrual, the collectively agreed holiday bonus, and occupational health care, which together add several further percentage points.

Thresholds and age limits

• TyEL insurance must be arranged for employees earning at least €71.72 a month, from the beginning of the month after the employee turns 17, up to an upper age limit of 68, 69 or 70 depending on year of birth.
• Unemployment insurance applies to employees aged 18 to 64; the employer is liable where total annual wages exceed €1,500, but the employee’s share must be deducted regardless.
• The Employment Fund invoices employers quarterly, based on Incomes Register data.

Employee deductions in 2026

Withheld by the employer from gross pay:

Deduction	2026 rate
Income tax	Per tax card (60 % if none presented)
TyEL pension, employee’s share	7.30 %
Unemployment insurance, employee’s share	0.89 % (ages 18–64)
Health insurance daily allowance contribution	0.88 % – nil if annual earned income is below €17,255
Health insurance medical care contribution	1.10 %

Note a significant 2026 change: the age-graded employee pension contribution was abolished on 1 January 2026. All employees now pay the same 7.30 %, replacing the previous 7.15 % / 8.65 % split by age band.

Payroll compliance in Finland: the Incomes Register, five days, every time

In short: Finland’s Incomes Register (tulorekisteri) is where payroll compliance in Finland is won or lost.

What	Deadline
Earnings payment report	Within 5 calendar days of the payment date (paper: 8 days)
Employer’s separate report	By the 5th day of the month following the payment month
Employer contributions, paid in MyTax	By the 12th of the month
Employee leasing notice	By the 5th calendar day after wages are first paid to the leased worker

Earnings payment reports are due within five calendar days of the payment date. Not five business days – five calendar days, with weekends and holidays counted, although if the fifth day falls on a weekend or holiday you may report on the next business day. Paper reporting gets eight days.

The employer’s separate report is due monthly, by the fifth day of the calendar month following the payment month. A regular employer files it every month, including months with no wage payments. Employer contributions are paid in MyTax by the 12th of the month.

Late filing is priced, not negotiated. €3 per day for the first late report in a calendar month, capped at €135. Beyond 45 days late, €135 plus 1 % of the payment reported late, whichever is greater – up to a maximum of €15,135 per calendar month. Corrections made within 45 days of the deadline attract no penalty.

Foreign employers without a permanent establishment

They file no employer’s separate report, but must file earnings payment reports in four situations:

1. Wages are paid to an income earner working in Finland who is insured in Finland.
2. The income earner stays in Finland more than six months, even if not insured here.
3. The employee is a leased employee who is a non-resident taxpayer and Finland has the taxing right under the applicable tax treaty (or no treaty exists).
4. Wages are paid to an income earner working abroad who is insured in Finland.

Leasing employees into Finland?

A foreign employer that leases an employee to a service recipient in Finland must also file an employee leasing notice to the Incomes Register – the estimated duration, the wage amount and the service recipient – by the fifth calendar day after wages are first paid to the leased worker. As a rule, workers leased from providers abroad pay tax to Finland on work performed here, and Finland’s taxing right applies from day one under the treaties with the Nordic and Baltic countries, Germany, Poland, Spain, Turkey and others.

The payroll items collective agreements add

In short: statute is only half of Finnish payroll. The other half sits in the applicable collective agreement.

The collective agreement typically sets pay minima, shift premiums, sick pay beyond the statutory minimum and the holiday bonus. The statutory baseline you build on:

• Pay day. Wages must be paid on the last day of each pay period unless otherwise agreed. Hourly or daily pay at least twice a month; performance-based pay, a pay period of no more than two weeks; commission or profit share, no more than a month. Money must be available for withdrawal on the due date.
• Payslip. A payslip must be given with every wage payment. It must show the grounds on which the pay is determined, the pay items paid, the employee’s and the employer’s details, the pay period, cumulative pay, tax withheld and any other deductions made from pay.
• Holiday pay. Under the Annual Holidays Act, holiday pay is calculated differently for full-time and part-time employees. For part-time employees it is calculated by the percentage method: 9 % of the wages of the holiday credit year where employment has lasted under a year at the end of the holiday credit year, and 11.5 % where it has lasted at least a year. Holiday pay for a holiday of more than six days must, as a rule, be paid before the holiday starts.
• Holiday bonus (lomaraha) is not statutory – but it is in most collective agreements, usually paid with the summer holiday. Budget for it anyway.

Note that in many sectors, collective agreements contain provisions that supplement or differ from the Annual Holidays Act – for example a different method or percentage for calculating holiday pay, or a different payment date. Always check the holiday pay rules in the applicable collective agreement as well.

Occupational health care is statutory from the first employee and preventive in scope, with medical care optional. It requires a written agreement with the provider and an annually reviewed action plan. Kela reimburses up to 60 % of approved preventive care costs and up to 50 % of approved medical care costs, within per-employee maximums.

On construction sites, two further obligations are enforced on site. Everyone working at a construction site, installation project or shipyard must have a Finnish tax number and wear photo ID displaying it. And the project supervisor or main contractor at a shared site must file a monthly report on everyone working there – their own people, other contractors’ and non-construction workers whose work relates to the job – by the fifth day of the second month following the reported month.

Build it yourself, or let an employer of record run it

Registration, withholding, five statutory contributions, five-day reporting deadlines and a collective agreement that overrides your assumptions – for two people in a new market, that is a disproportionate amount of machinery to build.

	Do it yourself	With Barona’s EOR
Employer registration and payroll set-up	You	Barona
Tax cards and withholding	You	Barona
Statutory contributions and deductions	You	Barona – one invoice
Incomes Register reporting	You, within 5 days	Barona
Collective agreement pay, holiday pay, payslips	You	Barona
Leading the team and the work	You	You
Permanent establishment analysis, corporate tax, VAT, business licences	You	You

An employer of record in Finland already has all of it running. We become the legal employer, you get one invoice, and your team gets paid correctly on the right day. You keep leading your people and your business.

Frequently asked questions

New to the model? Start with what an employer of record is, or read up on Finnish employment law.