Hiring Foreign Sole Traders in Finland – Key Obligations

The use of self-employed contractors has increased on construction sites, and many foreign workers now operate through their own companies. At the same time, official supervision has tightened and reporting obligations have increased. Many clients and main contractors only realise afterwards that responsibility for getting things right does not rest solely with the contractor. This article goes through the key points worth confirming before a collaboration begins.

Why is this topic relevant now?

The Finnish Tax Administration has stepped up supervision, particularly in the construction sector, and combating the grey economy is a priority for the authorities. Failures to comply can have consequences for the client as well, not just for the self-employed contractor. It is therefore important to check a contracting partner's background, registrations and notifications carefully.

Entrepreneur or employee?

Having a company of one's own does not necessarily mean that a person is genuinely working as an independent entrepreneur. If the work meets the characteristics of an employment relationship, it may be a case of disguised self-employment. This affects employer obligations, insurance and taxation. The situation should be assessed before the contract is signed, not only once an inspection takes place.

Taxation and registration

The taxation of a foreign company in Finland depends, for example, on whether the company has a permanent establishment here and which country's tax treaty applies. The Tax Administration reminds foreign companies that processing notifications and registrations can take weeks. It is therefore worth clarifying and arranging these matters well before work begins.

Reporting obligations on site

Reporting obligations in construction apply broadly to anyone purchasing construction services. The client purchasing a construction service must report the contract details to the Tax Administration, and the principal contractor of a shared construction site must report information on the people working on site. In addition, everyone working on a shared construction site must wear a visible photo ID that includes a tax number, and the principal contractor must keep an up-to-date list of those working on site. For large construction sites, the start of the project can also be reported to the Tax Administration, which may then offer guidance, for example on the tax matters of foreign workers.

Contractor's liability (Tilaajavastuu)

Under the Finnish Act on the Contractor's Obligations and Liability when Work is Contracted Out, the client must verify its contracting partner's details before signing a contract and during the contract period. For foreign companies, the required documentation may differ from that of Finnish companies, so special attention should be paid to record-keeping. The exact requirements should be checked with the Tilaajavastuu.fi service.

For more information on the requirements, see the Finnish Occupational Safety and Health Administration’s guide: Act on the Contractor’s Obligations and Liability when Work is Contracted Out. 

Insurance and social security

The pension and accident insurance of self-employed persons, and the social security of foreign entrepreneurs, are matters that often remain unclear. It is important to know in advance on what basis the contractor is insured and what the situation would be in the event of an accident.

Checklist for the client

Before starting a collaboration, make sure at least the following are in order:

• company details and registration
• tax number
• documentation required under the Contractor's Obligations and Liability Act
• insurance and social security
• a written contract
• necessary notifications to the Tax Administration

Prepare in good time

When these matters are clarified in advance, collaboration runs more smoothly and risks are reduced. Econia helps foreign companies and their Finnish contracting partners with the practical side of operating in Finland. Get in touch, and we will go through together what applies in your situation.