The concept of the economic employer is coming to Finland – what is it all about?

In international personal taxation, the concept of the economic employer is being used in several European countries, such as Norway, Germany and Sweden, as well as Great Britain.

The Finnish Government has formulated a proposal draft to the parliament, which deals with income tax law and certain other laws being changed for the implementation of the concept of the economic employer. The proposed amendment was meant to come into effect at the beginning of 2023, but this has been postponed until further notice.

In short, in tax legislation and tax convention, the economic employer is considered being the entity under whose management and supervision the employee conducts their work.

When the amendment passes, if an employee is regarded as having an economic employer in Finland, their wage income would become taxable from the first working day forward. In cases of affiliate situations, where for example a foreign group sends their employees to work for a Finnish group, would be an exception. In these cases, the economic employer would only form when the employment in Finland would last continuously for over 15 days or for over 45 days in a calendar year.

This is a big change from before: currently, when foreign employees come to Finland, their wage income is taxed only when they have either stayed in Finland for over 6 months, if their foreign employer has a permanent establishment in Finland, or in regard to leasing employees concerning specific countries. 

The amendment would bring new obligations to Finnish economic employer who ordered the work, foreign employers and employees. The obligations would apply for, among other things, employer registration, tax withholding, information about the length of employment and monthly income register notices.

We’re following the amendment’s progression.

Additional information
Mikko Hirvilammi
Tel. 044 700 2082