Key Employee’s Taxation

When talking about Finland and working, the conversation often turns to the taxation of income. In Finland and abroad this is considered rather high, but Finland has taken into consideration the importance of attracting exceptional talents for both companies and the society at large. That is why there has been a special tax card in Finland for 20 years almost to a day (happy birthday!) for these key employees and directors.

The so-called “key employee’s thirty-fiver” is a tax card, that’s intended for key employees moving to Finland from abroad to work in critical positions. This tax card allows the employee to pay only 35% of his income in taxes regardless of the level of income. This is important, as Finland has a progressive taxation system. This allows key employees moving to Finland to settle in with more ease and increases the attractiveness of Finland in the eyes of international top talent at a time when the global competition for talent is constantly increasing.

We reached out to Mr. Robert Kääriäinen from the Tax Administration for the history behind this special arrangement. “The Act governing the taxation of key employees was enacted on 18.12.1995 and it came into effect on 1.1.1996” according to Kääriäinen. “Initially tax cards issued under this act were valid for 24 months, but it has since been extended to 48 months”. Although the Act expired for the first time in 2000, it was re-enacted in 2001 and has been in force ever since.

The thirty-fiver has been pleaded actively and hundreds are issued each year. Last year 440 people received a tax card under this Act, a number 11 times higher than in -96. These numbers can be used as one measurement of Finland’s internationalization and growing attractiveness to the top experts and executives in the world.

For companies looking to hire globally there are good news. Although the Act is set to expire on the 31.12.2015, the government has suggested it be continued for the term 2016-2019. This adds to Finland’s attractiveness to high-end experts and is something that all employers would do well to know.