Tax Treaty Relief in Finland

Finland's treaty network spans roughly 70 income tax agreements with partners across every inhabited continent, administered by Verohallinto (the Finnish Tax Administration). The network follows the OECD Model Tax Convention, modified by Finland's specific policy choices and, since 1 June 2019, by the Multilateral Instrument (MLI). Together these frameworks determine whether Finnish-source income is taxed in Finland, taxed in the country of residence, or shared between the two.

Within the European Union, bilateral treaties are supplemented by two directives that can eliminate withholding entirely: the Parent-Subsidiary Directive (Council Directive 2011/96/EU) for qualifying dividend flows between associated companies, and the Interest and Royalties Directive (Council Directive 2003/49/EC) for qualifying cross-border interest and royalty payments between EU group companies.

How does Finland eliminate double taxation for residents?

For Finnish residents, the primary tool is the credit method: foreign-source income is included in Finnish taxable income, and a credit for the foreign tax paid is deducted from the Finnish tax computed on that income. [1] The credit cannot exceed the Finnish tax that would have been assessed on the same income, preventing a net subsidy. Unused credits may be carried forward for five subsequent years and applied against Finnish tax on income from the same foreign country. [1]

The exemption with progression method applies to certain income categories under some treaties. Under that approach, the foreign income is excluded from Finnish tax but is taken into account when calculating the rate that applies to the taxpayer's remaining Finnish-source income. [1] Which method applies to which income type is determined treaty-by-treaty; the credit method predominates in Finland's modern treaty policy.

Non-residents earning Finnish-source income are generally taxed at source (lähdevero, withholding tax) and are not required to file a Finnish tax return, unless they opt into ordinary Finnish income-tax assessment to claim deductions. [2]

What are the standard Finnish withholding tax rates, and how do treaties reduce them?

Under the Withholding Tax Act (Lähdeverolaki 627/1978), the default Finnish withholding rates on income paid to non-residents are: 30 % on dividends and royalties paid to non-resident individuals; 20 % on dividends and royalties paid to non-resident corporate entities; and 0 % on interest paid to non-residents in most circumstances, a position that has applied since the Finnish domestic-law reform of 2014. [2] For nominee-registered shares where the beneficial owner's identity and residence cannot be confirmed, the dividend rate rises to 35 %. [2]

Bilateral treaties typically reduce these rates significantly. The table below shows treaty withholding rates for a representative selection of Finland's partners; rates apply when the beneficial owner is resident in the listed country and the income is paid from Finland. [3]

Under EU directives, dividends paid to an EU parent that holds at least 10 % of the Finnish company's capital may be fully exempt from Finnish withholding. Qualifying interest and royalties between associated EU companies are likewise exempt under the Interest and Royalties Directive. [2]

How does the residence tie-breaker determine which country taxes you?

Most of Finland's treaties follow the OECD Model Article 4 tie-breaker for individuals who are fiscally resident in both contracting states simultaneously. The sequential test is: [4]

1. Permanent home - the state where the individual has a permanent home available.
2. Centre of vital interests - if homes exist in both states, the state with which personal and economic relations are closer (family, employment, social connections).
3. Habitual abode - if the centre of vital interests cannot be determined, the state where the individual spends more time.
4. Nationality - if habitually resident in both or neither, the state of citizenship.
5. Mutual agreement - if none of the above resolves the conflict, the competent authorities of both states resolve it by consultation.

For companies, most modern Finnish treaties resolve dual residence by reference to the place of effective management, that is, the location from which senior management exercises substantive control. MLI Article 4 modifies the corporate tie-breaker in covered treaties to require a mutual-agreement procedure between the competent authorities rather than an automatic rule. [4]

What is the Portugal situation, and which other treaties have changed recently?

The Finland-Portugal story illustrates how a treaty gap can emerge. Finland terminated the original 1971 Finland-Portugal treaty effective 1 January 2019, following Portugal's Non-Habitual Residents regime, which allowed Finnish pensioners to receive Finnish pensions essentially tax-free. A replacement treaty was signed on 7 November 2016, but Portugal did not complete its parliamentary ratification, so the new agreement has not entered into force. [5] As of June 2026, no income tax treaty is in force between Finland and Portugal. Finnish residents with Portuguese-source income, and Portuguese residents with Finnish-source income, must rely on domestic unilateral credit relief rather than treaty rates.

Several other recent treaty developments are material:

• France: A new treaty was signed on 4 April 2023, replacing the 1970 agreement once ratified. The new text switches the double-taxation-relief method from exemption to the credit method, reduces the qualifying shareholding threshold for 0 % dividend withholding to 5 % (with a 365-day holding period), and aligns the permanent-establishment article with the current OECD Model. [6]
• Albania: A new treaty with Albania was concluded in 2023, extending Finland's network to a further European jurisdiction. [7]
• Russia: Finland announced on 13 March 2026 that the President had approved suspension of the 1996 Finland-Russia income tax treaty and its 2000 Protocol, effective 1 July 2026. Russia had itself partially suspended treaty provisions in August 2023. [8] From 1 July 2026, no treaty-reduced rates apply between Finland and Russia.
• Nordic neighbours: Amendments to the Nordic multilateral tax convention covering Denmark, Iceland, Norway, and Sweden took effect in 2024. [7]
• Switzerland: A protocol amending the existing Finland-Switzerland treaty was signed on 28 May 2026 and awaits ratification. [5]

What is the MLI and how does it affect Finnish treaties?

Finland ratified the OECD Multilateral Convention to Implement Tax Treaty Related Measures (MLI) on 25 February 2019, with the instrument entering into force for Finland on 1 June 2019. [7] The MLI simultaneously modified multiple bilateral treaties without requiring individual renegotiation.

Finland's key MLI positions include adoption of the Principal Purpose Test (PPT) as the minimum-standard anti-abuse rule. Under the PPT, treaty benefits are denied if one of the principal purposes of an arrangement was to obtain them, unless granting the benefit accords with the object of the relevant treaty provisions. Finland also adopted mandatory binding arbitration for disputes under a number of its covered tax agreements. [7]

In 2023 Finland withdrew its reservation under MLI Article 9, which covers capital gains from alienation of shares in entities deriving their value principally from immovable property. This withdrawal applies from 1 January 2024, meaning more of Finland's covered treaties now include the Article 9 immovable-property gains rule. [7]

How does a non-resident claim treaty-reduced withholding from Finland?

Non-residents have two procedural routes to pay tax at the treaty rate rather than the full domestic rate:

Route 1 - At-source relief: Before Finnish income is paid, the non-resident obtains a tax-at-source card (Form 5057e) from Verohallinto. The card records the correct treaty rate and is presented to the Finnish payer (employer, investment fund, or securities depository), which then withholds only the treaty-reduced amount. [9]

Route 2 - Refund after the fact: Where full domestic-rate withholding has already been deducted, the non-resident applies for a refund. Individual non-residents use Form 6164e (Application for refund of Finnish withholding tax on dividends, interest, and royalties) together with Form 6167e (the specification enclosure listing individual dividend batches). Corporate and other non-natural-person recipients use Form 6163e instead. [10] Applications may be submitted on paper or via Verohallinto's OmaVero online portal.

Required supporting documents are: a certificate of fiscal residence issued by the tax authority of the applicant's country of residence; receipts or depository statements showing the income and the amount withheld; and, if an agent files on the claimant's behalf, a power of attorney. [10] Refunds below EUR 10 are not issued. The three-year filing deadline is measured from the end of the calendar year in which the tax was withheld; for example, withholding paid in 2023 must be claimed by 31 December 2026. [10]

The Finland country overview sets out the broader Finnish tax landscape, including corporate tax, VAT, and individual income-tax rates that interact with treaty relief in practice. Questions about applying treaty provisions to a specific cross-border structure should be directed to a qualified tax professional with international tax expertise.