Finland taxes foreign companies differently depending on one central question: does the company have a permanent establishment (PE) in Finland? The answer determines whether Finnish corporate income tax applies, what income is taxable, and what compliance obligations follow. This guide explains the rules clearly, using the definitions from Verohallinto (the Finnish Tax Administration) and current 2026 legislation.

This article covers income taxation only. VAT obligations, employer registration, and withholding tax on dividends are separate topics with their own rules — links are provided where relevant.

The core rule: permanent establishment determines tax liability

Foreign companies are liable to pay income tax in Finland if — and generally only if — they have a permanent establishment in Finland. Without a permanent establishment, income from Finnish sources is normally outside Finnish taxing rights for corporate income tax purposes. This is confirmed by both Finnish domestic law (Section 9, Income Tax Act) and the OECD Model Tax Convention framework that underlies Finland's 70+ bilateral tax treaties.

A permanent establishment is a fixed place of business through which a company carries out its operations — wholly or in part — in Finland. The concept is central to international tax law and its application in Finland follows the OECD standard closely, though specific definitions can vary in individual tax treaties.

A second trigger: place of effective management

Since 2021, Finnish law includes a second route to Finnish tax residency for foreign companies: if a foreign company's place of effective management is in Finland, it is treated as a Finnish tax resident and taxed on its worldwide income — the same as a Finnish company.

This rule targets situations where a foreign company is nominally registered abroad but is actually controlled and managed from Finland. If the key management decisions — board meetings, strategic decisions, day-to-day direction — take place in Finland, the Finnish Tax Administration may treat the company as Finnish-resident regardless of where it is incorporated.

For foreign founders who are personally based in Finland and manage their overseas companies from there, this rule is directly relevant. It is not automatically triggered by living in Finland, but it becomes a real risk if you are making all substantive decisions about a foreign company while residing there.

What income is taxed if a PE exists

If a foreign company has a permanent establishment in Finland, it pays Finnish corporate income tax on all income attributable to that permanent establishment. This is not limited to income earned directly in Finland — it includes income from other countries if it is attributable to the PE's activities.

The PE and the parent company are treated as separate entities for Finnish tax purposes. Income is attributed to the PE based on the functions it performs, the risks it bears, and the assets it uses — in line with the OECD arm's length principle. Expenses incurred for the acquisition and maintenance of PE income are deductible in the normal way.

What happens if you have no permanent establishment

If a foreign company operates in Finland but does not have a permanent establishment, Finnish income tax on business profits generally does not apply. The income remains taxable only in the company's home country.

However, two important exceptions apply:

Real estate income. A foreign company that owns real estate or housing company apartments in Finland is subject to Finnish income tax on income from those assets — even without a PE. This income must be declared on Form 6U.

Tax-at-source on trade income. Finnish clients paying a foreign company for services may be required to withhold tax at source (13% if the company has a PE; 0% if it does not). A foreign company can apply to Verohallinto for a tax-at-source card confirming a 0% rate if its activities do not create a PE. Without this card, Finnish clients may withhold unnecessarily, requiring the foreign company to claim a refund.

Branch vs subsidiary: how the tax treatment differs

Foreign companies entering Finland typically choose between registering a branch (sivuliike) or incorporating a Finnish subsidiary (Oy). The tax treatment is meaningfully different.

A Finnish branch is a permanent establishment of the foreign parent. It pays Finnish corporate income tax on income attributable to its Finnish operations only — not on the parent's worldwide income. There is no separate Finnish branch profits tax when money is transferred back to the parent. The branch files a Finnish tax return (Form 6U) and its accounting period mirrors the parent company's.

A Finnish subsidiary (Oy) is a separate Finnish legal entity. It is a Finnish tax resident from day one, pays Finnish CIT on its worldwide income, and has full Finnish accounting and filing obligations. Dividends paid by the subsidiary to a foreign parent are subject to Finnish withholding tax — although this is eliminated for qualifying EU parent companies under the EU Parent-Subsidiary Directive and may be reduced or eliminated for non-EU parents under applicable tax treaties.

Double taxation and Finland's treaty network

Finland has concluded bilateral income tax treaties with more than 70 countries — including all EU member states, the UK, the US, Canada, Australia, and most major trading partners. These treaties generally follow the OECD Model Convention and limit Finland's right to tax foreign companies to situations where a PE exists.

If a foreign company with a Finnish PE pays tax both in Finland and in its home country on the same income, Finland eliminates double taxation using the credit method: foreign taxes paid are credited against Finnish tax on the same income, up to the Finnish tax amount. Unused credits can be carried forward for five years and applied against future Finnish taxes on foreign income of the same type.

Where no tax treaty exists, Finnish domestic rules apply. Foreign companies from non-treaty countries should take specific advice before operating in Finland, as the absence of treaty protection can result in broader Finnish tax exposure.

Compliance obligations for foreign companies with a Finnish PE

A foreign company with a permanent establishment in Finland has the same core compliance obligations as a Finnish resident company. These include:

• Registering with Verohallinto's prepayment register before starting operations
• Making advance income tax payments based on projected annual income
• Filing an annual income tax return (Form 6U for foreign entities) within 4 months of the end of the accounting period
• Preparing financial statements in accordance with the Finnish Accounting Act — the accounting period of the PE matches the parent company's accounting period
• Registering for VAT if annual Finnish turnover exceeds €20,000 (separate from income tax registration)
• Registering as an employer with Verohallinto and the Incomes Register (tulorekisteri) if the PE employs people in Finland
• Applying transfer pricing rules to transactions between the Finnish PE and the parent company or related parties

What changes when Finland cuts corporate tax to 18% in 2027

Finland's confirmed reduction of the corporate income tax rate from 20% to 18%, effective 1 January 2027, applies to all Finnish-resident companies and to the taxable income of permanent establishments in Finland. For foreign companies operating through a Finnish PE or subsidiary, this means a lower Finnish tax cost from 2027 onwards.

Combined with an extended tax loss carry-forward period of 25 years (applicable to losses arising from 2026), Finland is deliberately reducing the cost of running a business through a Finnish entity. For foreign companies assessing Nordic expansion options, Finland's competitive position improves meaningfully from 2027.