Four developments from Verohallinto and the Finnish parliament are directly relevant to foreign founders and international companies with Finnish operations right now. A key employee tax rate reduction that most English-language guides have not yet covered. A VAT rate change on common business categories. An updated compliance framework for foreign employers starting work in Finland. And a corporate income tax reform moving through parliament with a planning window that closes at the end of this financial year. This briefing covers each one from the perspective of what it means for a foreign-owned Finnish Oy or a company building operations in Finland in 2026.
Finland cut the key employee flat-rate tax from 32% to 25%. Most foreign employers hiring into Finland do not know this changed.
Finland operates a special tax regime for foreign specialists and executives relocating to work in Finland. Instead of paying progressive income tax at rates that can reach well above 40% on Finnish earnings, qualifying employees can apply for the key employee (avainhenkilö) flat-rate tax. From 1 January 2026, that flat rate was reduced from 32% to 25%. The change applies to wages and salaries paid on or after 1 January 2026.
This is a meaningful reduction. At a monthly salary of €8,000, the difference between 32% and 25% flat-rate tax is approximately €6,720 in annual take-home pay for the employee. For a company trying to attract an international hire into a Finnish role, this changes the conversation with candidates comparing net pay across European locations.
Applies to qualifying foreign specialists and executives relocating to work in Finland. The reduction of 7 percentage points is the most significant change to this regime since it was introduced. At a salary of €8,000 per month, the annual saving for the employee is approximately €6,720 compared to the pre-2026 rate.
Who qualifies and for how long
The key employee regime is available to individuals who meet all four conditions set by Verohallinto. The person must become a Finnish tax resident when starting the relevant work. The monthly salary must be at least €5,800 for the entire period. The role must require special expertise. And during the five calendar years before work begins, the person must not have been a Finnish tax resident at any point.
If those conditions are met, the flat 25% rate applies for up to 84 months (seven years) from the start of the employment. A tax card previously granted showing the old 32% rate does not need to be replaced. Starting from 1 January 2026, the employer can apply the tax rate according to the new act to the wages and salaries governed by the act on key employees at its own initiative.
The 2026 reform also expanded the scope of who can access the key employee regime. The scope of application of the act on key employees expands on 1 January 2026 to also apply, under certain conditions, to Finnish citizens moving back to Finland. A returning Finnish citizen who has lived abroad for at least five consecutive years and meets the salary and expertise conditions can now access the 25% flat rate, which was not possible before 2026.
For foreign-owned Finnish companies planning to bring a Finnish founder or executive back to manage Finnish operations, this is a new planning tool that did not previously exist. The conditions are specific and should be reviewed with 1Office Finland before any employment arrangement is structured around the expectation of qualifying.
Finland's key employee regime is one of the more competitive specialist tax incentives in Northern Europe, but it is consistently underused by international companies because it is poorly understood outside the Finnish tax advisory community. The reduction to 25% makes it materially more attractive than before and gives Finland a genuine edge in attracting specialist international talent into Finnish roles.
For a company hiring a CTO, head of product, or senior engineer into a Finnish entity at €8,000 to €15,000 per month, the key employee regime meaningfully improves the net pay comparison against competitor locations. 1Office Finland advises on key employee regime eligibility and application as part of the payroll and employer setup service.
1Office Finland handles Finnish payroll, employer registration, and key employee tax applications.
Finland's intermediate VAT rate dropped from 14% to 13.5%. This affects more categories than most Finnish businesses have updated for.
Finland operates three VAT rates: the standard rate of 25.5%, a reduced rate, and a zero rate for certain exports and intra-EU supplies. A change is made to VAT rules to decrease the reduced-rate VAT, applied on certain goods and services, to 13.5 percent from 14 percent. This took effect from 1 January 2026.
The categories covered by the reduced rate are broader than many companies initially assume. They include food and non-alcoholic beverages, restaurant and catering services, pharmaceuticals, passenger transport including taxis and ride services, hotel accommodation, and subscription newspapers and magazines. Any Finnish Oy operating in these sectors, or any company supplying these categories to Finnish clients, should have updated its invoicing and VAT return setup from 1 January 2026. For companies that have not, the VAT rate applied to affected transactions may have been incorrect since January, creating a potential underdeclaration to Verohallinto or an overcharge to customers.
| Category | VAT rate from 1 January 2026 | Previous rate |
|---|---|---|
| Food and non-alcoholic beverages | 13.5% | 14% |
| Restaurant and catering services | 13.5% | 14% |
| Pharmaceuticals | 13.5% | 14% |
| Passenger transport (taxi, bus, rail) | 13.5% | 14% |
| Hotel accommodation | 13.5% | 14% |
| Subscription newspapers and magazines | 13.5% | 14% |
| Standard rate (most goods and services) | 25.5% | 25.5% (unchanged) |
VAT rate changes in accounting software sometimes require manual configuration updates rather than automatic adjustment. If your Finnish company uses Netvisor, Procountor, Visma, or any other Finnish accounting platform, the 13.5% rate needs to be confirmed as the active rate for affected categories from 1 January 2026 onwards. If your system is still applying 14% to these supplies, your VAT returns for Q1 and Q2 2026 may have been filed at the incorrect rate.
For companies whose accounts are managed by 1Office Finland, this was updated as part of the standard January 2026 accounting setup. For companies using other providers or managing their own accounts, a review of VAT coding from January 2026 onwards is worth completing before the next return.
1Office Finland handles Finnish VAT registration, returns, and rate configuration for all accounting clients.
Verohallinto updated its foreign employer compliance guidance. If you are sending workers to Finland, the reporting framework has changed.
Verohallinto updated its official guidance on starting business in Finland for foreign companies in January 2026. The core update reflects changes to the information-reporting rules that concern foreign employers effective from 1 January 2026, with specific revisions to how foreign companies must report when they lease out employees to perform work in Finland.
For the broader audience of companies sending workers to perform project work in Finland, the updated guidance reinforces a compliance framework that has been tightening for several years. A foreign company that sends employees to Finland must report the details of those workers and their Finnish earnings to Verohallinto through the Incomes Register, regardless of whether the company has a permanent establishment in Finland. The reporting obligation exists from the first day of work, not after a threshold period has elapsed.
What foreign employers consistently get wrong about Finnish reporting
The pattern that 1Office Finland sees most regularly with foreign companies starting Finnish project work is the assumption that a short project, a few months of posted workers, or a subcontracting arrangement with a Finnish prime contractor does not create Finnish employer reporting obligations. This assumption is incorrect in almost all cases.
A foreign company whose employees perform even a single month of work in Finland has Finnish employer reporting obligations from the first payroll cycle. Those obligations include registration with Verohallinto as a foreign employer, reporting each salary payment to the Incomes Register within five days of payment, and withholding Finnish source tax on earnings at the correct rate for each worker's tax status.
The obligation does not depend on whether the company has a Finnish permanent establishment. A Polish company, a German engineering firm, or an Estonian construction subcontractor working on a Finnish project for three months is a foreign employer in Finland for those three months and must meet exactly the same payroll reporting obligations as a company with a permanent Finnish presence. The rules apply based on where the work is performed, not where the employer is registered.
The updated Verohallinto guidance published in January 2026 makes this framework more explicit than its previous version. If your company is starting Finnish project work in 2026 and has not set up Finnish employer registration and Incomes Register reporting, this is the first thing to address before workers arrive on site.
1Office Finland handles foreign employer registration, Incomes Register reporting, and payroll for companies working in Finland.
Finland's 18% corporate tax rate is heading for a parliamentary vote this autumn. The planning window for your 2026 accounts is now.
Finland's proposed corporate income tax reform reduces the CIT rate from 20% to 18% and extends the loss carryforward period from 10 to 25 years for losses confirmed from the 2026 tax year onwards. The government published the draft proposal in April 2026, the consultation period closed in May 2026, and the parliamentary vote is expected in autumn 2026. If passed, the new rate applies to financial years beginning on or after 1 January 2027.
For most Finnish Oys with a December year-end, the 2026 accounts are still taxed at 20%. The 18% rate first applies in 2027. But the most consequential planning consideration sits right now, in how the 2026 accounts are prepared.
"The 25-year loss carryforward for 2026 losses is more immediately useful to most small Finnish companies than the rate cut. A loss that would have expired in 10 years now has 25. That changes the value of correctly documenting every loss this year."
Why the 2026 accounts matter more than usual this year
Under the proposed reform, the extended 25-year carryforward applies to losses confirmed in the 2026 tax year and later. Losses from 2025 and earlier still expire after 10 years under the old rule. This means any Finnish company that is building, investing ahead of revenue, or carrying operational losses through 2026 has a direct financial interest in ensuring those losses are correctly identified, documented, and recorded in the 2026 annual accounts. An improperly prepared 2026 annual report that omits or understates losses forfeits carryforward years that cannot be recovered retroactively.
For companies reporting under IFRS with deferred tax positions on their balance sheet, the rate change also triggers a remeasurement at the point the legislation is substantively enacted by parliament, which for accounting purposes is when the vote occurs in autumn 2026, not when the rate takes effect in January 2027. That is a balance sheet event with potential P&L implications that should be flagged to your accountant now, not when the annual report is being prepared in spring 2027.
If your company is profitable and distributing: the tax rate on those distributions is still 20% for the 2026 year. No change yet.
If your company is in a loss position in 2026: the 25-year carryforward proposal is directly relevant. Ensure your accountant is tracking all 2026 costs correctly and that the annual accounts will reflect the full loss position.
If your company has a deferred tax asset on its balance sheet: flag the 18% remeasurement event to your accountant. When parliament confirms the legislation in autumn 2026, that deferred tax asset needs to be recalculated at 18%, not 20%. 1Office Finland tracks this as part of the annual accounts preparation for all clients with deferred tax positions.
1Office Finland handles annual accounts and corporate tax returns for Finnish Oys, including loss carryforward documentation and deferred tax under the proposed new rules.
A practical checklist for foreign-owned Finnish companies in July 2026
| Issue | Who it affects | Action |
|---|---|---|
| Key employee flat-rate tax at 25% | Companies hiring international specialists into Finnish roles at €5,800 or more per month | Check eligibility before the hire. Confirm correct rate is applied at payroll. Review whether returning Finnish citizens in your team now qualify. |
| Reduced VAT rate at 13.5% | Finnish companies supplying food, hospitality, transport, pharma, or accommodation | Confirm accounting software is applying 13.5% not 14% from January 2026. Review Q1 and Q2 VAT returns if not already verified. |
| Foreign employer reporting rules | Any company sending workers to perform work in Finland, regardless of project length | Register as foreign employer with Verohallinto before workers arrive. Set up Incomes Register reporting from the first payroll cycle. |
| CIT reform and 2026 loss carryforward | All Finnish Oys, particularly those in a loss position in 2026 | Ensure 2026 costs and losses are correctly documented for the annual accounts. For IFRS reporters, flag deferred tax remeasurement to accountant now. |
Running a Finnish company or starting operations in Finland in 2026?
1Office Finland handles annual accounts, payroll, VAT, foreign employer setup, and tax advisory for Finnish Oys and international companies operating in Finland.
Sources: Verohallinto, What will change in taxation in 2026 (vero.fi); Verohallinto, Tax withheld at source from key employees will decrease on 1 January 2026 (December 2025); Verohallinto, Starting up business in Finland, updated guidance VH/2360/00.01.00/2026; Verohallinto, Your tax handbook in Finland (vero.fi); Finnish Government draft proposal on corporate income tax reform, 28 April 2026; Borenius Legal Alert on CIT reform, April 2026.
