Finland’s Tax Administration issued updated advanced tax guidance effective 9 February 2026. The guidance clarifies how dividends, interest and royalties paid from Finland to nonresident individuals and companies are taxed.

If your company receives income from Finland or operates through a Finnish subsidiary or permanent establishment, these rules directly affect your withholding tax exposure and compliance risk.

This article summarises the key points from a business perspective.

1. Who is considered a nonresident in Finland

A company is generally treated as nonresident in Finland if:

• It is established abroad, and

• Its place of effective management is not in Finland.

Nonresident taxpayers are taxed in Finland only on Finnish-source income. This includes:

• Dividends paid by Finnish companies

• Certain interest payments

• Royalties

• Income connected to a permanent establishment in Finland

If a foreign company has a permanent establishment in Finland, taxation changes significantly. Income attributable to the permanent establishment is taxed similarly to a Finnish resident company.

2. Dividends paid from Finland to foreign shareholders

Standard withholding tax rates

Under domestic rules:

• 20 percent withholding for nonresident companies

• 30 percent withholding for nonresident individuals

• 35 percent in nominee registered share situations if identification requirements are not met

However, tax treaties often reduce this rate.

Tax treaty relief in Finland

Most Finnish tax treaties reduce withholding on dividends to:

• 10 to 15 percent for portfolio investors

• 0 to 5 percent for qualifying direct investments

Some treaties eliminate Finnish withholding entirely.

Correct treaty application requires:

• Proof of residence

• Beneficial ownership

• Proper documentation provided before payment

If documentation is missing, full withholding may apply and refund must be claimed later.

3. EU exemptions and corporate structures in Finland

Under the Parent Subsidiary Directive, dividends paid to an EU parent company may be exempt from Finnish withholding tax if:

• The parent owns at least 10 percent of the subsidiary

• The parent meets directive requirements

• The structure is not abusive

Additionally, EEA resident companies may qualify for tax exemption if a comparable Finnish company would receive the dividend tax free.

This requires careful analysis of:

• Legal form

• Ownership structure

• Creditability of Finnish tax in the residence state

Incorrect classification can lead to unnecessary withholding.

4. Beneficial ownership is critical in Finland

The updated guidance emphasises beneficial ownership.

A company is considered the beneficial owner only if it:

• Has the right to use and enjoy the income

• Is not contractually or legally required to pass it on

Conduit or intermediary structures may be denied treaty benefits.

This is especially relevant for:

• Holding structures

• Transparent partnerships

• Investment vehicles

• Multi tier group arrangements

Improper structuring may result in full Finnish withholding tax being imposed.

 

 

5. Interest payments in Finland

In most cases, interest paid to nonresidents is tax exempt in Finland.

However, taxation may arise if:

• The interest does not fall under domestic exemptions

• It is connected to a Finnish permanent establishment

• Specific hybrid or equity like instruments are used

Tax treaties may further restrict Finland’s right to tax interest.

Careful classification of financing instruments is essential.

6. Royalties and intellectual property payments in Finland

Royalties paid from Finland to nonresidents are generally subject to:

• 20 percent withholding for companies

• 30 percent for individuals

Tax treaties typically reduce this rate to 0 to 10 percent.

Under the EU Interest and Royalties Directive, royalties between qualifying associated EU companies may be fully exempt.

However, classification matters. Payments for:

• Software

• Licensing

• Know how

• Technical services

may fall under different treaty articles depending on contract structure.

Incorrect categorisation can create unexpected withholding obligations.

7. Permanent establishment risk for Finnish companies

If a foreign company has a permanent establishment in Finland:

• Dividends, interest and royalties attributable to the PE are taxed as business income

• Withholding tax rules may not apply

• Corporate income tax obligations arise

The threshold for permanent establishment is not limited to physical offices. It may arise through:

• Fixed place of business

• Dependent agents

• Long term projects

PE analysis should always be performed in cross border structures.

8. Tax at source card and refund procedure in Finland

If too much tax is withheld, the foreign recipient may:

• Apply for a tax at source card in advance

• Apply for a refund within three years

Refund claims require:

• Residence certificates

• Ownership documentation

• Proof that Finnish tax cannot be fully credited in the residence state

For groups with recurring payments, proactive structuring is more efficient than repeated refund applications.

What this means for international companies

The 2026 guidance reinforces several themes:

• Documentation must be in place before payment

• Beneficial ownership is scrutinised

• EU law and treaty law must be analysed together

• Permanent establishment exposure can change tax treatment entirely

For international groups, incorrect withholding tax treatment can result in:

• Excess tax costs

• Delayed cash flow

• Administrative burden

• Potential tax disputes

 

How 1Office Finland supports international businesses in Finland

1Office Finland supports foreign owned companies operating in Finland with:

• Practical withholding tax compliance

• Ensuring correct tax documentation

• Ongoing accounting and reporting obligations