This following tax advice was prepared by EY in August 2018. The Fulbright Finland Foundation does not take any responsibility for the content of the tax advice.
Tax Status
Individuals staying in Finland over six months are considered tax residents in Finland, i.e. they are in principle liable to pay taxes to Finland on their worldwide income. Tax treaties may however limit this right.
Taxation of Fulbright Grant
Your Fulbright grant is taxed only in your country of residence, determined according to the applicable tax treaty (e.g. Finnish-US tax treaty). As you are most likely resident in both countries, i.e. your home country and Finland, the tax treaty residency is determined on a case-by-case basis based on certain facts set in the tax treaty.
If you are a resident in both countries (US and Finland), the country of residence for tax treaty purposes is determined:
- Primarily based on the location of your permanent home
- If you have a permanent home available for your own personal use in both countries, the country with which you have closer personal and economic ties (i.e. central of vital interest) determines the country of residence.
- Based on the above mentioned, you may claim your tax treaty residency to be the U.S.: (1) If you have your only home and your family in the U.S. (2) If you only have a temporary accommodation in Finland, (e.g. hotel, a furnished apartment rented from e.g. an apartment hotel or similar service provider) and your stay in Finland is less than one year, you can reasonably argue that your only permanent home is in the U.S. even though your family would stay in Finland.
In case you are considered as a U.S. resident for tax treaty purposes, the Fulbright grant will only be taxable in the U.S.
However, if you are a Finnish resident for tax treaty purposes (e.g. you have a home only in Finland and your family has accompanied you to Finland), Finland is entitled to tax the grant. Under Finnish internal legislation the grant is partly tax-free as it is granted for scientific research or for studies by a private organization. In 2018 the tax free amount is EUR 20.461,72 per calendar year. The exceeding amount is taxed as earned income in Finland using progressive tax rates.
Housing Provided in Finland
Housing provided to you in Finland (e.g. by a Finnish university or other Finnish entity) may be tax-exempt income for you if rules for temporary business trip or temporary secondary occupation in Finland can be applied.
The rules for temporary secondary occupation will apply if:
- You have your main employment in your home country and you stay in Finland for a temporary project or otherwise temporarily (not more than three years)
- You are not on leave of absence or leave without pay from the home country employment
- You handle the work tasks related to your main work also while staying in Finland
Instead of full tax-exemption, the accommodation provided to you may however be considered as partly taxable in case your family is residing there with you and this has increased the costs for the housing provided. Generally 50% of the value of the housing benefit is considered as taxable, if no further documentation regarding the value is provided.
The provider of the housing should determine whether the housing will be reported as taxable or not. Discuss with the provider of the housing. If the housing is tax-exempt, no actions are required from your side.
Taxable Housing Benefit – How to Proceed?
- If housing cannot be provided tax-exempt for you, the taxable value of the housing is taxed according to the progressive tax rates.
- Please note that the taxable value of the housing benefit is not the same as the amount of rent, but the value is determined on the basis of formula set by the tax authorities. The provider of the housing will be obliged to calculate the taxable value.
In order to pay the tax on the housing, you may either report the housing in your tax return (see below) and pay the tax as residual tax or contact the tax authorities and ask for advance tax payments (form 5010e). If advance tax payments are applied, no interest will be due (if paid as residual taxes, the interest will be due if the tax exceeds approximately 4,780 € per calendar year).
From 31 October 2018 onwards the procedure of advance tax payments will be slightly changed. As of then, you may apply for tax advance payments in MyTax service or via a paper form. No interest will accrue on the taxes in case those are settled prior to the end of January of the following tax year and in case the tax payments are settled between February and the closing of taxation, the interest to be paid is lower than usual.
Taxation of Other Income and Benefits in Finland
- Lecture fees paid from Finland are taxed in Finland as salary income. Please see the following section "Tax card".
- Salary received abroad from a foreign governmental organization (e.g. U.S.) is usually not taxable in Finland.
- Salary received abroad from a private employer may be taxed in Finland if the work is performed in Finland and days of physical presence in Finland are more than 183 days during a 12-month period (based on the Finnish-US tax treaty).
- For information on taxable income and available deductions please see Finnish Tax Administration. You may also contact the tax authorities by phone +358 20 497 024 (International taxation of Individuals).
Tax Card
The Tax card states the withholding percentage according to which a Finnish employer withholds the taxes. However, no withholding is made on the Fulbright grant by Fulbright Finland Foundation
- If you only receive the Fulbright grant and housing benefit while staying in Finland, no tax card is needed.
- If you receive salary from Finland (e.g. lecture fees), please apply for a tax card and give it to the payer.
The Tax card can be obtained from the local tax office (in person, by phone or online). In order to receive a tax card, form 5042e (also available from the tax office) must be filled in. You need a Finnish ID number for obtaining a tax card. You will also need an estimate of your annual gross salary. When visiting the tax office, your identity will be verified, i.e. please take your passport with you.
Tax Return Process
A Finnish tax return needs to be filed for every calendar year you have stayed in Finland. You should receive a pre-filled tax return (sent to your registered address) in April following the year you have stayed in Finland, e.g. for 2018 income year the pre-filled tax return is sent in April 2019. Necessary additions and corrections must be made to the pre-filled tax return and the amended tax return filed with the tax authorities by the due date stated on the first page of the pre-filled tax return. If you do not receive a pre-filled tax return, please use the blank form (form 3001e) and file it by the due date stated on the Finnish Tax Administration's web page, usually by mid-May. Please note that the timeline of the tax return process may change for the year 2019, which is why it is recommended to check the important dates from the Tax Administration website.
- If Finland is not entitled to tax your grant based on the fact that you are a U.S. resident for tax treaty purposes, you must claim for treaty exemption in your tax return using e.g. the additional information field or a separate appendix.
- If Finland is entitled to tax the grant, you must declare the grant as income in section 1.4 (other earned income) in your tax return. Please use the additional information field or a separate appendix to specify the income as Fulbright grant paid by Fulbright Finland Foundation.
- Please also state in the additional information field if you do not belong to the Finnish social security system (otherwise the tax authorities will collect the sickness insurance contributions together with the taxes).
See translations of the Finnish terms of pre-filled tax return.
Tax Assessment
Tax assessment (tax decision) shows the final amount of taxes imposed on you. Possible tax refund is paid during November or December and residual taxes usually in December and in February. The payment dates may vary slightly each year. The tax assessment which you have received in April in connection with the pre-filled tax return is your final tax decision, if no corrections or additions are made. If corrections/amendments have been made, a new decision is sent to you by the end of October.
Leaving Finland
Your Finnish tax return must be filed after the calendar year you have left Finland, i.e. if you leave Finland in November 2018, you must file a tax return regarding the tax year 2018 in May 2019. Possible tax refund may also be paid abroad. Prior to leaving Finland, please remember to inform the correct address abroad to the tax authorities.
Summary
- If you receive only the Fulbright grant and housing, you do not need to apply for a Finnish tax card.
- In case the housing is not tax exempt, you may report it in your tax return or ask for advance tax payments.
- If you receive e.g. lecture fees or other salary income from Finland, you must apply for a tax card and give it to the payer of the salary/lecture fees.
- You are obliged to file a Finnish tax return. Pre-filled tax return is sent to you in April following the tax year (calendar year). Please declare your income in the Finnish tax return and make a claim for tax treaty residency if applicable. Please also make other necessary corrections and additions to the pre-filled tax return and send it back the Finnish tax authorities.
- When leaving Finland, please remember to inform your U.S. address to the tax authorities as the last filing of the Finnish tax return will be after you have already left the country.
