Effective January 1, 2026, Finland amended the Law on Withholding Tax on Expatriates (Law 1144/2025), extending preferential tax treatment to returning Finnish nationals, reducing the tax rate, and limiting the duration of benefits for citizens.1
WHY THIS MATTERS
The revised expatriate tax regime introduces significant changes for employers and globally mobile employees considering assignments or relocations to Finland.
Finnish nationals relocating back to Finland are now eligible for the preferential flat tax rate, subject to a five-year lookback period for unlimited tax liability. The duration of the preferential regime for returning citizens is capped at 60 months, compared with 84 months for other expatriates, affecting long-term assignment planning. The reduction of the tax rate to 25 percent enhances the financial attractiveness of assignments for all qualifying expatriates.
Employers should help maintain robust tracking and communication for returning Finnish nationals and expatriate staff regarding eligibility and duration limits.
Background
Previously, the regime excluded Finnish nationals returning to Finland, and the preferential tax rate for qualifying expatriates was set at 32 percent, with the benefit period fixed at 84 months for all eligible individuals. Earlier consultation proposed a 24-month benefit for citizens, but the enacted law sets it at 60 months.
Key Highlights
Finland’s amended expatriate regime aims to attract talent and simplify tax compliance for inbound employees and returning citizens, effective for employment commencing on or after 1 January 2026.
- Inclusion of Finnish nationals: Finnish citizens returning to Finland may qualify for the regime if they have not been subject to unlimited Finnish tax liability in any part of the five years preceding their employment start date.
- Duration of benefit: For Finnish nationals, the preferential treatment applies for up to 60 months; for other expatriates, the limit remains 84 months.
- Reduced flat tax rate: The withholding tax rate for qualifying expatriates (including eligible Finnish nationals) is reduced to 25 percent, down from the previous 32 percent.
- Special rules for Åland: If local tax is due to a municipality in Åland, the withholding rate for qualifying expatriates is a total of 7.3 percent and applicable municipal tax rate.
- Effective date: The law applies to employment commencing on or after 1 January 2026, and to salary paid from that date forward.
KPMG INSIGHTS
Steps to Consider
In light of the changes, organisations and individuals within the scope of the update may wish to consider the following:
- Organizations may wish to update assignment policies and payroll systems to reflect the new eligibility criteria and withholding rates.
- Employers may wish to communicate clearly with both expatriates and returning Finnish nationals about qualifying conditions, duration limits, and the impact of prior Finnish tax residency.
If assignees and/or their programme managers have any questions or concerns about the scope of the update, its application and potential impacts, and appropriate next steps, they should consult with their qualified tax professional or a member of the GMS tax team with KPMG in Finland (see the Contacts section).
FOOTNOTE:
1 Ministry of Justice of Finland, (in Finnish) “SäädK 1144/2025”, published on 11 December 2025.
Contacts
Disclaimer
The information contained in this newsletter was submitted by the KPMG International member firm in Finland.
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