Starting 1 January 2025, employers in Finland will be able to reimburse tax-free for costs arising from cross-border work more widely.1
Relocating for work often involves navigating complex logistics, high costs, and significant administrative burdens. In Finland, the expanded tax-free provisions represent a major step forward in reducing such challenges.
Upcoming changes to Finnish tax regulations aim to bring significant relief for employees and their families. Employers now have greater opportunities to support their employees with tax-free benefits during relocations and international assignments.
For employees, the changes are expected to provide tangible financial relief, by way of lessening their tax burden and out-of-pocket (uncovered) expenses.
The new measures may strengthen employers’ ability to attract and retain global talent and enhance their employer-of-choice credentials, hence potentially boosting their competitiveness.
Tax exemption for employer-paid moving expenses will be expanded: When an employer covers moving and related travel expenses for employees and their family members, these expenses will be tax-free if the move occurs due to a change in the employee's work-place location. This will include the expatriate insurance taken out by the employer for the employee and his or her family members.
Previously, only 50 percent of these expenses could be reimbursed tax-free, and full reimbursement was allowed only in exceptional cases.
Currently, the tax exemption for relocation and travel expenses applies to cross-border work where employees are moving from Finland to another country or when employees relocate to Finland because of an assignment, whether employer- or employee-initiated, or the relocation is otherwise required by the employer. The new rules extend the tax exemption to cover situations where the employee moves to Finland for other reasons, for example because he or she has signed an employment contract with a Finnish employer.
Tax-free reimbursements for cross-border work: Under the new regulations, an employer can reimburse tax-free the costs of obtaining a passport, visa, work or residence permit, tax number, personal identification number as well as the expenses associated with registering residence rights. These reimbursements are tax-free for employees and their family members.
This also includes the registration of the residence of a citizen of the European Union (EU-registration).
Expenses for family members’ passports, visas, work and residence permits, or services provided by third-party vendors – such as acquiring these documents or obtaining a tax identification number or personal identity code – have previously been considered taxable income for the employee. Starting next year, such expenses incurred for family members will be tax-free. This change simplifies the inclusion of family members in cross-border work arrangements, potentially provides some degree of financial security, and fosters compliance with immigration requirements.
External service providers: Services purchased from an external service provider to handle the aforementioned registrations, as well as to acquire documents, permits, and identification numbers, can now also be reimbursed tax-free to employees and their family members.
Medical requirements due to the assignment: Costs incurred for vaccinations, medications, and medical check-ups required for entering the country, obtaining a visa, work or residence permit, or because of work-site conditions, will also not be considered taxable income to employees and their family members.
Cultural, language, and other trainings: A new legal amendment will formalise the long-standing tax practice that allows cultural orientation and language trainings to be provided tax-free to employees in cross-border work situations.
Also, there is no change regarding family members’ corresponding trainings. Under existing tax practices, training received by a family member is considered a taxable benefit for the employee. However, no taxable benefit arises if the family member's participation in the training does not incur additional costs for the employer.
Cultural, language, and other similar trainings are essential for successful integration in cross-border working situations, and formalising this in law will strengthen the current tax practice and clarify the scope and application of tax-free benefits, thus offering consistency for employers and employees.
1 Finnish government / Suomen valtioneuvosto Hallituksen esitys HE 108/2024 vp (only available in Finnish).
Parliament of Finland / Suomen eduskunta Eduskunnan vastaus EV 118/2024 vp (only available in Finnish).
Finnish government / Suomen valtioneuvosto Tiedote: Valtion vuoden 2025 talousarvioesitys: näin verotus muuttuu (only available in Finnish).
The information contained in this newsletter was submitted by the KPMG International member firm in Finland.
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