Taxation of key employees in Finland (1/2026)
At the beginning of 2026, significant changes were introduced to the taxation of key employees in Finland (link to the Act on Taxation of Key Employees). The changes will benefit not only foreign key employees but also Finnish citizens returning to Finland. Firstly the tax rate for key employees decreased from 32 per cent to 25 per cent which means that more employees will benefit from the relief. Secondly Finnish citizens returning to Finland will also be eligible for the taxation of key employees if certain conditions are met (link to the Tax Administration’s News Release on Taxation of Key Employees)
Conditions for the Taxation of Key Employees
If the employee is eligible for the taxation of key employees, the tax rate on salary income is always 25 percent, regardless of the amount of income earned. Thus it is a flat tax rate and not a progressive tax. Since the highest marginal tax rate in Finland in 2026 is 52%, the benefit can be substantial. As of 2026 also Finnish citizens returning to Finland will benefit from the taxation of key employees if they meet the requirements.
For example, the progressive tax rate on salary income of EUR 150,000 (calculated on the basis of the average municipal tax rate) in 2026 will be slightly over 35 per cent (excluding pension and unemployment contributions). With the relief, you can save about 15,000 euros a year in taxes, because the tax rate according to the relief is only 25 per cent, i.e. 10 per cent lower. In addition to taxes, pension (TyEL) and unemployment insurance contributions are levied on those covered by Finnish social security.
However, the conditions for applying the taxation of a key employee are quite strict, and all the conditions must be met in order to qualify for the relief. The conditions are, among other things, that the key employee becomes a resident taxpayer in Finland at the start of the work, that the monetary salary is at least EUR 5800 per month and that the person works in tasks that require special expertise. Teachers at universities and reseachers can, under certain conditions, be subject to the taxation of key employees, even if their monetary salary is less than 5800 euros or the work does not require special expertise.
In case of a key employee returning to Finland, it must also be ensured that the employee has not been a tax resident in Finland during the five years preceding the start of the employment. Usually tax residency in Finland ends when person moves out of Finland permanently. Contrary to the above, Finnish citizens remain tax residents in Finland even after moving according to the so-called 3-year rule. If certain conditions are met, a Finnish citizen’s tax residency may be ended earlier but this must be requested separately.
Applying for the Taxation of Key Employees
The key employee must apply for a so-called Key Person’s Tax-at-Source Card from the Tax Administration, in which the conditions for applying for the taxation of key employees have been explained. The key employee’s tax-at-source card must be applied for within 90 days of the start of the employment in Finland. The deadline for applying for the tax card is absolute, and the opportunity for the taxation of key employees is lost if the tax card has not been applied for within the above-mentioned time limit.
A key employee can remain subject to taxation of key employees for a maximum of 84 months, i.e. seven years. An exception to this, however, are Finnish citizens returning to Finland, who can only remain subject to the taxation of key employees for 60 months, i.e. five years.
Because the key employee’s tax-at-source card is always issued separately for each employer, a change of employer leads to the loss of the taxation of key employees. However, if working for the new employer also meets the requirements for the taxation of key employees and the employment relationship is concluded within one month of the end of the previous employment, the taxation for key employees can also be applied to the new job. However, for this purpose, you must always apply for a new key person’s tax card, in which the conditions for taxation of key employees are explained as regards to the new job.
What if I earn other salary income while being eligible for the taxation of key employees
If the key employee also receives salary income from another employer while being eligible for the taxation of key employees, the salary income subject to the taxation of key employees will increase the progressive tax rate of the other earned income. This is because the salary income that is the subject of the taxation of key employees is taken into account in the tax rate of the other earned income.
For example, if the total earned income of a key employee was EUR 150,000, of which EUR 30,000 would be salaries other than those covered by the taxation of key employees, the tax rate on that other salary income would be slightly over 35 per cent (excluding pension and unemployment contributions and calculated on the basis of the average municipal tax rate). On the other hand, the tax rate on the salary covered by the taxation of key employees is not affected by the other earned income, but the tax rate on that remains at 25 per cent.
Questions on Taxation of Key Employees?
We would be happy to help with all questions related to international taxation with over 20 years of experience, so do not hesitate to contact us. We assess in advance the possibilities of applying for the taxation of key employees and, if necessary, prepare an application for a tax-at-source card for the key employee. We also provide answers to questions related to the taxation of income received from Finland or abroad, the application of tax treaties and other tax obligations related to international taxation in Finland.
Please be aware that while every effort has been made to ensure that the information in this article is correct and reliable, Avente Oy is not responsible for any errors or omissions in it. The articles or tax advice on our website are for general informational purposes only and are not applicable in individual cases as guidance. Please always use a competent tax lawyer or tax advisor who is familiar with the details of your individual case.
