Foreign corporate entities will be considered resident in Finland for tax purposes from 2021 onwards based on place of effective management

21.1.2021

An amendment to the rules concerning the taxation of foreign entities has entered into force. According to the amendment, a foreign corporate entity is considered resident in Finland if its place of effective management is in Finland. The amendment entered into force on 1 January 2021.

The tax liability of a foreign corporate entity in Finland from tax year 2021 onwards depends on the location of the entity's effective management. The place of effective management means the place where key day-to-day management decisions are made. Previously foreign entities have been liable to tax in Finland mainly on Finnish-source income and on income from a Finnish permanent establishment.

You can read more about the changes and background in our article published in October.

Foreign corporate entities considered resident in Finland should file a tax return (main form 6B) from tax year 2021 onwards.

The tax administration has updated several of its guidelines due to the change and is also preparing detailed guidance relating to the change in legislation that should be available in early 2021.