Tax Residency in Finland
1. Criteria for Determining Tax Residency in Finland
According to the Finnish Income Tax Act (ITA), an individual is considered a tax resident in Finland if they meet any of the following criteria:
- Domicile: An individual is domiciled in Finland if they have a permanent home or habitual abode in the country.
- Residence: An individual is considered a resident of Finland if they have lived in the country for at least six months during a calendar year.
- Significant economic ties: An individual may also be considered a tax resident if they have significant economic ties to Finland, such as owning a business or property in the country.
The ITA provides detailed guidelines for determining an individual's domicile and residence status. For example, an individual is considered domiciled in Finland if they have a permanent home in the country and intend to reside there indefinitely. Residence is determined based on the individual's physical presence in Finland, as well as their intention to remain in the country for an extended period.
2. Impact of International Tax Treaties on Tax Residency
Finland has entered into numerous tax treaties with other countries to prevent double taxation and promote cross-border trade and investment. These treaties may modify or provide exceptions to the standard criteria for tax residency as defined in domestic law.
For instance, under the Finland-Sweden tax treaty, an individual is considered a resident of Finland if they have a permanent home in the country or if their center of vital interests is in Finland. The treaty also provides tie-breaker rules for individuals considered residents of both Finland and Sweden under each country's domestic law.
These treaty-specific modifications aim to provide clarity and prevent double taxation by establishing clear rules for determining tax residency in cases involving cross-border activities. They reflect the mutual agreement between Finland and other countries to facilitate tax compliance and enhance economic cooperation.
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