Mobility Matters

Long-Awaited Finnish Tax Administration's Statement Clarifies Taxation of Certain Assignment-Related and Relocation Services Expenses Paid by Employers

March 2022 | By Paula Holmström, Antti-Pekka Haverinen, and Jasmiina Untamo, KPMG in Finland 

It is fairly common for employers in Finland to cover certain employee relocation costs in addition to paying the employee a "standard" salary and assignment-related stipend/bonus/premium. Examples of such relocation costs include certain travel and moving expenses, language training expenses, and costs related to obtaining a work or residence permit. 

In Finland, for some time, there has been a good deal of uncertainty -- and a little controversy -- around the appropriate tax treatment of certain costs related to relocation that are reimbursed by employers. The government, legislators, the administration, and the courts, have all grappled with this issue over the course of many years.

In August 2021, the Finnish Tax Administration issued a Statement1 regarding the tax treatment of the reimbursement by employers of various expenses related to work abroad and the “settling in” services, otherwise known as “relocation services.” 

The Statement applies to:

  • those employees working abroad for whom the so-called “six-month posting rule” does not apply, and 
  • situations where the employee arrives in Finland to work. 

The Statement clarifies the taxation of employees who are arriving in Finland, but also for those who are departing Finland.

This article discusses important aspects of the August 2021 Statement, and highlights some examples of cost reimbursements related to employee relocation and how those would be treated for tax purposes. It also suggests ways in which employers may wish to re-evaluate and restructure relocation-related expense reimbursements for their employees to help ensure compliance and enhance their tax positions.

Then and Now: What Cost Reimbursements and Relocation Services Are Covered

The costs paid by the employer may include, for example, travel expenses for the employee and his/her family, removal costs, the cost of obtaining a work or residence permit, the cost of language training, and the costs of childcare and school fees. In addition, the employer may provide services to the employee to help him or her settle into a new country and help to facilitate any number of practical matters. These can be, for example, handling tax-related matters, opening a bank account, taking care of necessary registrations, and/or house hunting.

Prior to the Statement, the tax treatment of reimbursements for such costs and relocation services had been partly subject to interpretation. The basis for how such matters were treated for tax purposes was Finland’s Income Tax Act (Tuloverolaki 1535/1992 (TVL)), and legal and tax praxis (court ruling and the Finnish Tax Administration’s previous practice). Some of the costs paid by the employer are exempt from tax directly under the Income Tax Act. This led to some confusion and challenges and inconsistencies in treatment for tax purposes.

However, following the ruling KHO 2020:155 of the Supreme Administrative Court (which was the basis for the tax administration’s Statement), employers, employees, and their tax service providers have more clarity around the tax treatment of relocation services.

Tax Treatment under the Statement

The Statement covers taxation of the reimbursement of various costs related to work abroad and the relocation services paid by the employer especially in the situations that had previously been unclear.

Tax treatment of certain situations had previously been subject to interpretation, but have now been made clearer:

  • The travel expenses of an employee moving to Finland can be reimbursed tax-free for the employee when the employee arrives in Finland to work in a so-called “special place of work,” but the travel expenses of his/her family are, in principle, always taxable income for the employee. (However, it should be noted that a partial tax exemption, due to a change in the location of the employment, could be applicable, in which case only half of the price of the family’s airplane tickets would be considered as taxable income for the employee.) 
  • The costs of obtaining visas and work and residence permits that are reimbursed are non-taxable income for the employee, but if the corresponding expenses are reimbursed for the employee’s family members, those family-related expenses are considered to be taxable income for the employee.
  • Assignment coaching and language training are considered as trainings provided by the employer, which does not create a taxable benefit for the employee.
  • If the employer pays for school fees or child-care on behalf of the employee coming to Finland, that is considered to be taxable income for the employee.
  • If the employer provides a service for assisting with so-called “personal authority” matters or similar obligations of an employee or members of his/her family, that is considered as taxable income for the employee. 

It is important to note that the Statement also takes a stand on the taxation of many other costs or services paid by the employer and presents, in addition, several exceptional situations for taxable income – in other words, there are many other costs and services as well as exceptional situations mentioned in the Statement, but for purposes of this article we will not go into detail here, but rather, refer readers to the Statement (see the footnote).

According to the Statement, taxable income for the employee is considered to be assistance with authority registrations, tax returns, social security applications, obtaining a passport, house hunting, and opening a bank account (this is not an exhaustive list). In addition, the Statement confirms that the amount of the taxable benefit to the employee is the cost paid for the service, including VAT. 

A taxable benefit arises when the employer pays an expense that is considered to be the employee’s living expenses; for example, in the case of residence permits for the family members, the taxable benefit arises when the employer pays an invoice sent by the service provider related to the residence permits.

Employer Considerations

The Finnish Tax Administration’s Statement should be seen as a catalyst for beginning a review of the employer’s internal processes regarding the costs and relocation services paid on behalf of employees. The taxable benefit should be taken into account in the company’s internal processes, for example in the payment phase of invoices related to the costs or in payroll administration. It might be worthwhile for employers to map out their current internal processes and share pertinent information concerning the Statement and its impact within the company. Each situation should be analysed on a case-by-case basis, taking into account the specific nature of the costs or the relocation services paid on behalf of the employees. It is important to note that all situations are not regulated by law, and the Statement does not list the different types of costs or relocation services in detail. Therefore, it is advisable that employers consider carefully whether the costs relocation services paid on behalf of employees could be provided as a non-taxable for the employee or whether it is, for example, personal tax advice or assistance with registration.


While it has been a long time coming, the Finnish Tax Administration’s Statement helps move the needle considerably in terms of clarifying the tax treatment of moving and travel expenses of an employee and his/her family members, arising from working abroad, which are paid by the employer. This should greatly help employers, employees, and tax services providers to better understand their obligations, what is required to be in compliance, and bring certainty and clarity to the tax treatment of expenses for travel and relocation services paid on behalf of the employees. 


 For the Statement (in English), see: