Taxes in Finland Fulbright Grantees 28 August 2014

1 © 2014 KPMG International Cooperative ("KPMG International"), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no services to clients. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved. Contents  Case Study 1: 6 months or less in Finland (Student or Scholar)  Taxation of Fulbright Grant  Taxation of housing  Taxation of salary  When do I need to contact the Finnish tax authorities?  Case Study 2: more than 6 months in Finland (Student or Scholar)  Taxation of Fulbright Grant  Taxation of housing  Taxation of salary  When do I need to contact the Finnish tax authorities?

2 © 2014 KPMG International Cooperative ("KPMG International"), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no services to clients. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved. Case Study 1 – 6 months or less in Finland For Finnish tax purposes you may be either:  Non-resident (limited tax liability to Finland), or  Resident (unlimited tax liability to Finland) Non-resident: –A foreign individual is a non-resident in Finland if he/she does not stay in Finland for more than 6 months –Non-residents only have an obligation to pay taxes only for the income received from Finnish sources (as determined in the Finnish Income Tax Act)  If you stay in Finland for 6 months or less, you are a non-resident for tax purposes in Finland How is a non-resident taxed?  Fulbright grant  not taxable in Finland (taxable only in your home country, i.e. USA)

3 © 2014 KPMG International Cooperative ("KPMG International"), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no services to clients. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved. Case Study 1 – 6 months or less in Finland Taxation of other income  Housing provided in Finland:  Taxable unless the Finnish rules regarding temporary business trip or temporary secondary occupation can be applied.  Always depends on your personal circumstances and should be investigated case-by- case basis!  If housing is taxable, you need to report the housing to the tax authorities on a tax- return. The provider of the housing will also be liable to report the benefit to the tax authorities.  You may file the tax return in advance, but the due date is in the beginning of May (exact date to be informed by the tax authorities) at the latest for the benefits received during previous calendar year  Housing can be tax exempt if: You have your main employment in your home country and you stay in Finland for a temporary project or otherwise temporarily You are not on leave of absence or leave without pay from the home country employment You handle the work tasks related to your main work also while staying in Finland.  If housing is tax exempt, no actions required.

4 © 2014 KPMG International Cooperative ("KPMG International"), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no services to clients. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved. Case Study 1 – 6 months or less in Finland Taxation of other income (cont.)  Salary from a Finnish employer (e.g. lecture fees)  Taxable in Finland  Taxed at 35% flat tax  A deduction of 510 €/month or 17 €/ day can be done by the payer of the salary if you have a tax-at-source card stating the deduction  Please contact the local tax office and apply for a tax-at-source card and present it to the payer of the salary before payment

5 © 2014 KPMG International Cooperative ("KPMG International"), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no services to clients. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved. Case Study 1 – 6 months or less in Finland Summary – what to do?  As a main rule, non residents are not liable to file a Finnish tax return. There are a couple of exeptions (see below)  You only receive your Fulbright grant, no other income  no actions required  You only receive your Fulbright grant and tax exempt housing  no actions required  You receive your Fulbright grant and taxable housing  file a tax return and report the housing to the tax authorities  You also receive salary from a Finnish employer  apply for a tax-at-source card before the payment

6 © 2014 KPMG International Cooperative ("KPMG International"), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no services to clients. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved. Case Study 2 – more than 6 months in Finland For Finnish tax purposes you may be either:  Non-resident (limited tax liability to Finland), or  Resident (unlimited tax liability to Finland) Resident: –Unlimited tax liability (tax resident) in Finland = worldwide tax liability to Finland –An individual becomes tax resident in Finland when; ■he/she has the permanent home in Finland or ■he/she continuously stays in Finland for more than 6 months (in practice a temporary absence of less than 2 months does not cut the continuous stay) A tax treaty may limit Finland’s right to tax the worldwide income  according to Finnish-US tax treaty Fulbright grant is only taxed in the country of residence (as determined in the tax treaty)

7 © 2014 KPMG International Cooperative ("KPMG International"), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no services to clients. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved. Case Study 2 – What is the country of residence? ■The country of residence needs to be solved based on the applicable tax treaty – this needs to be analyzed if you stay in Finland for more than 6 months –The decision is based on your personal circumstances ■The tax treaty sets the conditions which determine the residency for tax treaty purposes –Article 4: ■If you are a resident (based on internal tax law) in both countries (Finland and the US), the country of residence for tax treary purposes is: –Country where your permanent home is; –If you have a home in both countries, the country with which you have closer personal and economic ties (centre of vital interests); ■The most important factor is location of your family –If the above mentioned does not solve the question, the habitual adobe, nationality or mutual negotiations between the authorities in Finland and the US may determine the country of residence.

8 © 2014 KPMG International Cooperative ("KPMG International"), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no services to clients. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved. Case Study 2 - Taxation of Fulbright grant in Finland ■If you are considered as Finnish tax resident for tax treaty purposes, Finland will tax the Fulbright grant ■Taxation of a grant differs from taxation of salary income ■There is a tax exempt amount of 19, € per year (in 2014, confirmed annually)  The amount of the grant which exceeds the above mentioned, is taxed as earned income in Finland  Deduction for certain costs related to the work done on the basis of the grant may be available before the taxable amount is set  These may include e.g. buying research material, travel costs, using assistant etc.

9 © 2014 KPMG International Cooperative ("KPMG International"), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no services to clients. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved. Case Study 2 – more than 6 months in Finland Taxation of other income  Housing provided in Finland:  Taxable unless the Finnish rules regarding temporary business trip or temporary secondary occupation can be applied.  Always depends on your personal circumstances and should be investigated case-by- case basis!  If housing is taxable, you need to report the housing to the tax authorities on a tax- return. The provider of the housing will also be liable to report the benefit to the tax authorities.  You may file the tax return in advance, but the due date is in the beginning of May (exact date to be informed by the tax authorities) at the latest for the benefits received during previous calendar year  Housing can be tax exempt if: You have your main employment in your home country and you stay in Finland for a temporary project or otherwise temporarily You are not on leave of absence or leave without pay from the home country employment You handle the work tasks related to your main work also while staying in Finland.  If housing is tax exempt, no actions required.

10 © 2014 KPMG International Cooperative ("KPMG International"), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no services to clients. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved. Case Study 2 – more than 6 months in Finland Taxation of other income (cont.)  Salary from a Finnish employer (e.g. lecture fees)  Taxable in Finland  Taxed at progressive tax rates - marginal tax rate in Helsinki 2014 is 50.25% including state tax and municipal tax). - a tax card needs to be applied from the tax office for withholding purposes  Please contact the local tax office and apply for a tax card and present it to the payer of the salary before payment (without tax card withholding is 60%)

11 © 2014 KPMG International Cooperative ("KPMG International"), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no services to clients. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved. Case Study 2 – more than 6 months in Finland Summary – what to do?  You only receive your Fulbright grant, no other income  File a tax return  If your country of residence for tax treaty purposes is US, make a claim that Finland cannot tax the grant  You receive your Fulbright grant and tax exempt housing  File a tax return  If your country of residence for tax treaty purposes is US, make a claim that Finland cannot tax the grant  If you think the housing should be tax exempt, please make a claim for it  You receive your Fulbright grant and taxable housing  File a tax return and report both the grant and the housing to the tax authorities (or check that the provider of the housing has reported the housing and it is stated in the pre-completed tax return form, if you have received one)  If your country of residence for tax treaty purposes is US, make a claim that Finland cannot tax the grant  You also receive salary from a Finnish employer  Apply for a tax card before the payment  File a tax return, report the grant, possible housing (see above) as well as check that the salary paid by the Finnish employer is stated correctly in the pre-completed tax return form (if you have received one)

12 © 2014 KPMG International Cooperative ("KPMG International"), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no services to clients. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved. Tax rates in Finland – earned income for residents  The state tax rate depends on the annual taxable income. The 2014 tax table is:  The municipal tax rate depends on which municipality you live in. –In Helsinki the municipal tax rate for 2014 is 18.50% –In Espoo 18.00% –In Vantaa 19% and Oulu 20.00%  Church tax is payable only if you belong to the Finnish church. The tax rate depends on which municipality you live in. Church tax in Helsinki, Espoo and Vantaa is 1%.  If you belong to Finnish social security sickness insurance (daily allowance and medical treatment premiums) is also levied from you with taxes. The rate is 2.16% for 2014 Taxable incomeTax on income below bracketTax rate on income in bracket 16,300 – 24, ,300 – 39, ,700 – 71,4003, ,400 – 100,00010, , ,

13 © 2014 KPMG International Cooperative ("KPMG International"), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no services to clients. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved. Tax rates in Finland Earned income for non-residents: ■35 % flat tax ■Tax-at-source deduction 510 €/month or 17 €/day if stated in the tax-at-source card Capital income:  30 % for capital income up to 40,000 € and 32% for capital income exceeding 40,000 €  lower tax rates may apply due to tax treaty provisions (e.g. for dividends paid from Finland)

14 © 2014 KPMG International Cooperative ("KPMG International"), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no services to clients. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved. Tax return process Finnish residents are obliged to file a tax return in Finland  non-residents only on Finnish-source income if no tax has been withheld ■Tax returns are filed in May following the tax year (calendar year). –Prefilled returns are sent out in March/April and need to be filed around 8 or 15 May (exact date to be confirmed by the tax authorities annually) –Tax returns are filed individually ■With Finnish tax return you need to report all the income including the capital income received from other countries. A claim for tax treaty exemption needs to be made –Final tax assessment is made in August – October –Refund or additional payment due in December ■Additional tax can be paid voluntarily in advance by your own initiative to avoid interest if no taxes have been withheld during the year

15 © 2014 KPMG International Cooperative ("KPMG International"), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no services to clients. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved. Supplementary payment of tax  No tax is withheld from the Fulbright grant in Finland (exempted from withholding liability)  If the grant will be taxed in Finland, you will need to handle the tax payments yourself  You can make a supplementary payment of tax on your own initiative to cover your tax liability. In this way, you can avoid paying unnecessary interest and penalties.  Interest rates are 0.5% or 2,5% for the year 2014  Interest will be due if the residual tax liability exceeds approximately € 4,784.  If you make the supplementary tax payment before 31 January following the tax year in question, no interest is due.  The supplementary payment has to be made by 30 September – the interest is then calculated until the date of payment.  To check a rough estimate amount of tax due you can use the Tax percentage calculator on the Tax Administration’s website. Go to select the section Individuals and click the Shortcut called Tax percentage calculatorwww.tax.fi

16 © 2014 KPMG International Cooperative ("KPMG International"), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no services to clients. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved. Finnish Tax Year January: ■Make the supplementary payment of tax before 31 January if you want avoid paying interest April: ■Prefilled tax returns are sent ■Check and complete prefilled tax return (if necessary) - the forms in English can be found at May: ■Return completed tax return to Tax Administration September: ■Make supplementary payment of tax before 30 September if not done in January (not obligatory) October: ■Tax assessment sent to tax payers December: ■Pay residual tax or receive tax refund

17 © 2014 KPMG International Cooperative ("KPMG International"), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no services to clients. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved. / The tax authorities may also be contacted by phone: Tel / International tax issues

© 2014 KPMG Oy Ab, a Finnish limited liability company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. The KPMG name, logo and “cutting through complexity” are registered trademarks or trademarks of KPMG International. Esa Johnsson Tax Manager Puh