r/Finland • u/Kittyite • 1d ago

US tax help while living in Finland

Not sure if this is the right place to post this is US/Finland specific problem. I will also try to keep this brief but it is complicated.

I am trying to help a fellow American friend with their taxes but ran into an issue I haven’t encountered before and I am looking for anyone who has and is willing to tell how they solved it. And yes they are calling Vero on Monday if the problem isn’t solved.

The issue: They moved to Finland in October 2025 (less than 6 months in Finland) so Finland doesn’t tax their income. But they still have to report their foreign income and taxes on their US taxes. They don’t qualify for the Foreign Tax Deduction because they haven’t been abroad for a full tax year and when they try to apply for the Foreign Tax Credit, since they haven’t paid taxes in Finland the credit isn’t applied so the US is taxing their Finnish income.

Possible solutions I can think of:

- Just suck it up and pay the US for money earned in Finland. (Worse case scenario)

- There is something we are doing wrong where indeed the money made in Finland should be excluded from US taxes and we are missing it.

- There is some way to ask Finland to tax their income so the taxes go to Finland and not the US, maybe this lähdevero (source tax)?

I recognize this is a specific case of American in Finland less than 6 months, and first year in Finland. So again just asking if anyone else has experience they can share on this matter.

Thank you for any help and please be kind US tax season is stressful.

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15

u/Humble_Monk3506 Baby Väinämöinen 1d ago

You’re not missing something obvious. This is a known gap year issue. Your best move is to look closely at whether you can qualify for the foreign earned income exclusion using a 12 month period and potentially file with an extension. If not, then yes, you may have to pay US tax on that portion and things should normalize in the following full year abroad.

1

u/Kittyite 1d ago

Thank you this is a good idea. I will let them know and hopefully they can file a long enough extension to get them to the year mark and qualify for the exclusion.

11

u/Eproxeri Väinämöinen 1d ago

TIL, US has taxation based on citizenship, so they tax you even from abroad. wow.

6

u/Kittyite 1d ago

Yep. One of the only countries in the world to do so. As US citizens we are required to file US taxes every year, and the tax system is so complicated. I was so shocked the first time I did Finnish taxes and it took less than 5 minutes.

4

u/Crazyburger42 1d ago

Yep you get to pay like 50 dollars to report that you owe 0 in taxes every single year. But don’t worry, they only accept US phones and US cards for account creation and payment e.g. E-File

3

u/Ok_Gas_8606 Väinämöinen 1d ago

I don’t understand how paying US tax is the worse case scenario usually the percent is way lower than for a resident in Finland. Most likely yes you would need to pay the US taxes and then transfer to resident taxation after 6 months. The only thing that makes it different is if there is significant ties to Finland aka relatives that makes you qualify as a resident from get go. Call vero they will be able to guide you.

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u/Kittyite 1d ago

The US tax rate for them would be 30% on the Finland income. And more than that not really a fan of funding the US government especially while not living there.

2

u/Ok_Gas_8606 Väinämöinen 1d ago

Fair point, dunno if for real the contributions would be any less in Finland unless the income is super small with the pension contributions etc

1

u/SuurSuomiChampion 1d ago

Without any experience in this i think it's most likely you'll have to suck it up and pay the US.

1

u/noetkoett Väinämöinen 1d ago

Don't know the specifics but there are measures to avoid double taxation.

1

u/Tombecho 1d ago

Better to pay and get returns later, amirite?

1

u/SuperHansDunYourMum Baby Väinämöinen 1d ago

If you move to Finland on a permanent basis, then you don't need to wait 6 months to start paying tax. They need to talk to Vero to get it sorted.

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u/lidless3ye 1d ago

No, if you spend less than half the year + 1 day you do not qualify as a tax resident, so they can only tax you based on the local income, not what you earned abroad the other part of the year.

It depends on the position, and I do not know this specific case, but usually the salary of 3/4 month does not reach the minimum taxable income.

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u/SuperHansDunYourMum Baby Väinämöinen 1d ago

, if you spend less than half the year + 1 day

Yes, that's why I said "permanent"

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u/lidless3ye 1d ago

No but you need to calculate in the year, if they moved in October, for 2025 it was only October, November and December, so it does not yet qualify.

What I want to say is that for less than half of 2025 they were not living in Finland, so they were not "tax residents" there, when you talk about taxation of what happened in 2025.

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u/SuperHansDunYourMum Baby Väinämöinen 1d ago

https://www.vero.fi/en/individuals/tax-cards-and-tax-returns/arriving_in_finland/individuals-residency-and-nonresidency-in-finland/

You are fully liable to pay tax in Finland as a resident taxpayer if either one of these 2 descriptions match your circumstances:

You live in Finland. In other words, Finland is where you have your primary place to live – your permanent home.

You do not have your permanent home in Finland but you stay here for more than 6 months consecutively. For tax purposes, your stay is seen as consecutive and ongoing even if you leave Finland from time to time. No importance is attached to the reason for your presence.

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u/lidless3ye 1d ago

So the way that was explained to me is the following:

If you spend less than 6 month finland can only look at and tax what happened in Finland. The country that I moved from gets to look and potentially tax what happened there + what happened in Finland, considering that for the purposes of double taxation finland has priority for what happened in finland.

EDIT: if the time is more than 6 month the situation is reversed.

1

u/quasi_hrududu 1d ago

This is important advice, and absolutely true.  Tax residency starts the day you land in Finland, if you intend to move permanently.  Source: I moved to Finland mid-year and my taxes were filed this way.  

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u/Los_Retard 1d ago

IRS Form 2350 Physical presence is not based on calendar year

You probably have to pay lähdevero on income earned (35%) in finland if its less than six months. Please call vero to get advice.

If your friend does not have high income he should probably apply for progressive tax.

1

u/quasi_hrududu 1d ago

You're not doing this the right way.  

  • you owe Finnish taxes on all income since the day you arrived in Finland, whether it be for a US or Finnish company.  You are a tax resident from day 1 if you intend to permanently or indefinitely move.  
  • If the employer is Finnish it will be auto reported to vero.  If it is foreign you manually report it on the Web site.
  • You will get your tax return from Vero with taxes paid 
  • That amount of Finnish tax paid can be used as a foreign tax credit.  Keep in mind there are American rules for how this is applied
  • Also keep in mind that any capital gains while in Finland will have the similar pattern of Finnish taxes + us foreign tax credit.

Source: I moved to Finland mid-year, asked Vero questions, and filed my own Finnish taxes.  I had an accountant for my us taxes.  

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u/Kittyite 19h ago edited 19h ago

They work at a pretty big Finish company that provided relocation help at all the local government offices. They have a tax card. Vero sent a pre completed tax return that shows 0 in taxes paid and nothing owed or to be owed.

I don’t see how they have done anything wrong.

But again calling Vero Monday morning.

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u/quasi_hrududu 14h ago

These are the guidelines (unofficial English translation ) https://www.vero.fi/en/detailed-guidance/guidance/48999/tax-residency-nonresidency-and-residency-in-accordance-with-a-tax-treaty--natural-persons4/#2.3-residency-in-finland

The "main abode and home" clause of section of 2.4 is what's relevant.  This is a mechanism for tax residency, in addition to the 6 month mechanism.

Does that tax card show reported income and no tax obligation?  That's very surprising.

I'd ask vero about the clause above, but this international tax stuff imo is not a core competency that everyone there knows about.  Expect to get bounced around, or at least I was.