International taxation

Taxation is only one small area of when expanding business abroad, but it can create significant challenges if it is not taken into account.

Typically, questions related to internationalization include permanent establishments for income taxation and value-added taxation, registrations and reporting and employee tax liabilities. In addition, questions outside taxation often arise, for example, the notifications of posted workers, locally applicable collective agreements, assignment appendices to employment contracts, the determination of social security and accounting cost centers. Our experienced specialists are here to help you with all these questions related to internationalization.

Rantalainen already operates in Finland, Sweden, and Norway, allowing us to provide services for these countries under a one-stop-shop principle. For other countries, we provide our extensive network of international partners.

While tax treaties may initially seem straightforward, interpreting them solely from a domestic perspective can lead to oversights. Our international tax experts consider not only the specific income article but also how the terms and definitions are perceived from foreign perspectives. This involves applying the rules for interpreting tax treaties, which address questions such as:

• Which country’s legislation defines the term “independent services”?
• Can the 2017 OECD commentary be used to interpret a tax treaty signed in 1973? If yes, under what conditions?
• Does the tax treaty apply to a legal entity that is not itself a taxpayer, i.e. taxation takes place at the level of the shareholder?
• Could activities that otherwise constitute a permanent establishment be characterized as “preparatory” or “auxiliary,” and how is this determined?

Our experts are highly skilled in tackling these and many other complex interpretative challenges.

In our experience, the formation of a permanent establishment often comes as a surprise, particularly in construction and installation services or through local sales agent functions.

In construction operations, interpretative challenges are caused by repeated contracts for the same foreign customer, delays in project schedules, labor leasing situations, and assessing whether the operations at the site could be defined as supervision rather than construction services – and whether such classifications even impact the outcome.

For sales agents, risks include insufficient assessment of financial and legal independence. Additionally, it is often incorrectly assumed that a subsidiary cannot act as a dependent agent for its parent company, thus avoiding the creation of a permanent establishment for the parent company.

In these situations, we always evaluate whether the activity could instead be classified as preparatory and/or auxiliary, which is an exception to the formation of a permanent establishment in most tax treaties.

In our strategic approach, we also consider the broader long-term picture and assess the most suitable solution for each situation.

The place of effective management in Finland can lead to numerous complex consequences, not least because this is a relatively new regulation in Finland. As a result, established processes are often lacking, and there is uncertainty, especially regarding tax treaty interpretations and the elimination of double taxation.

For example, is the “place of management” in tax treaties the same as the “place of effective management” defined in Finnish tax law?

What factors determine the place of effective management, and can it be avoided by making decisions exclusively abroad? How does remote participation in meetings affect its determination?

We have already explored answers to these and many other questions – It is time for your question!

In international taxation, the concept of a permanent establishment defines the extent of taxing rights between different countries. It is therefore critical to understand how and to what extent income should be allocated to each jurisdiction. If local tax authorities are given free rein, there is a risk that the Finnish Tax Administration may not accept excessive income allocations—especially when the applicable tax treaty specifies that double taxation must be eliminated using the exemption method.

Allocation also involves more difficult questions, such as the deductibility of fictitious interest expenses paid to the head office. If they can be deducted, the next step is to assess what is the correct interest rate for the transaction in question. The assessment is based on the OECD Transfer Pricing Guidelines.

Additionally, transfer pricing issues often arise for group companies providing services exclusively within the group, where external comparables may not be readily available. In such cases, it is necessary to determine an appropriate transfer pricing method to ensure that the transaction price meets the Finnish Tax Administration’s standards and guarantees a fair tax outcome.

By demanding foreign tax paid to be credited in Finland as such, the response may be a strict no and followed by a tax increase. Before claiming the credit, it must first be verified whether the source country actually had taxing rights over the income, and if so, to what percentage.

After this, the maximum amount of credit in Finland must be calculated. In practice, it is necessary to determine how much tax has been paid in Finland on the same income. It is particularly important to note that the way taxable net income is calculated abroad rarely corresponds to the way taxable income would be calculated in Finland. Therefore, calculations made by a foreign accountant do not always apply in Finland.

In addition, the proportion of income received from abroad must be compared to income received from Finland and the taxes paid on them. After all the steps mentioned above, these details must also be reported correctly on tax returns and accompanying forms.

Does this sound complicated? It can be, but we are here to help.

Initially, EU regulations on the tax neutrality of corporate restructurings only covered mergers, but nowadays the provisions also apply to business transfers, demergers, transfers of registered office and share exchanges. Furthermore, as of January 1st, 2026, Finnish tax legislation will allow share exchanges with companies located in non-EU countries in certain situations.

We assist in the implementation of cross-border corporate restructurings, especially from the perspective of tax and company law. We are able to offer expertise from planning to execution for most EU countries.

Even if a permanent establishment is not founded abroad, employees may still become personally liable to pay tax in the foreign country they are working.

Typically, the basis for tax liability is either the number of days spent working abroad or the fact that the country applies the so-called “economic employer” concept, meaning that even indirect payment of the employee’s salary by the client may be sufficient to trigger tax liability.

Furthermore, the general rule is that the labor legislation of the country where the work is performed always applies, unless an alternative labor law provides better protection for the employee. Determining this can be challenging without an international network of experts, which is why it is easy for us.