Changes to Key Taxation of Key Employees in 2026
The Tax at Source for Key Employees Will Decrease from 32% to 25%, and Returning Finnish Citizens Will Also Become Eligible for the Key Employees’ Tax Card
Finland is taking a significant step in strengthening its competitiveness as an attractive working destination for international talents. According to the Government Proposal (HE 98/2025 vp), the tax rate for key employees arriving in Finland from abroad is intended to be lowered from the current 32% to 25%. At the same time, the model would be expanded to cover, under certain conditions, returning Finnish citizens who have not previously been eligible for the key employee tax card. The changes are intended to enter into force at the beginning of 2026, provided that the government proposal is adopted as such.
For returning Finnish citizens, the requirement is that the individual has had a limited tax liability in Finland for at least five years prior to starting work in Finland. The key employee tax card granted to Finnish citizens would be valid for 24 months, whereas foreign employees may receive the benefit for up to 84 months.
Under the current legislation, key employee taxation applies only to foreign citizens, provided that the statutory conditions are met. This has been considered problematic from the perspective of equality between Finnish citizens and citizens of other countries, making the proposed change a positive improvement. Based on the key employee tax card, a final 32% (or 25% in the future) source tax is levied on salary, and progressive taxation is not applied. This flat tax differs from Finland’s usual tax model. One of the key requirements, a minimum monthly salary of €5,800, will remain unchanged.
At present, the 32% source tax has not been advantageous for everyone, as in some cases progressive taxation has resulted in a lower tax burden even with monthly incomes of up to €10,000. If the source tax rate is lowered to 25%, the source tax model available through the key employee tax card will become more beneficial for nearly all individuals within its scope and will simultaneously improve Finland’s competitiveness in attracting top professionals.
Why are planned changes and the key employee tax card significant?
Taxation is often one of the key factors when an international professional considers a new country of employment. Finland’s progressive tax system has not always been the most competitive compared to other countries. Many countries with personal income tax burdens similar to Finland already have comparable systems that offer attractive flat-tax arrangements or other tax benefits for professionals relocating from abroad for a limited period. Such mechanisms are found, for example, in other Nordic countries.
The key employee tax card and the planned seven percentage point reduction in the source tax rate immediately increase an employee’s take-home pay and simplify, among other things, salary negotiations, as the overall tax burden becomes more predictable. Employers may also benefit from the lower taxation, particularly in situations where an employee seconded to Finland from a foreign group company and has a net salary arrangement. In such cases, the total compensation paid by the Finnish employer may decrease without reducing the employee’s net income.
Planning ahead is important
It is important to keep in mind that this is still a special provision, the application of which requires that strict criteria are met. Careful advance planning is therefore essential. Ideally, the requirements should be examined even before the recruitment process begins to avoid surprises and delays.
These changes should be taken into account when filling open positions, planning ongoing transfers, and identifying potential returnees. When the conditions are met and the 25% source tax can be applied, it may become a important competitive advantage for the employer.
The key employee tax model can provide significant benefits for both employer and employee and simultaneously strength Finland’s position as an attractive destination for international talents.
Would you like to assess your situation?
We are happy to help determine whether the requirements for key employee taxation are met in your or your organization’s case, and to identify any potential pitfalls. We can also review together how the 25% tax rate affects overall costs. In addition, we can assist with practical matters, such as applying for the key employee tax card.
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