Vero confirms 25% tax on options exercised under the key-person scheme

Employees covered by Finland’s key-person tax scheme are taxed at 25% on the Finnish-taxable portion of an employment-option benefit when they exercise the option while the scheme applies to them, Vero’s revised international-equity guidance confirms. The statutory rate applies to salary paid on or after 1 January 2026.Finlex

The timing of exercise is decisive. If the key-person scheme applied during the benefit’s earning period but has ended before the employee exercises the option or receives the benefit, Vero says the special source-tax treatment does not apply to any part of that benefit. For cross-border awards, the Finnish-taxable portion is determined using the earning-period rules and any applicable treaty restrictions.

The special tax also replaces the insured person’s health-insurance contribution under section 1 of the key-person law. That treatment must be distinguished from the ordinary rules discussed elsewhere in the guidance for option holders insured in Finland. The key-person law separately preserves liability for other social-insurance payments where the relevant legislation requires them.

For non-resident recipients with limited tax liability in Finland, Vero’s sections 6.4–6.5 also clarify the procedure when source tax has not been collected from a benefit at payment. The recipient must seek assessment, either using the source-tax assessment form or by declaring the income on the tax return.Vero They must report the full benefitVero and provide an explanation if only part is taxable in FinlandVero. The guidance identifies a move to another employer or the absence of cash salary as situations in which collection may be impossible. Where non-collection results from the payer’s negligence or error, Vero says the tax is assessed on the payer.

Outside the key-person scheme, the revised health-insurance chapter distinguishes insurance coverage when the option is exercised from the basis on which a contribution is calculated. Its example 19 concerns an employee resident and insured in Finland at exercise whose benefit accrued during overseas work covered by the six-month tax exemption and for which insurance salary, vakuutuspalkka, had been established. Contributions are based on that insurance salary, without a separate increased medical-care contribution on the option benefit.Vero

Example 21 reaches a different result for an employee resident and insured in Finland at exercise who was resident but uninsured in Finland throughout the overseas earning period and had no insurance salary. Even though the option income meets the six-month exemption’s conditions, Vero says an increased medical-care contribution is charged on the option benefit. Tax exemption therefore does not by itself settle the contribution calculation.Vero

The legal basis is laki ulkomailta tulevan palkansaajan lähdeverosta (1551/1995), particularly sections 1, 3 and 10 and the application provision of amendment 1144/2025, together with sairausvakuutuslaki (1224/2004), Chapter 18, sections 5 and 17–18.