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Elop enjoyed preferential tax status in Finland

Former Nokia chief executive Stephen Elop belonged to an exclusive circle of so-called foreign key personnel, which entitled him to a fixed tax rate of 35 percent regardless of his income level. Just a handful of about 100 foreign corporate bigwigs enjoy the tax benefit.

Nokian entinen toimitusjohtaja Stephen Elop puhui yhtiön tiedotustilaisuudessa Espoossa 3. syyskuuta.
Ex-Nokia CEO Stephen Elop speaks with hands clasped at a press conference announcing Microsoft's buyout offer for the company's mobile phone business on September 3. Image: Sari Gustafsson / Lehtikuva

Stephen Elop has benefited the preferential tax treatment for the entire duration of his term as chief executive of Nokia, formerly one of the world’s leading mobile phone makers.

Finnish taxation regulations allow so-called foreign key persons to pay a fixed tax rate of 35 percent on their income, rather than the typical progressive tax rate, which rises as incomes rise.

Last year Elop’s basic pay came in at around one million euros. Based on his preferred status, he paid 350,000 euros in taxes to the Finnish state.

By contrast, recent tax records show that Matti Alahuhta, CEO of Finnish engineering company Kone, paid some 46 percent of his annual earnings to the tax authorities on the basis of Finland’s progressive taxation system.

If the same principle were applied to Elop’s earnings, his income would have landed him in the 50 percent tax bracket and he would have paid 500,000 euros in income taxes.

Elop’s key personnel status has also earned him a light touch in terms of the taxation applied to additional pay and bonuses which ran into millions of euros annually.

Fixed tax rate on foreigner salaries exceeding 5,800 euros

Foreign workers can benefit from the fixed tax rate as key personnel for a maximum of four years. -- Elop held the post of CEO for just three.

To qualify for the tax break, applicants should be non-Finns, should have lived abroad for a minimum of five years, and should have a minimum monthly salary of 5,800 euros.

Elop qualified on all points, and earned a salary of tens of thousands each month.

There is no public record of Elop’s tax payments since Finnish tax authorities don’t publicise the tax data of this special group of workers.

During his three-year tenure at the top of Nokia, Stephen Elop earned about 9 million euros in salary and bonuses. If shareholders agree to sell Nokai’s mobile phone business to software giant Microsoft, he will pocket an additional 19 million euros. The deal will come up for a shareholder vote at an extraordinary general meeting scheduled for November 19.

A "temporary" measure

The key personnel tax regulation was introduced as a temporary measure in the 1990s to attract top-of-the-line foreign talent to Finland, but has not been rescinded by any government.

The Finnish Tax Authority Verohallinto said that it receives around 100 applications annually for the tax status, and that almost all are approved. Typical applicants are foreign experts who hire tax consultants to help them with their taxation planning.

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