Corporate Finance

Starting a Business in Finland

By Sabrina Kaleva, Rantalainen Oy

Finland might be one of the best countries in the world to set up a company – with its clean environment and stable economic and political conditions the country sets the perfect surrounding for developing your business.

The latest Social Progress Index 2018 shows that Finland is a great country in many aspects, ranking as the fifth of 146 countries. The quality of education, the amount of the share that is put into research and development funding, and Finnish companies' competitiveness have all been ranked highly by the international observers.

The administrative environment is very business-friendly in Finland. The government has several programmes for helping new actors expand or set up a business. According to the organisation Transparency International, Finland is the second least corrupt country in the world.

International flights and a welldeveloped transportation infrastructure serve as effective connectors for global business. Advanced data communication technology, people casually utilising modern technology and applications in their daily life, and ubiquitous internet connections makes Finland one of the front row sites of the ongoing tide of digitalisation. In Finland, companies use Katso ID, which is an electronic right to sign and act on behalf of a company. The master user can manage subusers for the ID. With the Katso ID, a company can, for example, monitor the company tax account online.

Limited company or branch?

Most of the foreign companies starting their business in Finland establish a limited liability company or a branch in Finland.

The limited company is suitable for private businesses with a clear and stable shareholder structure. The company must have at least one shareholder and one to five regular members on the board of directors. At least one of the founders shall be a permanent resident in the European Economic Area (EEA) unless the National Board of Patents and Registration grants an exemption.

Steps for setting up a business in Finland:

  1. Select a name for your company, and register it to the Trade Register. The Trade Register is maintained by the Finnish Patent and Registration Offce (PRH). https://www.prh.fi/en/kaupparekisteri.html
  2. Open a bank account for your company.
  3. Establish and register your business with the Y1 form to the Trade Register and Tax Administration Register. https://www.ytj.fi/en/index/notifications/start-upnotifications/foreignbusiness.html

Minimum share capital when establishing a private limited company is EUR 2,500 until July 2019; afterwards, there is no minimum. This change was settled in the Finnish parliament in January 2019. A public limited company requires a minimum share capital of EUR 80,000. The share capital must be paid to the company’s bank account before the company can be entered in the Trade Register.

A branch is not a separate legal entity from its foreign parent company, therefore it may be managed by the same foreign managing directors. There is no minimum capital for establishing a branch in Finland, but it must operate in the same field as the foreign parent company.

Organisations from outside the European Economic Area (EEA) wishing to establish a branch in Finland have to apply for a permit from the Trade Register (PRH). Employment contracts with employees working in Finland might be subject to mandatory provisions of Finnish Labour Law.

Taxes and general information

Taxes depend on the following characteristics of the business:

  • Type and purpose of the business
  • Scale of the business
  • Legal Form: Subsidiary or Branch
  • Presence: Permanent or Temporary
  • Rules for permanent presence in income taxation www.vero.fi/en-US/Companies_ and_organisations/Foreign_business_in_Finland/Permanent_establishments_ in_income_taxat(21534)
  • Rules for permanent presence in VAT taxation www.vero.fi/en-US/Companies_ and_organisations/Foreign_business_in_Finland/Permanent_establishment_ for_purposes_of_(30191)

The corporate income tax rate is 20%, and VAT tax rates are 24%, 14% and 10%.

The only mandatory organ in the company is the Board of Directors. The board is appointed by the General Meeting, and the decisions made in the meeting must be documented and sent to shareholders.

All companies are obliged to keep books. The management of an enterprise is responsible for arranging the accounting, and the duty starts when founding the company. The monthly responsibilities include tax-related declarations (among others VAT), and the annual obligation is a financial statement including balance sheet, income statement, and balance book. Auditing is mandatory if two of the following were met in both the past completed financial year and the financial year immediately preceding it: the balance sheet total exceeds EUR 100,000, the net sales exceed EUR 200,000, or the average number of employees exceeds three.

Please contact the author, Sabrina Kavela, if you have any questions about starting a business in Finland. She would be happy to help.


Sabrina Kaleva

Sabrina Kaleva

Rantalainen Oy, More than 40 offces throughout Southern Finland
T: +358 10 324 3100
E: This email address is being protected from spambots. You need JavaScript enabled to view it.; W: www.rantalainen.fi/en/
 


Published: March 2019 l Photo: Elina - stock.adobe.com

 

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