COUNTRY

Finland is located in northern Europe between Sweden and Russia and the country borders the Baltic Sea, the Gulf of Bothnia and the Gulf of Finland. With a land area of just over 300,000 sq km, the population is approximately 5.2m. The official languages are Finnish and Swedish, although the latter is spoken by only about 5% of the population. Finland has a highly industrialized, largely free-market economy with exports accounting for over one-third of GDP. Finland is historically competitive in manufacturing, principally the wood, metals, engineering, telecommunications, and electronics industries and the country excels in export of technology for mobile phones as well as promotion of start-ups in the ICT, gaming, cleantech, and biotechnology sectors. Finland had been one of the best performing economies within the EU in recent years and its banks and financial markets avoided the worst of global financial crisis. However, the world slowdown hit exports and domestic demand. Some parts of Finland are eligible for EU-financed incentives.

TAXATION

  • Headline tax rates: CIT 20%, PIT 6.5%-31.75%, VAT 24%
  • Treaty Jurisdictions: Argentina, Armenia, Australia, Austria, Azerbaijan, Barbados, Belarus, Belgium, Bosnia and Herzegovina, Brazil, Bulgaria, Canada, China, Croatia, Cyprus, Czech Republic, Denmark, Egypt, Estonia, Faroe Islands, France, Georgia, Germany, Greece, Hungary, Iceland, India, Indonesia, Ireland, Israel, Italy, Japan, Kazakhstan, Korea, Republic of, Kyrgyzstan, Latvia, Lithuania, Luxembourg, Macedonia, Malaysia, Malta, Mexico, Moldova, Montenegro, Morocco, Netherlands, New Zealand, Norway, Pakistan, Philippines, Poland, Portugal, Romania, Russia, Serbia, Singapore, Slovakia, Slovenia, South Africa, Spain, Sri Lanka, Sweden, Switzerland, Tajikistan, Tanzania, Thailand, Turkey, Ukraine, United Arab Emirates, United Kingdom, United States, Uruguay, Uzbekistan, Vietnam, Zambia
  • TIEA Jurisdictions: Andorra, Anguilla, Antigua and Barbuda, Aruba, Bahamas, Bahrain, Belize, Bermuda, Botswana, British Virgin Islands, Brunei, Cayman Islands, Cook Islands, Costa Rica, Curacao, Denmark, Dominica, Gibraltar, Grenada, Guatemala, Guernsey, Isle of Man, Jamaica, Jersey, Liberia, Liechtenstein, Macau, Marshall Islands, Mauritius, Monaco, Montserrat, Niue, Norway, Panama, Qatar, Saint Kitts and Nevis, Saint Lucia, Saint Vincent and the Grenadines, Samoa, San Marino, Seychelles, Turks and Caicos Islands, Vanuatu

Corporate Tax: Finnish LLCs must pay tax in Finland on their income from both Finnish and foreign sources. Limited liability companies pay a flat 20 % in tax on their profits.

Value-Added Tax (VAT): The VAT must be paid for the sale of goods and services through business operations in Finland. Since 2016, LLC’s whose sales exceed 30,000 Euro during its fiscal year must pay the full VAT. However, if sales are between 10,000 and 30,000 Euro during the fiscal year, tax relief is available.

Excise Duty: Excise duties are indirect duties levied on the consumption or use of certain products including:

  • Alcoholic beverages and beverage containers
  • Sweets, ice cream and soft drinks
  • Electricity and fuels
  • Tobacco
  • Waste

The excise duty is collected on all imported and manufactured Finnish products. The Duty is paid by the commercial importer or manufacturer of the products, or any other operator who possesses untaxed products.

BUSINESS

  • Suitable for: Wealth Management, Banking, Fund Management, Shipping
  • Company Types: Limited liability companies, public limited companies, sole proprietorships, general partnerships and limited partnerships
  • Formation Cost: 4500 – 5900 USD
  • Formation Time: 10 – 14 days
  • Maintenance cost: 2700 – 3500 USD

INCORPORATION

The process of incorporation is relatively straightforward in Finland, as the Finnish legislation on incorporation encourages foreign investors to do so with ease. The procedures are similar to most countries in the EU. The laws pertaining to incorporation in Finland is regulated by the Limited Liability Companies Act.

Limited Liability Company

The Limited Liability Company (LLC) in Finland may be private (osakeyhtiö-Oy) or public (julkinen osakeyhtiö-Oyj), where private LLCs may not trade their shares on the stock exchange, whereas the public companies have the ability to do so. This is the most common form of incorporation for foreign firms entering Finland.

Capital Requirements

Private Limited Liability Company: €2,500

Public Limited Liability Company: €80,000

Management Structure

In private LLCs, the management is assured by at least one manager. Major decisions for the firm’s future are made during the general meeting of the shareholders.

In public LLCs, the management must be assured by a management board that is composed of more than 3 members, where more than half must be EEA residents. A managing director is required if the invested capital exceeds €80,000.

Process of Registration

  • A bank account must be opened with proof that the minimum share capital was deposited into the banking institution.
  • The following documents must be submitted to the banking institution to obtain a certificate of verification or receipt that the capital has been deposited:
    • Foundation deeds
    • Memorandum of association
    • Description of the company’s business
    • Description of the company’s banking activity
    • Information of the shareholders and directors
    • Notarized copies of passports for bank account users
  • An application known as the Start-up Notification of a LLC is lodged to the National Board of Patents and Registration and the Tax Administration, which streamlines the business registration process. This must be done three months from the signing of the memorandum of association.
  • The following documents must be accompanied with the application:
  • All relevant documents are submitted to the Finnish Trade Register along with the proposed business name to check violations of existing names or trademarks.
  • The company then registers for pension insurance, accident insurance and medical insurance at any pension provider.

Documentation Required

  • Notarized copies of passports for authorized bank account holders
  • Foundation deeds
  • Memorandum of association
  • Description of the company’s business
  • Description of the company’s banking activity
  • Information of the shareholders and directors
  • Declaration of incorporation under the Finnish Limited Liability Companies Act
  • Certificate from auditors confirming the shares under the LLC Act.

Costs

  • Fee for Start-up Notification: €380
  • Average total fees: €11,855

Time: Minimum 14 days up to 10 weeks

Limited Partnership

The limited partnership is formed by an agreement between two partners. The extent of liability for the partners depends on the type of partnership it is: general or limited. Although partnerships are fairly common in Finland, they are not used as often as a method of incorporation for establishing a business in Finland from overseas.

The limited partnership arrangement in Finland may be registered by two or more individuals or legal entities, and may be either a General Partnership or Limited Partnership. In a General Partnership (avoin yhtiö-Ay), at least two members, or general partners, are involved in the establishment and incorporation of the business, with all members equally responsible for debts, liabilities and profits. In the Limited Partnership (kommandiittiyhtiö,-Ky), one partner assumes the role of general partner who executes all decisions and may claim all profits, while the limited partner remains ‘silent’, has no decisional power or claim on profits, but is entitled to a return for their investment. The limited partner is only liable to the extent of their contribution to the business.

Capital Requirements

There are no capital requirements in a partnership arrangement.

Management Structure

There are no formal requirements for management. However, the general partner has the power to intervene in the company’s management and exert authority over managers, while limited partners may not do so.

Process of Registration

  • A bank account must be opened
  • The following documents must be submitted to the banking institution to obtain a certificate of verification or receipt that the capital has been deposited:
    • Foundation deeds
    • Memorandum of association
    • Description of the company’s business
    • Description of the company’s banking activity
    • Notarized copies of passports for bank account users
  • An application known as the Start-up Notification of a LLC is lodged to the National Board of Patents and Registration and the Tax Administration, which streamlines the business registration process. This must be done three months from the signing of the memorandum of association.
  • The following documents must be accompanied with the application:
  • All relevant documents are submitted to the Finnish Trade Register along with the proposed business name to check violations of existing names or trademarks.
  • The company then registers for pension insurance, accident insurance and medical insurance at any pension provider.

Documentation Required

  • Notarized copies of passports for authorized bank account holders
  • Foundation deeds
  • Memorandum of association
  • Description of the company’s business
  • Description of the company’s banking activity
  • Information of the shareholders and directors
  • Declaration of incorporation under the Finnish Limited Liability Companies Act
  • Certificate from auditors confirming the shares under the LLC Act.

Costs

  • Fee for Start-up Notification: €380
  • Average total fees: €11,855

Time: Minimum 14 days up to 10 weeks

Branch

A branch office (sivuliike) may be established by the foreign business that operates under the company name while carrying out regular business activities. Foreign companies may find this option attractive as it provides greater exercise of control over business operations, while business functions like accounting, HR and tax do not become burdensome.

A branch office may engage in any function that the parent company engages in as stipulated in the corporate rules, as long as the activities of the branch are permitted by Finnish law and regulations. The wide range of activities available to branches makes it an advantageous method of establishing a business presence in Finland.

Branch offices must be registered with the Finnish Trade Register under the Trade Register Act, which details provisions on the compulsory registration and disclosure of annual accounts of the foreign company.

Companies from the EEA may establish branch offices by simply submitting a notification to the Finnish Trade Register. Countries from other regions must apply through the National Board of Patents and Registration as well.

A Finnish resident must be appointed as the domestic representative of the branch with authority to act on the company’s behalf. A board of directors is not required, although the foreign company is still liable for all debts and obligations of the branch, nots imply the invested capital.