Business in Finland
When establishing a business in Finland, the name, company form, municipality and the choice of the field of activity have to be determined. The number of founders, capital requirement, division of responsibility and decision-making, financing and taxation are factors that influence the choice of which legal entity to choose.
Legal entities in Finland: Private Entreprenuer(toiminimi), Limited company (osakeyhtiö), Partnership (avoin yhtiö), Limited partnership (kommandiittiyhtiö), Cooperative association (osuuskunta), Branch Office/PE (sivuliike-kiinteä toimipaikka).
The most popular legal entity is osakeyhtiö (OY)- Limited company. At least one shareholder is needed, minimum share capital is 2500 EUR and 1-5 regular members in the board of directors.
For limited companies, the corporate income tax is 20% and it is uniform for all types of corporate income, including sales profits, interest income, dividends, royalties and rental income.
The basic VAT rate in Finland is 24%. Reduced VAT rate is 14% for the supply of foodstuffs, animal feed and restaurant and catering services. 10% reduced rate is applied for example to the supply of books, pharmaceutical products, passenger transportation, accommodation, the subscriptions of newspapers and periodicals.
In Finland Taxation of an individual's income is progressive. In other words, the higher the income, the higher the tax rate. In 2019, the income tax rate (national tax) for an individual is between 0 % and 31.25 %. In addition to the national tax, individuals also pay a municipal tax of around 20 %.
Finnish labour and occupational safety legislation is applicable to all employees working for Finnish employers regardless of their nationality. In the case of 'posted workers', terms and conditions such as overtime, working hours, vacations, sick-leave and minimum wage are in accordance with the applicable collective agreement.
Finland has signed treaties with various countries that prevent double taxation. Those foreign nationals that work in Finland for more 183 days either over a period of 12 months or in the course of a calendar year are taxed in Finland.
BEING AN EXPAT
The citizens of the EU Member States, Nordic countries, Liechtenstein or Switzerland do not need a residence permit to stay in Finland. It is possible to reside and work freely in Finland for up to three months. If the stay is more than three months, the foreign national has to register with the Finnish Immigration Service. A valid identity card or passport is needed for the registration.
Foreign nationals coming to Finland from outside the EU for more than 90 days have to apply for a residence permit. Even if the stay is less than 90 days, the foreign national might need a resident permit for working purposes. The residence permit must be applied for personally.
Expats staying in Finland for longer than 6 months are resident taxpayers and are subject to unlimited tax liability. This means that their income is taxed progressively in the same way as that of people living in Finland permanently. The A1 certificate attests which country’s social security laws apply to the worker when working abroad. The A1 certificate also determines to which country the social insurance contributions are to be paid when working in Finland.
Helsinki is one of the fastest growing cities in Europe and one of the most attractive locations for foreign investment. It is also a growing and highly interesting consumer market with positive trends in economic development, population growth and purchasing power. According to the estimates of Statistics Finland, the population of Helsinki will increase to over 700,000 residents by 2030.
Helsinki is 470 years old and stands as the political, educational, financial, and cultural center of Finland. About three-quarters of the foreign companies that operate in Finland have their base in this region.