Foreign companies can do business in Finland in several ways. A company may establish a Finnish limited liability company or branch, but setting up a separate company in Finland is not always necessary. Depending on the nature of the business, a foreign company may also operate in Finland directly through its existing foreign entity.
If you are starting a business in Finland as an existing foreign company, one of the first decisions is therefore how your Finnish operations should be structured. The right approach depends on what the company will do in Finland, how permanent its activities will be, whether it will have employees or premises in Finland and what types of goods or services it will sell.
These choices can affect company registration, corporate income tax, VAT, employer obligations, accounting, payroll and statutory reporting in Finland.
For this reason, entering the Finnish market should be considered as a whole. Whether you are planning company establishment in Finland, opening a branch, hiring your first Finnish employee or simply starting to sell to Finnish customers, it is important to identify the local requirements before operations begin.
This guide explains the key issues foreign companies should consider when planning to do business in Finland.
Can a foreign company do business in Finland without setting up a Finnish company?
Yes. A foreign company does not always need to establish a Finnish subsidiary or another separate legal entity in order to conduct business in Finland.
Depending on its activities, a foreign company may operate in Finland through:
- its existing foreign company
- a Finnish limited liability company
- a Finnish branch of the foreign company
- a project or other temporary business activity carried out in Finland.
The appropriate structure depends on factors such as the scale and expected duration of the business, customers, employees working in Finland, premises available to the company and its long-term plans for the Finnish market.
Establishing a company in Finland may be appropriate when the foreign company intends to build a permanent presence, employ local personnel or create a clearly separate Finnish business operation. A Finnish limited liability company is a separate legal entity, whereas a branch is part of the foreign company.
For more limited or temporary activities, operating directly through the existing foreign entity may be possible.
However, doing business without a Finnish subsidiary does not necessarily mean operating without Finnish registrations, tax obligations or reporting requirements. These must be assessed separately based on the company’s actual activities.
The Finnish Tax Administration provides official guidance for foreign companies starting business operations in Finland. Companies considering a branch can also consult the Finnish Patent and Registration Office’s guidance on setting up a branch in Finland.
How can a foreign company establish a company in Finland?
For foreign businesses planning a long-term presence in the Finnish market, company establishment in Finland is often one of the alternatives to consider.
A common option is to establish a Finnish limited liability company. Another possibility is to register a branch of the existing foreign company. The right structure depends on the company’s business objectives, planned activities and wider corporate structure.
When deciding whether to open a company in Finland, it is important to consider more than the company registration itself. The chosen structure can affect areas such as:
- taxation
- accounting and financial statements
- VAT
- payroll and employer obligations
- statutory reporting
- administration of the Finnish operations.
A foreign company should therefore choose its Finnish structure based on how the business will actually operate rather than treating company registration as a separate administrative procedure.
In some cases, establishing a Finnish company will be the most practical solution. In others, the foreign company may be able to achieve its business objectives without creating a separate Finnish legal entity.
When does a foreign company need to register in Finland?
The registrations required from a foreign company depend on the activities it carries out in Finland. The fact that a company has not established a Finnish subsidiary does not automatically mean that no Finnish registrations are required.
Depending on the circumstances, a foreign company may need to be entered in registers such as:
- the Finnish Trade Register
- the Prepayment Register
- the VAT Register
- the Employer Register.
These registrations serve different purposes and their requirements must be assessed separately.
A foreign company may, for example, have VAT registration obligations in Finland even if it does not have a permanent establishment in Finland for corporate income tax purposes.
In some situations, a foreign company will also need a Finnish Business ID (Y-tunnus). Receiving a Business ID does not in itself mean that a Finnish subsidiary has been established, nor does the Business ID alone determine whether the company is liable for corporate income tax in Finland.
The required registrations should therefore be identified before the company starts its sales, project, employment or other business activities in Finland.
What tax and VAT obligations can a foreign company have in Finland?
A foreign company doing business in Finland may have both corporate income tax and value-added tax obligations. These need to be considered separately because different rules and concepts apply.
For corporate income tax purposes, one of the key questions is whether the company’s activities create a permanent establishment in Finland. If a permanent establishment is created, Finland may have the right to tax the business income attributable to it.
For VAT purposes, relevant factors include the type of goods or services sold, where the sale is considered to take place and which party is responsible for accounting for VAT.
A foreign company can therefore have VAT registration or reporting obligations in Finland even if it does not have a Finnish subsidiary or a permanent establishment for corporate income tax purposes. VAT rules also use a separate concept known as a fixed establishment.
The company’s home country’s tax treaty with Finland may also affect the taxation of its Finnish activities, particularly when determining whether Finland has the right to tax the company’s business income.
The Finnish Tax Administration provides more detailed information on VAT obligations for foreign businesses in Finland.
Tax and VAT implications should ideally be assessed before business operations begin and before the first invoices are issued.
When does a foreign company have a permanent establishment in Finland?
A permanent establishment in Finland is one of the most important tax issues for a foreign company entering the Finnish market.
In general terms, a permanent establishment can arise when a foreign company has a sufficiently permanent place of business or, in certain circumstances, another arrangement through which it conducts business in Finland.
Factors that may contribute to the creation of a permanent establishment include:
- a fixed place of business available to the company
- the nature and permanence of the company’s activities in Finland
- the duration of a construction or installation project
- the activities and authority of people acting for the company in Finland.
Under certain circumstances, even an employee’s home office may need to be considered when assessing whether a permanent establishment exists.
A permanent establishment is not automatically created simply because a foreign company has Finnish customers or because an employee visits or works in Finland.
The assessment is based on the company’s actual activities. An applicable tax treaty between Finland and the company’s country of residence may also affect whether a permanent establishment is considered to exist.
For construction and installation projects, for example, relevant time limits can differ between tax treaties. There is therefore no single project duration that determines the existence of a permanent establishment in every situation.
The Finnish Tax Administration explains these rules in more detail in its guidance on income taxation and permanent establishments of foreign companies in Finland.
Companies should assess this issue particularly carefully when their activities in Finland become longer-term or involve employees, premises or substantial projects.
Can a foreign company hire employees in Finland?
Yes. A foreign company can hire employees in Finland or send its existing employees to work in Finland without necessarily establishing a Finnish subsidiary.
However, having employees working in Finland can create local employer, payroll, tax, social security and reporting obligations.
A foreign company employing people in Finland will typically need to determine:
- where the employee’s salary is taxed
- whether the company has employer obligations in Finland
- what payroll information must be reported
- which country’s social security system applies
- where social insurance contributions must be paid
- whether the employee needs a residence permit, registration or other right to work in Finland.
The applicable obligations depend on factors such as the employee’s country of origin, the duration of the work in Finland, the identity of the employer and the foreign company’s status in Finland.
Even relatively short periods of work in Finland can create reporting obligations. Taxation, social security, payroll administration and required registrations should therefore be reviewed before the employee starts working in Finland.
The Finnish Tax Administration provides specific guidance on the obligations of foreign employers in Finland.
How should accounting and financial administration be organised in Finland?
Starting business operations in Finland can create local accounting, reporting and filing obligations for a foreign company. The extent of these obligations depends on the company’s structure and the nature of its Finnish activities.
If a foreign company establishes a Finnish limited liability company, the Finnish entity’s accounting and financial statements must be organised in accordance with Finnish requirements. For other forms of operation, the company’s local accounting and reporting obligations need to be assessed separately.
Financial administration in Finland may include:
- bookkeeping
- accounts payable and accounts receivable
- VAT calculations and returns
- payroll and payroll administration
- employer reporting
- corporate income tax returns
- financial statements and statutory reporting
- management reporting.
For an international company, accounting in Finland is often also part of a wider group reporting process. Local accounting requirements, group reporting standards and the company’s financial systems should therefore be coordinated from the beginning.
Well-organised financial administration helps a foreign company meet its Finnish obligations on time while also providing management with reliable information about the financial performance of its Finnish operations.
How is a foreign company taxed in Finland?
The taxation of a foreign company’s Finnish business activities depends on its structure, the nature of the activities and the company’s tax presence in Finland.
If a foreign company establishes a Finnish subsidiary, the Finnish company is generally subject to Finnish corporate income tax on its own taxable income.
If the foreign company operates directly in Finland, the existence of a permanent establishment can become a key issue. When a permanent establishment exists, Finland may have the right to tax the business income attributable to that permanent establishment.
This also requires determining which income and expenses should be attributed to the Finnish permanent establishment.
In international situations, Finnish domestic tax legislation must be considered together with any applicable tax treaty between Finland and the company’s country of residence.
Other international tax matters may also become relevant, including transactions between group companies, transfer pricing and withholding taxes. Their significance depends on the company’s structure and activities in Finland.
Tax implications should therefore be assessed when planning how the company will enter the Finnish market. This allows the company to understand its Finnish obligations before operations begin and choose a structure that supports its actual business needs.
What ongoing reporting and compliance obligations apply in Finland?
Establishing a company in Finland or completing the initial registrations is only the beginning. Companies operating in Finland must continue to meet the reporting, filing and payment requirements applicable to their activities.
Depending on the company’s structure and operations, these may include:
- VAT returns
- employer reports and payments
- payroll reporting to the Incomes Register
- corporate income tax returns
- advance tax payments
- financial statements and related filings
- other statutory notifications relevant to the company’s activities.
Not every obligation applies to every foreign company, and reporting periods and deadlines can vary.
Changes in the company’s Finnish operations may also create new obligations. Hiring the first employee, starting a new type of sale, obtaining premises or extending the duration of a Finnish project may change the company’s registration or tax position.
Foreign companies should therefore review their Finnish obligations throughout the lifecycle of their operations rather than only when entering the market.
Checklist: what should a foreign company consider before starting a business in Finland?
Whether the company is establishing a Finnish subsidiary, opening a branch or starting business operations through an existing foreign company, the Finnish expansion should be considered as a whole.
Before entering the market, a foreign company should answer at least the following questions:
1. What will the company do in Finland?
Is the company planning a single project, selling products or services to Finnish customers or establishing a long-term presence in Finland?
2. Should the company establish a company or branch in Finland?
A Finnish company is not always required. The legal, administrative, operational and tax implications of the available structures should be assessed before making the decision.
3. Which Finnish registrations are required?
Determine whether the company needs to register with the Trade Register, Prepayment Register, VAT Register or Employer Register and whether a Finnish Business ID is required.
4. Could the activities create a permanent establishment in Finland?
Consider whether the company’s premises, employees, projects or other activities could create a permanent establishment for corporate income tax purposes.
5. What corporate income tax and VAT obligations will arise?
Corporate income tax and VAT should be assessed separately. Where relevant, the tax treaty between Finland and the company’s country of residence should also be considered.
6. Will the company have employees working in Finland?
Review employee taxation, social security, right-to-work requirements and the company’s payroll and employer reporting obligations.
7. How will accounting and payroll in Finland be organised?
Define who will be responsible for Finnish bookkeeping, payroll, tax filings, statutory reporting and any reporting required by the foreign parent company or group.
8. Who will manage ongoing Finnish compliance?
Responsibility should be clearly assigned for ensuring that Finnish filings and payments are completed correctly and on time after operations have started.
Reviewing these issues before starting a business in Finland makes it easier to choose an appropriate structure and reduces the risk of discovering registration, tax or reporting obligations only after the company has already begun operating.
How Leinonen Finland supports foreign companies starting a business in Finland
Foreign companies entering Finland do not need to build all local accounting, payroll and compliance processes in-house. A local partner can help determine which requirements apply to the company’s specific activities and organise them efficiently from the beginning.
Leinonen Finland supports international companies starting a business in Finland, establishing a Finnish company or branch, and foreign companies that already have business operations in Finland.
Our services include company registration and establishment in Finland, accounting and financial administration, payroll and payroll administration and corporate taxation services. We also assist foreign companies with statutory filings and other Finnish compliance obligations and can provide management reporting for their Finnish operations.
As part of the international Leinonen Group, Leinonen Finland has experience supporting foreign companies whose international processes and group reporting requirements need to be combined with local Finnish accounting, tax, payroll and regulatory requirements.
Learn more about Leinonen Finland’s services for companies operating in Finland.
Frequently asked questions about doing business in Finland
Does a foreign company need to establish a company in Finland?
Not always. A foreign company may in certain circumstances conduct business in Finland directly through its existing foreign entity. Whether establishing a Finnish company or branch is appropriate depends on the nature, scale and duration of the activities and the company’s objectives in Finland.
How can a foreign company start a business in Finland?
A foreign company can start business operations in Finland by establishing a Finnish company or branch or, depending on its activities, by operating directly through its existing foreign entity. The required registrations, tax obligations and administrative requirements depend on the chosen structure and the activities carried out in Finland.
Can a foreign company invoice Finnish customers without a Finnish company?
Yes, this may be possible. Selling to Finnish customers does not in itself require establishing a Finnish subsidiary. However, sales can create VAT, registration, tax or other obligations in Finland.
Does a foreign company need a Finnish Business ID?
It depends on the company’s activities and required registrations. A foreign company may receive a Finnish Business ID without establishing a Finnish subsidiary. Having a Business ID does not by itself determine the company’s corporate income tax liability in Finland.
When does a foreign company need to register for VAT in Finland?
The need for VAT registration depends on factors including what the company sells, where the sale takes place for VAT purposes and which party is responsible for accounting for VAT. VAT obligations must be assessed separately from corporate income tax and the existence of a permanent establishment for income tax purposes.
Can a foreign company hire an employee in Finland without establishing a Finnish company?
Yes. Establishing a Finnish subsidiary is not always required in order to employ someone in Finland. However, the foreign employer may have Finnish payroll, tax, social security and reporting obligations.
What is a permanent establishment in Finland?
A permanent establishment is a tax concept used to determine whether a foreign company’s business presence in Finland creates Finnish corporate income tax obligations for the business income attributable to that establishment. The assessment depends on the company’s actual activities and any applicable tax treaty.
What reports does a foreign company need to file in Finland?
The required filings depend on the company’s activities and registrations. They may include VAT returns, employer and payroll reports, corporate income tax returns and financial statement filings. Not all obligations apply to every foreign company.
