In this article, Leinonen Finland will introduce the seven main legal entities you can opt for, covering everything from formation and governance requirements to compliance and tax considerations.

Legal Entities in Finland

There are Seven Main Business Entities in Finland:

1. Private Limited Company (Osakeyhtiö – Oy)
2. Public Limited Company (Julkinen osakeyhtiö – Oyj)
3. Branch of a Foreign Company
4. Sole Trader (Toiminimi)
5. Limited Partnership (Kommandiittiyhtiö – Ky)
6. General Partnership (Avoin yhtiö – Ay)
7. Cooperatives and Foundations

What is the Most Popular Business Entity in Finland?

Oy is the most popular legal entity in Finland. Offering benefits like limited liability, it is a flexible option suitable for small and large businesses alike. Oy is often a great choice for those looking to attract investors and scale a business.

When Might Branch or Sole Proprietorship be Favoured?

Branches are often favoured by foreign companies that want a local presence without forming a separate legal entity, and sole traders can be simpler for small scale, individual businesses and entrepreneurs.

Formation Requirements

What are the key Steps Involved in Forming a Legal Entity in Finland?

• Oy and Oyj must register with the Trade Register; the company only exists after this. Registration requires articles of association and founding documents to be provided. For Oyj, payment of share capital is also required.
• Branches must also register with the Trade Register, providing documentation from the home country and appointing a local representative.
• Registration is not a requirement for sole traders; the business starts upon notification.
• A Ky or Ay is formed by an oral or written partnership agreement. Registration is not constitutive, but is required for public record.

How Long Does it Take?

Typically, registering a business entity in Finland takes three to four weeks.

How Much Does it Cost?

This depends on the type of legal entity and whether expedited processing is used. For example, statutory fees to register an Oy typically range from €270 to €380. If specialists are used, the total expense can be around €1,500 to €2,000.

Capital and Ownership

Do any Legal Entities in Finland Require a Minimum Share Capital?

To form an Oyj, a minimum share capital of €80,000 is needed. None of the other main business entities in Finland have minimum share capital requirements.

Do any Business Entities in Finland Have Restrictions on Foreign Ownership or Directors?

At least one Oy board member must be a European Economic Area (EEA) resident. If not, an additional fee must be paid to apply for a permit from the Business Register (PRH). There are no broad restrictions on foreign ownership for any of the main legal entities in Finland.

How Many Shareholders or Partners are Required for Each Business Entity?

Taxation

Corporate Income tax

All companies are subject to 20% corporate income tax on profits. For sole traders and partnerships, income is subject to personal taxation.

VAT Registration

If turnover exceeds the €20,000 threshold, Value Added Tax (VAT) registration is required. The general rate of VAT in Finland is 25.5%.

VAT in the Digital Age (ViDA)

ViDA came into force in March 2025, and will be gradually rolled out until January 2035. This new package will have an effect on practices surrounding VAT in Finland – find out more in this article by the European Commission.

Profit Distribution Taxation

Dividends Received by Individuals

When a dividend is received from a listed company, 85% of the dividend is taxable capital income, and 15% is tax exempt. Capital income tax rates are 30%, or 34% for the portion exceeding €30,000 annually.

Taxation of dividends from unlisted companies depends on the amount relative to the company’s net assets. For dividends up to 8% of net assets and up to €150,000, 25% is taxable as capital income and 75% is tax exempt. Exceeding €150,000, 85% is taxable as earned income, and 15% is tax exempt. For dividends over 8% of net assets, 75% is taxable as earned income, and 25% is tax exempt.

Dividends Received by Entities

Dividends received from domestic companies are generally tax exempt, with exceptions including when the payer is an unlisted company but the recipient is a listed company. In this case, the dividend is fully taxable.

Are Dividend Payers Taxed?

Companies do not generally pay tax on distributed dividends, but must withhold tax on the dividend and report distributed dividends to the tax authority. Dividends received from abroad are generally taxed similarly to domestic dividends, but any withholding tax may be credited against Finnish taxes.

Accounting and Reporting

Accounting Standards

The Finish Accounting Act and Finnish Accounting Standards (FAS) apply. Public listed companies must also keep accounts in line with International Financial Reporting Standards (IFRS).

Statutory Audit Requirements

A legal entity in Finland must appoint an auditor and conduct an audit unless otherwise stipulated by law. An auditor may only be omitted if in both the most recent and the previous financial year, no more than one of the following conditions were met:

• The balance sheet total exceeds €100,000
• The turnover or corresponding revenue exceeds €200,000
• The average number of employees exceeds three

Deadlines and Procedures

Typically, annual financial statements and tax returns must be filed no more than four months after the end of the financial year.

Legal and Operational Aspects

Permitted Business Activities

All legal entities in Finland can engage in most business activities, unless restricted by law or articles of association.

Employment

Branches and sole traders can employ staff in Finland.

Liability of Business Entities in Finland

• In an Oy or Oyj, liability is limited to company assets
• Ay partners have unlimited liability
• Ky general partners have unlimited liability, but the liability of limited partners is restricted to their investment
• Sole traders have unlimited personal liability

Compliance and Governance

All legal entities in Finland have a number of ongoing compliance and governance requirements. We will focus on two of the most common entities, Oy and Oyj, but full guidelines for other entities can be found by consulting with a Finnish accounting and tax expert.

Governance Requirements

What Conditions do Board Members Need to Meet?

For both Oy and Oyj, board members must be of legal age and not bankrupt. They must not have restricted legal capacity. At least one board member (and one deputy member for Oy) must reside within the EEA, unless an exemption is given by the Finnish Patent and Registration Office.

As per the Equality Act, companies majority owned by the state or municipalities and bodies exercising public authority must have at least 40% representation of both men and women (unless specific reasons justify otherwise).

For Oyj, board members must also possess sufficient expertise and experience in the company’s industry and risks. Diversity of the board’s composition and gender balance must also be promoted, with written policies on these matters in place.

Ongoing Obligations for Oy and Oyj: Summary Table

Choose the Right Legal Entity With Leinonen Finland

Leinonen Finland has specialised in supporting cross-border businesses in Europe for more than 34 years. With unparalleled local knowledge, our Finnish accounting, tax, and payroll experts can offer tailored advice for foreign-owned businesses in Finland.

Choosing the right legal entity for your foreign-owned business in Finland is crucial. Consult with Leinonen Finland for the expert guidance your company deserves.

The post Choosing a Legal Entity in Finland as a Foreign-owned Business appeared first on Leinonen Finland.

In this article, we will explore the key aspects of payroll in Finland, including employee costs, minimum salaries, employee benefits, overtime work, and work on public holidays.

Employee Costs in Finland

In Finland, payroll calculation involves determining the net salary of an employee based on Finnish legislation and Collective Bargain Agreements (CBAs). Payroll accountants are responsible for this.

The process includes the following:

• Calculating and reporting income
• Handling tax contributions
• Communicating with authorities like KELA (the Social Insurance Institution of Finland), trade unions, and insurance providers

In Finland, employees are subject to:

• Personal income tax on qualifying gross income (12.64% – 44.25% based on salary)
• Pension insurance contributions (7.15% or 8.65% based on age)
• Unemployment insurance contributions (0.59%)

There may also be voluntary trade union contributions and compulsory distraint payments. Foreign employees have specific tax and social insurance regulations based on their home country and the nature of their stay in Finland.

Minimum Salary in Finland

Finland does not have a legally mandated minimum salary. Instead, minimum wage levels are determined by the applicable CBA or left to the employer’s discretion. By law, pay must be deemed normal and reasonable based on industry standards, and normal wages must be paid during probationary periods.

Overtime Regulations in Finland

Overtime work in Finland is defined as work performed in addition to regular working hours. Normal working hours are up to eight hours per day and up to 40 hours per week. When these limits are exceeded, the extra hours qualify as overtime. Overtime compensation in Finland is typically 50% or 100% of the employee’s hourly wage, and employers must pay it as additional compensation or provide equivalent paid time off.

Work on Public Holidays in Finland

Public holidays in Finland are considered paid time off. Working on a Sunday or public holiday entitles employees to a 100% hourly wage, and CBAs may specify additional payments for work on certain holidays and eves, such as Midsummer, Christmas, and New Year’s Eve.

Employee Benefits and Taxation

Finnish employees receive various fringe benefits. They can include things like company paid phones or cars, or housing benefits. These benefits are considered taxable (fictional) income, and employers are responsible for paying taxes, including withholding tax and social contributions based on the benefit’s value. Employers in Finland can also offer some tax-free benefits to employees.

Tax-free benefits in Finland may include:

• Bicycle benefit up to EUR 1,200 per year
• Public transport tickets for commuting up to EUR 3,400 per year (including bicycle benefit amount, if applicable)
• Up to EUR 400 per year for cultural or sporting activities (usually offered in the form of a voucher with which employees can buy a service of their choice)

Mandatory State Social Security Contributions

In addition to employee contributions, employers in Finland are required to make various contributions.

These include:

• Social security contribution (1.87%)
• Accident and group life insurance (amount varies based on salary, job risk, and CBA)
• Pension insurance (average contribution of 17.38%)
• Unemployment insurance (0.2% or 0.8%, depending on total wage)

All of the above contributions are calculated based on the employee’s gross salary, and contribution rates change frequently! Consult with a professional on tax and payroll in Finland to find out the latest rates.

Leinonen Finland: Supporting Foreign-owned Businesses With Payroll, tax, and Accounting

The Finnish payroll system is highly regulated, with various components that must be adhered to by both employers and employees. Adherence to the complex CBAs and Finnish holiday regulations is crucial to ensure accurate and compliant payroll processing.

Foreign-owned businesses in Finland must have a strong understanding of the intricacies of payroll in Finland. This understanding will allow them to maintain legal compliance and support the wellbeing of their employees.

Operating in 11 locations across Northern, Central, and Eastern Europe, Leinonen specialises in supporting cross-border businesses. Leinonen Finland’s local team are experts in accounting, tax, and payroll in Finland, and are ready to help your foreign-owned business thrive.

To find out more on managing payroll as a foreign-owned business in Finland, read this article. Alternatively, contact Leinonen Finland to arrange a consultation and get the personalised support and guidance your business deserves.

The post Payroll in Finland: Taxes, Regulations, and Important Considerations appeared first on Leinonen Finland.

In this article, Leinonen Finland will introduce you to the basics you need to know for success as a foreign-owned business in Finland.

Why set up Your Business in Finland?

Innovation thrives in Finland, and strong innovative skills generate business results. New businesses are continuously emerging in the gaming, electronics, software, cleantech, and health industries.

Finland also boasts one of the most competitive and open economies in the world. Like many Nordic countries, it is a European Union (EU) member state, but Finland is the only one of them to have adopted the euro.

Finland benefits from being one of the least corrupt countries in the world, too, and this is reflected in its business life. The judicial system is independent and impartial; in Finland, you can expect your case to be processed fairly and in accordance with the law. Companies appreciate Finland’s stable and transparent environment.

Company Establishment in Finland

When establishing a business in Finland, there are a few things that must be determined. The basics are the company’s name, field of activity, and company form (legal entity).

What Legal Entities can be Formed in Finland?

• Private entrepreneur (toiminimi)
• Limited company (osakeyhtiö)
• Partnership (avoin yhtiö)
• Limited partnership (kommandiittiyhtiö)
• Cooperative association (osuuskunta)
• Branch office/PE (sivuliike-kiinteä toimipaikka)

The following factors should be taken into account when choosing a legal entity:

• Number of founders
• Capital requirement
• Division of responsibility and decision making
• Financing and taxation

If you are unsure on which legal entity is the best fit for your foreign-owned business in Finland, consult with a Finnish tax expert for advice.

What is the Most Popular Legal Entity in Finland?

Limited company is the most popular legal entity in Finland. For this, at least one shareholder is needed, and the company must have one to five regular members in the board of directors. To set up a private limited liability company, no share capital is required. This makes it an accessible and attractive option for many local and foreign-owned businesses in Finland.

Tax in Finland

Corporate Income tax

For limited companies, the corporate income tax in Finland is 20%. This is uniform for all types of corporate income, including sales profits, interest income, dividends, royalties and rental income. Deductible expenses include any expenses linked to the generation of income (e.g., rents, salaries, and purchases for the business).

Personal Income tax

Personal income tax in Finland is progressive; the higher the income, the higher the tax rate (up to a maximum of 44.25% on qualifying gross income). Individuals must also contribute to pension insurance, health insurance, municipal tax, church tax, and unemployment insurance totalling 15.97% to 23.67%.

Note: Rates and regulations surrounding payroll, accounting and tax in Finland are constantly changing. Consult with an expert Finnish tax advisor to find out the latest changes affecting your business.

Accounting in Finland

Accounting Requirements

In Finland, only publicly traded companies are required to comply with IFRS standards. All other companies, partnerships, sole traders or professionals can adopt the local Finnish Accounting System. Provisions on accounting are laid down in the Accounting Act (1336/1997) and Accounting Decree (1339/1997).

Financial Information

The financial year in Finland is generally a calendar year (or another 12 month period). In the year of commencement, the financial year can be less or more than 12 months (up to a maximum of 18 months). Financial statements must be prepared within four months of the end of the financial year, and submitted to the Trade Register and tax authorities. The universal accounting principles of true and fair presentation and the material disclosure of information should be followed in all financial statements.

As per chapter three, section one of the Accounting Act (30.12.2015/1620), financial statements should contain the following:

• Balance sheet disclosing financial position at the balance sheet date
• Profit and loss account, disclosing how profit or loss has arisen
• Cash flow statement and its application, if the reporting entity is a large enterprise or a public interest entity
• Notes to the balance sheet, profit and loss account, and cash flow statement

The Finnish Accounting Act defines microbusinesses, small enterprises and large enterprises. Each have their own rules for financial statements. All operators other than sole traders and those offering a professional service must use the double entry method of accounting. If expenditure and revenue are recorded on cash basis, trade creditors and trade debtors must be identifiable at all times (30.12.2015/1620).

Financial statements must be kept for at least 10 years from the end of the financial period they correspond to, as per the Accounting Act. Other accounting materials such as invoices, vouchers, reconciliation reports, accounts receivable and human resource documents are to be retained for six years from the end of the financial year.

If you need support preparing financial statements, speak to a local expert on accounting in Finland.

Tax Liability

Some entity forms (e.g., limited liability companies), are independently liable to pay income tax. In Finland, the corporate income tax rate is 20%. Corporate entities must file their income tax returns electronically within four months of the end of the financial year. E-filing requires authentication with Finnish online banking codes or Katso identification, depending on the company type.

VAT in Finland

The general Value Added Tax (VAT) rate for goods and services in Finland is 25.5%. Reduced rates are applicable on certain goods and services.

14% VAT rate applies to goods and services including:

• Groceries
• Animal feed
• Restaurant services (not including supply or serving of alcoholic drinks, or supply of tobacco)
• Meal services
• Books
• Sanitary protection products and diapers
• Admittance to cultural, entertainment, or sports events

10% VAT rate applies to:

• Newspapers and magazines
• Public broadcasting

0% VAT rate applies to things like:

• Sales, rental, and chartering of vessels specified in the VAT Act (and work performed on them)
• Exports outside the EU
• Sales of goods within the EU to VAT-liable buyers

Are any Business Operations VAT Exempt?

Yes, some operations are exempt from VAT, including:

• Health and medical services
• Social services
• General education
• General postal services

Need Personalised Guidance? Find an Authorised Accounting Firm

The Association of Finnish Accounting Firms authorises accounting firms that comply with their guidelines for good practice, standards and tools. These firms are subject to regular inspections.

Of the 4000+ accounting firms offering accounting and payroll administration services in Finland, only around 800 have been authorised. One of them is Leinonen. For more details on products and services exempt from or subject to a lower rate of VAT, speak to a trusted Leinonen Finland accounting and tax professional.

Employment and Payroll in Finland

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 tax treaties with various countries to prevent double taxation. Foreign nationals that work in Finland for more than 183 days, either over a period of 12 months or in the course of a calendar year are taxed in Finland.

Collective Agreements

In Finland, employment legislation creates the general framework of the terms and conditions of employment, but the unions of employers and employees enter into collective agreements that are more specific than the law.

Some of these agreements are universally binding. This means that even unaffiliated employers that do not belong to an employer’s organisation must apply the terms and conditions of the sector’s collective agreement. If the terms of an employment contract are not in accordance with a binding collective agreement, they are not legally valid. There are around 160 binding collective agreements in Finland.

Employer Obligations

In Finland, employers have a list of obligations. For example, they must:

• Observe the law and employment related contracts
• Treat employees equally regardless of their origin, religion, sex, age or political views
• Look after employees’ safety and occupational health
• Provide employees with a written description of the conditions of work
• Promote a good working environment
• Boost employees’ performance and contribute to their occupational development
• Provide preventative occupational health care, even if they only have one employee
• Have accident insurance covering their employees
• Pay fees related to employees’ pension insurance, unemployment insurances, group life insurance and social security

Offering medical care is voluntary, but regular health examinations must be arranged if the work involves special health risks. There are also some exemptions from the obligation to insure employees in Finland. Most of these are related to foreign employers and/or employees, and are therefore often relevant to foreign-owned businesses in Finland.

For example, if an employee is not covered by social security in Finland, their employer does not need to withhold the employee’s share for this. However, they must still ensure contributions are paid in the country where the employee is covered by social security. The Website of the Occupational Safety and Health Administration in Finland provides a thorough checklist of obligations for employers.

Holidays

The legal provisions concerning annual holidays can be found in the Annual Holiday Act, but there may be further provisions in the collective agreement. The accrual of holidays is calculated in accordance with the holiday credit year (April 1 to March 31).

If the employee has been working for less than a year on March 31, they are entitled to two weekdays of holiday for each full holiday credit month. Conversely, if they have been employed for at least a year by March 31, they are entitled to two and a half weekdays of holiday per full holiday credit month. A holiday credit month is defined as any calendar month during which an employee works at least 14 days or 35 hours.

Although there are no provisions regarding holiday bonuses in the Annual Holiday Act, it is common to pay a bonus (for example, a bonus of 50% of the holiday pay). Rules on holiday bonuses can be set out in a collective agreement.

Being an Expat in Finland

Citizens of 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 must register with the Finnish Immigration Service. A valid identity card or passport is needed for this.

All foreign nationals coming to Finland from outside the EU for more than 90 days must apply for a residence permit. Even if the stay is less than 90 days, a person may need a residence permit for working purposes. Residence permits must be applied for personally. Expats staying in Finland for longer than six months are considered 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.

An A1 certificate specifies which country’s social security laws apply to a worker when working abroad. It also determines to which country social insurance contributions should be paid while they are working in Finland.

Give Your Foreign-owned Business in Finland a Strong Start With Leinonen

Helsinki is an impressively fast growing European city. With its ever-expanding and highly interesting consumer market, positive trends in economic development, population growth, and purchasing power, it is an incredibly attractive location for foreign investment. According to a projection by Statistics of Finland, the population of Helsinki will increase to almost 750,000 by 2030.

If you are ready to set up your foreign-owned business in Finland, Leinonen Finland’s experts are here to help with tailor made, high quality accounting, payroll, and tax services. Leinonen has been supporting cross-border businesses for over 34 years, helping over 100 clients register their foreign-owned businesses in Finland alone.

Contact Leinonen Finland today to organise a personalised consultation with one of our local experts on business and accounting in Finland.

The post BUSINESS IN FINLAND appeared first on Leinonen Finland.

Who and What Does the Finland VAT Rise Affect?

The September 2024 VAT rise only affects goods and services that were previously taxed at the general rate of 24%. Therefore, the VAT rate rise has no impact on goods and services sold with reduced VAT in Finland (14% or 10%), like physical exercise services or hotel accommodation.

Will VAT be Raised for Reduced Rate Goods and Services?

Discussions are underway about potential changes to reduced rate VAT in Finland.

It has been proposed that:

• Many of the goods and services currently sold with 10% VAT could be moved to the 14% Finland VAT rate.
• Chocolate and candy may be moved from the reduced 14% VAT rate to the general 25.5% VAT rate.

However, it is important to note that nothing has been finalised, and none of these changes would apply until 2025 at the earliest.

When Should a Business Apply the new General VAT Rate?

• Goods
  In most cases, the VAT rate payable on a sale of goods is determined by the date of delivery. Therefore, if goods were handed over to the buyer on or before 31 August 2024, the VAT rate is 24% (regardless of when the buyer pays). Conversely, if goods were delivered after 31 August 2024, the new 25.5% VAT rate is applicable.

• Instalment Contracts
  In an instalment contract (or hire-purchase), a buyer pays for an item in several smaller amounts over a period of time. In this case, the date of the item’s delivery to the buyer should still be used to determine the correct VAT rate (as explained above).

• Services
  In general, the VAT rate applicable when a service was provided should be used, even if payment occurs after 1 September 2024. If the service was unfinished when the new VAT rate came into effect (i.e., the service began before the change came into place, but was finished afterwards), the new VAT rate of 25.5% should be applied.

Advance Payments
In cases where a buyer has fully paid for a service in advance before the Finland VAT rate was increased, the 24% VAT rate is applicable. In this situation, the service is deemed as ‘paid’ when the money has been received by and is available to the seller.

• Goods or Services Provided on a Continuous Basis
  Some goods and services are paid for based on the passing of time (not to be confused with payment in instalments for a single good or construction service). The VAT rate applicable to a continuous supply payment should be based on the last day of the contract (considered the date of ‘supply’), even if payments began before the Finland VAT rate rise.

Example: Rental Properties

A rental property contract may cover the period of 1 June 2024 – 31 May 2025. In this scenario, the new VAT rate of 25.5% should be applied for the whole period, as the final day falls after 1 September 2024.

What if Rent was Paid Upfront?

If a full payment was made for the whole term before 1 September 2024, the service would be subject to 24% VAT in Finland.

What About Rent Charged by the Month?

If a property owner charges rent month by month and the tenant is not contracted to stay in the property for a longer period (6 or 12 months, for example), then the period determining remittance would be the month. In this case, rent for August 2024 would have been subject to 24% VAT, but rent for September onwards would be subject to 25.5%.

How Does the new Finland VAT Rate Affect Businesses Buying Goods and Services?

• When Buying Goods from an EU Country

When purchasing goods from a seller in the EU (intra-community acquisitions), the correct month for VAT reporting is usually the month after you acquired the goods (when they were delivered). If the correct VAT reporting month for your purchase is September 2024 or later, you must apply the new VAT rate of 25.5% when filing and paying VAT.

The main exception to this rule is if the final invoice is dated within the month when the goods were delivered. In this case, the intra-community acquisition must be reported within that month. It is also important to note that the VAT reporting month remains the same, even if part of the price is paid in advance.

• When Purchasing Services From a Foreign Business

In all EU countries, the reverse charge mechanism means buyers pay VAT on sales, not sellers. This mechanism is applied when a business sells a service governed by the VAT general provision to another business in a different EU member state. In Finland, reverse charges also apply to certain other services not governed by the VAT general provision.

As a Finnish buyer liable for a reverse charge, it is important to know which Finland VAT rate is correct. For services provided on 1 September 2024 or later, the VAT rate is 25.5%. For any services provided earlier than this, the VAT rate payable is 24%.

• When Buying Imported Goods

For goods imported into Finland, the date of VAT liability is the date when customs acknowledge receipt of the import declaration. If this date is 1 September 2024 or later, the new VAT rate (25.5%) is applicable. The calendar month for reporting VAT on imports to the Tax Administration is the month in which customs issued a decision on customs clearance.

• When Receiving an Import into Mainland Finland From Åland

The VAT rate applicable to an import from Åland to mainland Finland is determined by the date on the decision on the first customs clearance of the goods. If this date is after September 1, 2024, the VAT rate applied should be 25.5%. However, this should be reported on the VAT return for the tax period when the customs decision was issued.

Master VAT in Finland With Leinonen

Our experts in tax, accounting and payroll have been supporting businesses in northern, central, and eastern Europe for more than 34 years, specialising in foreign-owned enterprises. Arrange a consultation today to find out why Leinonen’s tailored services are already trusted by more than 200 long-term clients in Finland.

The post Everything you Need to Know About the Latest Finland VAT Rate Rise appeared first on Leinonen Finland.

Like many other EU countries, Finland enjoys a range of religious and nationally significant public holidays each year, and with these holidays come some key responsibilities and considerations for employers.

List of Public Holidays in Finland (With 2024 Dates)

• 1^st January: New Year’s Day
• 6^th January: Epiphany
• 29^th March: Good Friday
• 31^st March: Easter Sunday
• 1^st April: Easter Monday
• 1^st May: May Day
• 9^th May: Ascension Day
• 19^th May: Whit Sunday
• 21^st June: Midsummer’s Eve
• 22^nd June: Midsummer Day
• 2^nd November: All Saints’ Day
• 6^th December: Independence Day
• 24^th December: Christmas Eve
• 25^th December: Christmas Day
• 26^th December: 2^nd Day of Christmas

Do Employees Have any Legal Entitlements on Public Holidays in Finland?

Although employers are not obliged to give public holidays as days off by law in Finland, most do. Because of this general understanding, employees should be given the day off on a public holiday unless specified in the collective bargain agreement.

For salaried employees, public holidays in Finland are paid days off. For workers on an hourly wage, they are unpaid days off. In cases where an employee does work on a public holiday, they are entitled to double their usual wage (Sunday compensation).

Are any Specific Public Holidays Subject to Additional Regulations?

• Independence Day is the only public holiday in Finland that is a day off by law. On this day, employees paid an hourly wage also get a paid day off.
• In most collective bargain agreements, Midsummer’s Eve is recognised as a public holiday. This means it is usually given as a paid day off by employers, despite not being an official public holiday according to Finnish legislation.

How is Holiday pay Calculated in Finland?

In addition to public holidays, employees in Finland are entitled to annual leave as defined in the Annual Holidays Act. Holiday pay is calculated in one of three ways based on how an employee is paid – these are:

1. Based on weekly or monthly pay. This method is used for employees paid a set weekly or monthly wage. Using this method, employees are simply entitled to their usual weekly or monthly pay for the time they are on holiday.
2. Based on average daily pay. This is used for employees paid by the hour or on a performance-based basis (e.g., commission), who work at least 14 days each month. In this method, the employee’s average daily pay is calculated by dividing their total pay during the holiday credit year by the number of days worked in the same period. Average daily pay is then simply multiplied by the multiplier corresponding to the number of days they will be on holiday.
3. Percentage-based. This method of calculating holiday pay is typically used for employees whose contract states they work a minimum of 35 hours either every month, or in certain months. Holiday pay is calculated as a percentage of total pay received during the holiday credit year.

In all cases, pay for emergency work and agreed overtime are not taken into consideration in the calculation. More information on holiday pay in Finland, including specific guidance on multipliers and percentages can be found in the Annual Holidays Act.

How can Leinonen Help?

Leinonen have more than 34 years of experience in navigating cross-border payroll, tax, and accountancy issues in northern, central, and eastern Europe. Our 15 employees boast a wealth of excellent local expertise, which is why our Finland office is already trusted by over 100 foreign-owned and local companies. To find out more about holiday pay and public holidays in Finland, get in touch today and arrange a consultation.

The post Public Holidays and Holiday pay in Finland: What do you Need to Know as an Employer? appeared first on Leinonen Finland.

But while doing business in a country like Finland can present valuable new opportunities, cross-border payroll can be confusing. Even if you plan to stay within the bounds of the European Union (EU), you will likely find different rules in different countries. Familiarising yourself with relevant legislations early can save hassle, time and money in the long run.

What are the Different Types of Cross-Border Payroll in Finland?

Overall, there are two potential cross-border payroll situations in Finland. These are:

1. Foreign Employer. In most cases, salaries must be calculated and reported to the Incomes Register in line with Finnish legislation. Therefore, some of the most common issues faced by foreign employers with employees in Finland surround understanding Finnish taxation rules and communicating with Finnish authorities.
2. Foreign Employee. In the case of a company in Finland hiring a foreign employee, the business must verify and keep a record of an employee’s right to work in the country. They must also ensure minimum Finnish terms and conditions of employment are adhered to. Posted workers are subject to separate legislation that can be found in the Act on Posting Workers.

What is the Difference Between Local and Cross-Border Payroll in Finland?

In practise, there is little difference between local and cross-border payroll in Finland. This is because:

• Foreign employees have the same rights (and obligations) as Finnish employees.
• The minimum Finnish terms and conditions of employment must be observed when employing both local and foreign employees.
• The same software and legislation are used for all payroll calculations.

How to Employ a Person Cross-Border

When employing a foreigner as a business in Finland, employers have a few key obligations. Firstly, they must check the person has a valid Finnish work permit. They must keep a record of this and inform the authorities about the employment. Foreign employees should then simply be treated the same as a local employee, with the employer adhering to the minimum Finnish terms and conditions of employment.

For payroll calculations, the employer will need the employee’s contract, contact information and their Finnish tax card. For posted workers insured in their home country, an A1 (or other social insurance) certificate is also required.

What About Remote Working in Finland?

As a rule, any work in Finland must be done in accordance with Finnish legislation. This includes remote work done in Finland by employees of any nationality. For instance, when a person works remotely in Finland for a foreign employer, the employer is responsible for arranging statutory social security for their employee in Finland.

Who is Responsible for Taxes in Finland?

Employers are usually responsible for handling taxes in Finland. However, non-tax residents may be responsible for reporting all income made in Finland to Finnish Tax Administration, and for making their own tax contributions. For example, if an employee has an A1 certificate or a non-tax resident tax card, social insurance contributions are not applied in the payroll. In these cases, the employer may authorise an employee to take out statutory insurance (with a Finnish insurance company) on their behalf.

Key Issues for Consideration When Managing Cross-Border Payroll in Finland

Social Insurance for Finnish Residents Working Abroad

Within the EU, a person working abroad is generally covered by the social security laws of the country they are working in. This means their social security contributions are paid to that country’s authorities. However, if a Finnish employee is going to work in an EU/EEA country, Switzerland, or a country Finland has a social security agreement with, they can apply for a certificate allowing them to continue being covered by Finnish social security.

Personal Taxation of Foreign Employees in Finland

A foreign employee’s personal taxation depends on the length of their stay in Finland:

• >6 months. If a foreign employee is in Finland for more than six months, their income from both Finland and abroad is taxable in Finland. This is because they are in the country long enough to be considered a resident taxpayer.
• <6 months. If they are in Finland for less than six months, only income received from Finland is taxable in Finland. This makes them a non-resident taxpayer, and typically applies to employees who live in another country but make short trips to Finland for work.

Tax treatment can sometimes also depend on whether a person works for a Finnish or foreign employer, and special rules apply to some professions. It is important to note that until a foreign employee can provide their employer with a tax card or tax-at-source card, the employer must withhold 60% tax on their gross salary.

Where can you Find Further Information on Cross-Border Payroll in Finland?

Official government and tax authority sources are a great place to find accurate information on cross-border payroll issues in Finland. For example:

• Finnish Tax Administration website: https://www.vero.fi/en/individuals/
• Finnish Centre for Pensions website: https://www.etk.fi/en/
• Website of the Occupational Safety and Health Administration in Finland: https://tyosuojelu.fi/en/home

Get Help Managing Cross-Border Payroll in Finland

With more than three decades of experience managing tax, payroll and accounting for businesses across Europe, Leinonen can help you competently manage cross-border payroll in Finland. Our expert payroll accountants have already helped over 100 foreign-owned businesses seamlessly set up base and hire in Finland.

To find out more about our services and how we can support your company as you move into Finland, get in touch today.

The post Managing Cross-Border Payroll in Finland appeared first on Leinonen Finland.

In this article, we will delve into the key aspects of this innovative platform, including its history, benefits, application process, and its reception among foreign entities.

A Brief History

The Suomi.fi-service is a relatively new addition to Finland’s digital landscape, having been active for approximately five years. It emerged as a replacement for the previous KATSO-service, driven by an increasing need to offer a broader range of electronic services to both citizens and businesses. This transition marked a significant step towards the government’s commitment to providing efficient and accessible digital services to its constituents.

Government Support and Popularity

The Finnish government has been actively supportive of the Suomi.fi-service, recognizing its potential to revolutionize how citizens interact with public services. The platform’s popularity has steadily grown since its inception, with more and more individuals and organizations benefiting from its user-friendly interface and extensive service offerings.

Foreign companies have become aware of the Suomi.fi-service, although it is more common for them to grant a mandate to a Finnish partner, such as an accounting office, to represent them within the platform. This approach facilitates smoother collaboration and ensures compliance with Finnish regulatory requirements.

Benefits of Suomi.fi Service

One of the key advantages of the Suomi.fi-service is its consolidation of all digital public services in one accessible location. This streamlined approach allows users to easily manage authorizations, making it simple to grant or terminate access as needed. This unified platform minimizes the complexity of navigating various government services individually.

Steps to Join Suomi.fi Service

For foreign individuals seeking to join the Suomi.fi-service, a few steps are required:

• Read the instructions provided on the Suomi.fi service website.
• Register in the Finnish Authenticator Identification Service by clicking on the website’s registration link.
• Download the Finnish Authenticator App from your preferred app store (available on iOS and Android).
• Verify your identity using the application by taking a photo of yourself alongside your official identity document (typically a passport, or in select cases, an ID card).

Limitations and Misconceptions

It’s important to note that there are currently limited services available for foreign individuals within the Suomi.fi-service. Additionally, the Authenticator does not replace Finnish online banking IDs. However, the availability of services for foreign individuals is anticipated to expand in the future.

The Suomi.fi-service has proven to be an invaluable tool for accessing a wide array of digital public services. Its user-friendly interface and centralized approach make it a convenient solution for individuals and businesses alike. With just one login, users can efficiently handle nearly all their administrative needs.

Conclusion

The Suomi.fi-service stands as a testament to Finland’s commitment to modernizing its public services. Its user-centric design and comprehensive offerings make it a valuable resource for citizens and businesses alike. As the platform continues to evolve, it is expected to play an even greater role in shaping the future of digital governance in Finland.

For further info you can visit the following webpages: https://dvv.fi/en/suomi.fi-services https://idm.finnauth.tunnistaminen.suomi.fi/self-care/#/prod/login

The post Suomi.fi Service: Streamlining Digital Access to Finnish Public Services appeared first on Leinonen Finland.

International payroll compliance is by far not easy. Global payroll administration means tiresome and ever-changing activities, i.e., applying employment laws, monitoring local country-specific requirements, preparing contracts, maintaining employee records, etc. that can make international payroll management a frustrating experience for companies that do business abroad.

In Leinonen Group we have helped many companies expand abroad and build payroll processes that comply with local requirements. To share our knowledge that organizations usually face in their journeys, we have written down the main aspects to keep in mind when operating payroll internationally with minimal reputational risks.

Based on our experiences over 25 years we can highlight 3 areas that are usually affected by payroll compliance risks and are related to international payroll challenges: ACCOUNTING, LEGAL and HUMAN RESOURCES.

Accounting challenges: how to align payroll-related accounting procedures internationally?

Expanding your business is supposed to support the growth of the company, but very often the expansion results in increased exposure to accounting and payroll compliance risks. Every market has its own unique regulations and rules that will impact payroll-related accounting procedures. Therefore it´s of utmost importance to get the right accounting systems and processes in place to avoid possible future fines, tax errors, or the disclosure of sensitive employee information. These risks will threaten the company’s performance and reputation the most.

For smaller or medium-sized companies it´s not always very practical to manage to account for international payroll in-house because each country may have its own requirements for GAAP (Generally accepted accounting principles), GDPR (General Data Protection Regulation), record keeping, filing, etc. Therefore, outsourcing payroll and accounting functions may help the companies to simplify their operations whilst being able to take advantage of financial and legal specialists, optimize costs and increase efficiency.

Read further from this article on what to keep in mind when choosing international accounting and payroll providers (Why do companies stick with poor accounting and payroll providers?)

Legal challenges: how to avoid non-compliance with local regulations?

International payroll goes hand in hand with tax and legal requirements. Some rules that apply in one country may not apply in others, even if the countries are located geographically close to each other. For example, the Baltic States (Estonia, Latvia, Lithuania) are often considered as one region but if you take a closer look into payroll taxes (e.g social security tax rates, PIT rates, minimum salary levels, etc) the variation by markets can be quite big. Read further about different tax rates from the summary of 2022 Baltic Taxes.

If you dive deeper into legal aspects, you find out soon enough that country-specific laws and regulations are constantly changing and therefore need focus every day. From a risk perspective, non-compliance with local labor regulations inevitably leads to fines and penalties.

How do overcome these risks? One way is to hire its own tax and legal team for each market that in the end could become a quite costly exercise. Another way is to outsource international payroll providers with a tax & legal department to help manage the updates throughout the year. Having a reliable partner or a team of experts will keep you away from payroll tax errors.

In Leinonen Group we have payroll and tax experts available to share their knowledge and experiences in all our 12 markets: Finland, Sweden, Norway, Estonia, Latvia, Lithuania, Belarus, Bulgaria, Poland, Hungary, Russia, and Ukraine.

HR challenges: to whom to delegate the payroll questions?

When it comes to payroll activities there is always a question of who should be executing them in a company and how. Delegating these tasks to your accounting team might not be the best decision in terms of efficiency. On the other hand, delegating the payroll-related tasks to your HR sometimes requires additional training and investment in terms of salary calculation, tax reporting, and usage of payroll software.

Nowadays businesses tend to outsource a big part of their supporting activities. Marketing, IT support, and accounting are some of the most popular outsourced functions. Delegating payroll-related tasks to an external provider allows a company to have a team of outsourced specialists who are dedicated to their business which is usually costly to have in the house. In addition to the costs, it is not always efficient to build an in-house team since there are not enough tasks for a full-time job.

Therefore, based on our experiences we believe that outsourcing international payroll brings numerous advantages to companies. For example, when you use an outsourced payroll service provider, the output, speed, and quality will not be affected by holidays or sickness. When having an in-house payroll department, there is always the possibility that one of your key payrolls staff members will leave, taking with them all their knowledge. If this happens, replacing them could be extremely difficult, resulting in a logistical nightmare when payday comes not to mention the reputational risk. If you are outsourcing, you will not have to spend time training new employees or assisting them in understanding your company’s payroll system.

What are the key benefits of outsourcing payroll activities, you can read further from this article (Here is why outsourcing payroll is a great idea).

In summary, to successfully operate internationally, make sure your payroll systems and processes are in place and convert international investments into bottom line profits. To avoid negative impacts, companies need to understand the international payroll compliance risks and be aware of three main challenge areas: international accounting, payroll, and human resource-related issues.

If you as a business owner or a manager would like to concentrate on running your business without worrying about your international payroll, accounting, or legal obligations, feel free to contact any of Leinonen’s offices for help. Our experts will handle these obligations correctly, efficiently, and legally, keeping your company away from any reputational risks.

The post International Payroll – Successfully operating globally with minimal reputational risk appeared first on Leinonen Finland.

We denounce the war in Ukraine started by the Russian government in violation of international law. It is truly heartbreaking to see civilians being affected by military aggression. We urge governments to resolve the conflict peacefully as soon as possible.

We are committed to ensuring that EU sanctions against Russia following the invasion of Ukraine are enforced by our organization. We are taking these matters very seriously and will refuse to work with any sanctioned entities.

We are standing with our people and clients in Ukraine. We guarantee employment to all our employees in Ukraine and will continue to support our teammates and their families throughout the events.

Additionally, we offer help to our clients in Ukraine with the relocation of their company if needed. We will do the best we can to consult and guide our clients to ensure the continuity of their business.

As a company, we have taken part in offering financial support to Ukrainian refugees and we urge everyone to do what they can to support the Ukrainian people by:

• Offering financial support where possible;
• Educating yourself with trustworthy sources and verified information about the situation: https://ukraine.ua/news/stand-with-ukraine/;
• Sharing fact-based and accurate information about the Russian invasion of Ukraine to help raise awareness about the situation.

#StandWithUkraine

The post Our thoughts are with everyone affected by the events taking place in Ukraine. appeared first on Leinonen Finland.

¹Regularly paid dividends are subject to a discount rate of 14/86. Please note: if the payment is made to a private person, income tax of 7% is charged on dividends.

The income tax withheld can be 5% or 0% (depending on the tax agreement) in the case of a non-resident shareholder.

²The annual basic exemption is up to EUR 6,000 (EUR 500 per month). If a person’s annual income is up to EUR 14,400, they can use the exemption in full. If the annual income is between EUR 14,400 to EUR 25,200, the amount of the basic exemption is reduced pursuant to the following formula: 6,000 – 6,000 / 10,800 × (amount of income – 14,400).

The post Baltic tax rates from 1 January 2022 appeared first on Leinonen Finland.