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 payroll in Finland, including employee costs, minimum salaries, overtime regulations, work on public holidays, employee benefits, and some important considerations.

Employee Costs

Payroll calculation in Finland involves determining the net salary of an employee based on Finnish legislation and CBA agreements. Payroll accountants are responsible for this process, which includes calculating and reporting income, handling tax contributions, and communicating with authorities such as KELA (the Social Insurance Institution of Finland), trade unions, and insurance providers.

In Finland, employees have personal withholding tax contributions, unemployment insurance contributions (1.5% of gross salary for employees aged 17-64), and pension insurance contributions (ranging from 7.15% to 8.65% depending on age) deducted from their salaries. There may also be voluntary trade union contributions and compulsory distraint payments.

Foreign employees have specific tax and social insurance regulations based on their stay period and home country.

Minimum Salary

Finland does not have a legally mandated minimum salary. Instead, minimum wage levels are determined by the applicable CBA or are left to the employer’s discretion.

Overtime Regulation

Overtime work in Finland is defined as work performed in addition to regular working hours. Normal working hours are up to 8 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 hourly wage, and employers must pay it as additional compensation or provide equivalent paid time off.

Work on Public Holidays

In Finland, public holidays are considered paid time off. Working on Sundays and public holidays 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, such as company-paid phone, car, and housing benefits. These benefits are considered taxable (fictional) income, and employers are responsible for paying taxes, including withholding tax and social insurance contributions, based on the benefit’s value. As these benefits are processed as a part of payroll, then correct treatment is employers’ responsibility.

Employers in Finland can offer additional tax-free benefits to employees, such as public transportation or bicycle benefits (up to €1,200 per year), sport and cultural benefits (up to €400 per year), and voluntary pension insurance contributions (up to €8,500 per year).

Mandatory State Social Security Contributions

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

• Social insurance (1.53%)
• Accident and group life insurance (approximately 2%)
• Pension insurance (approximately 25% with employee’s contribution)
• Unemployment insurance (2.02% with employee’s contribution)

All these contributions are calculated based on the employee’s gross salary.

In conclusion, the Finnish payroll system is highly regulated, with various components that must be considered by both employers and employees. Adherence to the complex Collective Bargain Agreements and Finnish holiday regulations is crucial to ensuring accurate and compliant payroll processing. Understanding the intricacies of payroll in Finland is essential for businesses operating in the country to maintain legal compliance and support the financial well-being of their employees.

If you have any further questions on Finnish payroll or taxation questions, Leinonen Finland´s team is happy to help you https://leinonen.eu/fin/ .

Note: Employers and employees contributions are presented as 2023 values and they are subject to change annually!

The post Understanding Payroll Taxes and Regulations 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.

Innovation thrives in Finland and strong innovation skills generate business results. New businesses are continuously emerging in the gaming, electronics, software, cleantech and health. Moreover, Finland is one of the most competitive and open economies of the world.

Finland is one of the least corrupt countries in the world, which 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. In Finland you can feel safe anywhere, anytime. Companies appreciate Finland’s stable and transparent environment for doing successful business

COMPANY ESTABLISHMENT

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 0 EUR and 1-5 regular members in the board of directors.

TAXATION

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 %.

ACCOUNTING

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 and Accounting Decree. The Legislation providing general provisions and guidelines for accounting are the Accounting Act (1336/1997) and Accounting Decree (1339/1997).

Financial Information

The financial year in Finland is generally a calendar year or another twelve-month period. In the year of commencement, the financial year can be less or more than 12 months. However, the maximum length of the financial year is 18 months. The Financial Statements must be prepared within four months of the end of the financial year and submitted to the Trade Register (PRH) and Tax authorities.

The universal accounting principles of true and fairpresentation and the material disclosure of information should be followed in the financial statements.

As per chapter 3, section 1 of the accounting act (30.12.2015 / 1620,) the financial statements should consist of the following:

Balance sheet disclosing the financial position at the balance sheet date;

the profit and loss account disclosing how the profit or loss has arisen;

the cash flow statement and its application, if the reporting entity is a large enterprise or a public-interest entity; and

 notes to the balance sheet, the profit and loss account and the 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).

Maintaining of Financial Records

The financial statements are required to be maintained for at least 10 years from the end of the financial period as per the Accounting Act. Other accounting materials such as invoices, vouchers, reconciliation reports, accounts receivable and human resource documents are to be maintained for 6 years from the end of the financial year.

Tax Liability

Some entity forms, such as the limited company, 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. Also the financial statements are filed electronically. E-filing requires authentication with Finnish online banking codes or Katso identification, depending on the company type (www.vero.fi).

The general VAT rate for goods and services in Finland is 24%. Reduced VAT rates are applicable on certain goods and services (www.vero.fi). The due date for VAT returns depends on the length of the company’s tax period. If the tax period is one month, VAT is to be filed and paid by the 12^th of the second month from the taxable month. If the tax period is a quarter, the due date is the 12^th of the second month from the end of the taxable quarter, and if the tax period is one year, then VAT is paid by the end of February in the following year.

Authorized Accounting Firms

The Association of Finnish Accounting Firms may authorize an accounting firm complying with the guidelines for following good practice, standards and tools and the regular inspections created by the Association for the industry (www.taloushallintoliitto.fi).  Of the more than 4 000 accounting firms offering accounting and payroll administration services in Finland, only around 800 have been authorized. One of them is Leinonen.

EMPLOYMENT & PAYROLL

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.

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 collective agreements are universally binding. This means that even unaffiliated employers which don’t belong to an employers’ organization 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 more than 100 binding collective agreements.  

Employer’s obligations

An employer must observe the law and employment related contracts, treat employees equally regardless of their origin, religion, sex, age or political views, look after the 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.

According to the law, the employer must provide preventive occupational health care even if it only has one employee. Offering medical care is voluntary. However, regular health examinations must be arranged if the work involves special health risks.

The employer must have an accident insurance covering its employees. It also has to pay fees related to the employees’ pension insurance, unemployment insurance, group life insurance and social security.

There are some exemptions from the obligation to insure the employees. They are mostly related to foreign employers and/or employees.

Holidays

The provisions concerning annual holiday are in the Annual Holiday Act. There may be further provisions in the collective agreements.

The accrual of holidays is calculated on the basis of the holiday credit year (April 1 to March 31). If the employee has been working for less than a year on March 31, he/she is entitled to two weekdays of holiday for each full holiday credit month. If the employment has continued for at least a year on March 31, the employee is entitled to two and a half weekdays of holiday for each full holiday credit month.

Although there are no provisions regarding holiday bonuses in the Annual Holiday Act, it is common to pay a bonus of for example 50 percent of the holiday pay. There may be rules on holiday bonuses in collective agreements.

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.

The post BUSINESS IN FINLAND 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.

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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

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Over 25 years of experience has brought us hundreds of clients along the way wanting to expand their businesses abroad. Being good or maybe even the best on your own market is one thing but going global with your business brings to light a set of considerations for business owners to evaluate, including market trends and analysis, political and economic factors, entity set-up, legal barriers, competitors´ overview, hiring workforce, etc.

Now that Leinonen Group has 14 offices in 12 countries and the company has a reliable international network of accountants, lawyers, payroll advisors, etc. we can help others who are in a similar situation wanting to move their business abroad.

Therefore, we have written down 5 important aspects to consider before going global and what to keep in mind when assessing the benefits and risks to a business entering a new market.

1. Market analysis and a strong business case

Even though a market analysis of a target country or region seems obvious, many companies forget the importance of it or don´t do it very thoroughly. Quite often we notice companies wanting to expand their reach starting with neighboring countries believing they know the local market well enough without detailed research. But when digging into the details of cultural differences, consumer behavior, market trends, language barriers, competition, taxation, legal aspects, or employment regulations, one might be surprised how different our neighbors can be.

You can read the story of Leinonen Group´s first expansion to the Estonian market over 25 years ago and what were our learnings on the way from the article “Make it or break it – expanding your business abroad”.

Based on our experiences we suggest doing your homework very thoroughly, making market analysis and a strong business case before going global as the more prepared you are the greater your chances of success. Without a thorough business plan, your company might lose hundreds of thousands in an instant and damage your brand along the way.

2. Proper entity set-up

When establishing a company abroad, it’s crucial that the company form and registration comply with the local legislation. The number of founders, capital requirement, division of responsibility and decision-making, financing, and taxation is only some factors that influence the choice of which legal entity to choose. Therefore, make sure that the chosen entity form is financially the most profitable for you.

As every market is different, we highly suggest consulting with local authorities or service providers before making a final decision about entity set-up as the registration processes vary a lot by the market by the amount of time and resources needed.

If you plan to expand to Estonia, Latvia, Lithuania, Belarus, Bulgaria, Finland, Hungary, Poland, Russia, Sweden, or Ukraine, you can always consult with Leinonen offices and use our best knowledge and experiences from the local markets.

3. Understanding local laws and regulations

Different markets have different regulations when it comes to taxes and local laws. The taxation of international businesses changes frequently and is somewhat difficult to comprehend.

As legal regulations affect everything from establishing a company to the hiring of employees, it´s better to minimize the risks and to investigate specific regulations rather sooner than later.

Carefully consider also how your home country treats income earned internationally as this might impact profits significantly. The earlier in the process regulations enter the decision, the better for your company, as they might impact your mode of entry choice.

There is an interesting case study published by Leinonen Latvia that illustrates well the importance of knowing local regulations. From the case study, you can find out how they helped a client to recover an incorrectly calculated corporate income tax in the amount of 100 000 euros.

4. Hiring employees globally

Are you planning to open a local office or simply use remote workers in different markets? Will you use ex-pats or focus on local talents? Whatever decisions you make, be aware of local employment laws and how your human resource plans will need to comply with local requirements.

In many markets 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 collective agreements are universally binding. This means that even unaffiliated employers which don’t belong to an employers’ organization 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. For example, in Finland, there are more than 100 binding collective agreements to consider!

Money is a sensitive matter and managing employee salaries should always be handled with the utmost care, confidence, and punctuality. If you use a payroll partner as many companies do, make sure they provide compliance support in-country and most importantly also communicate in the local language.

5. In-house or outsourced services

For many businesses, outsourcing the accounting and payroll functions help them simplify company operations whilst being able to take advantage of financial and legal specialists, optimize costs and increase efficiency.

The COVID-19 crisis has uncovered a complex and challenging business environment, and more companies are considering the outsourced option as they look at saving costs and focusing on their core business activities. But there could be also other reasons companies outsource functions like accounting. There may be a stakeholder/ investor requirement to have an independent party, they could be looking to save costs, or they may just want the best local expertise available.

In summary, expanding your business globally can be complex and these are only 5 factors we often notice that get too little attention, but of course, there are many more to consider. Important is to do the proper homework, to prepare a strategic business case and if you lack local expertise, don´t be afraid to lean on a trusted international partner, who can provide the local expertise to address your needs in any country.

To learn more about Leinonen Group services and how we can help your business to go abroad, please visit our website for further info and contacts – / 

The post 5 Important Aspects to Consider When Going Global with Your Business 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).

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