What should I consider when setting up business in Finland?

There are several registers that may be statutory for your company and should be verified before starting operations in Finland:

Registration requirements vary for each register. You should consult with the respective authorities to determine whether registration is required for your specific situation. Alternatively, Azets has specialists who can help you identify the necessary registrations for your business.

Finland requires statutory insurance coverage for companies with employees in Finland. These social security expenses are comparable to other countries and include:

The costs for these insurances are government-regulated, ensuring uniform pricing regardless of the insurance provider. Azets has established partnerships to secure these insurances on behalf of our clients. The process is efficient and, most importantly, ensures coverage is in place from day one.

Suomi.fi registration is a secure digital authentication service for electronic transactions with the Finnish Tax Administration and the Social Insurance Institution (Kela). This registration enables you to manage your affairs electronically, eliminating the need for paper forms.

However, the process of obtaining and using this service can be complex and detailed, as government communications are primarily conducted in Finnish and Swedish. The most convenient and efficient approach is to have Azets handle your electronic filings on your behalf.

Determining tax statuses and reporting obligations is vital from day one, enabling your company to focus on conducting its core business activities. For foreign companies, one of the first matters to assess is whether a permanent establishment is formed and the obligations that follow. Advance preparation and clarification of these matters is always lighter than dealing with them retrospectively. 

Operating as a foreign company (Finnish: Ulkomainen yhteisö, Swedish: Utländskt samfund) can be the most straightforward business structure when you have limited operations and few or no employees in Finland. This approach allows you to operate under your existing overseas company structure without establishing a separate legal entity in Finland. Your business activities are conducted as a foreign company operating in Finland, and in its simplest form, no registrations are required.

Depending on your circumstances, you may be subject to Finnish taxation if you establish a permanent establishment (PE) in Finland. This determination is highly case-specific and difficult to generalize. Key factors considered include the nature of your operations, number of employees, assets held in Finland, and any physical premises within the country. If a PE is established, profits generated from Finnish operations will be subject to Finnish taxation.

Whether you have a PE significantly impacts various requirements, including employer registration, trade register obligations, and taxable income reporting. Without a PE, you typically have minimal concerns and few or no reporting obligations in Finland. However, you may need to register for the prepayment register to avoid withholding tax requirements.

It's important to note that a company may also be liable for VAT in Finland without having an income tax permanent establishment. Often, foreign companies that sell goods to Finland from abroad but maintain, for example, a warehouse in Finland, are liable for VAT without having a PE for income tax purposes.  

A branch office (Finnish: sivuliike, Swedish: filial) is not a separate legal entity from your parent company but is registered in Finland with its own business ID. Legally, the branch remains part of your company and therefore does not have a separate board of directors, cannot enter into independent contracts, or file for bankruptcy. It functions as an overseas extension of your business that must be registered with the trade register. Often, the core consideration between a branch and subsidiary is how permanent the operations are intended to be and how much growth is expected. 

A branch must maintain separate books and accounting records and is taxed in Finland independently from the parent company. Establishing a branch typically results in creating a permanent establishment (PE) in Finland. However, registering a branch does not require separate assets or capital investment. A key advantage of the branch structure is that it provides clarity regarding taxable income and deductible expenses under Finnish tax law, compared to operating as a foreign business.

It's worth noting that whilst Finnish company law applies specifically to Finnish limited companies, EEA company laws are generally well harmonised in practice. However, there are differences in tax treatment, particularly in situations involving mergers and acquisitions or asset transfers. If a PE is involved in corporate reorganisations, exit tax assessment becomes relevant. If a PE is later converted to a Finnish limited company, consideration must be given to whether valuable assets have been transferred between related entities. 

A subsidiary is an independent legal entity (Finnish: Osakeyhtiö, Swedish: Aktiebolag) that operates separately from its owners (parent company) and can enter into contracts independently. A limited liability company structure can be valuable for limiting potential risks when operating in Finland, as owners are only liable to the extent of their invested assets, not for company decisions.

Establishing a subsidiary is relatively cost-effective, with administrative fees currently under 500 euros and no minimum capital requirement. A limited liability company maintains its own board of directors, which may include members from the parent company's board. A subsidiary is often viewed as more credible by other businesses and public authorities, as it represents a registered Finnish entity with established local presence.

However, operating costs may be higher compared to a branch structure. You may require an auditor for your company and must document board meetings and annual shareholder meetings. Additionally, dissolving operations is more complex and requires a minimum of five months. Unlike a branch, a subsidiary can file for bankruptcy as an independent entity.

A company is required to elect an auditor if it meets two of the following three criteria:

Note that in Finland, your accounting partner cannot provide auditing services due to legislative independence requirements.

In Finland, the business ID serves as both the company identifier and VAT number. You can verify your company's business ID and access other public information through official registers.

No, mandatory insurances must be obtained from Finnish providers. While additional insurance coverage can be purchased elsewhere, be aware that these may be considered taxable benefits for employees.