HOW to set up a business in Finland
Setting up a business in Finland offers a strategic location, a competitive economy, and a supportive environment for innovation and entrepreneurship.
Business in Finland
Setting up a business in Finland offers a strategic location, a competitive economy, and a supportive environment for innovation and entrepreneurship. With a stable political climate and a transparent legal system, Finland is an attractive destination for firms looking to expand their operations.
The Finnish Business Environment
Finland’s business environment is characterized by a high level of trust, ease of doing business, and a skilled workforce.
The country ranks highly in global competitiveness reports, reflecting its efficient infrastructure, advanced technological capabilities, and commitment to research and development.
Legal structures for businesses
When establishing a business in Finland, one must decide on the legal structure, which could be a private entrepreneur (toiminimi), a partnership (avoin yhtiö or kommandiittiyhtiö), a limited liability company (osakeyhtiö or Oy), or a branch of a foreign enterprise. Each structure has its own legal and tax implications, and the choice depends on the size and nature of the business.
- Private entrepreneur structure doesn’t allow multiple owner and entrepreneur has personal liability for company.
- Partnerships are rarely used for bigger operations. As partners also have personal liability for partnership liabilities.
- Limited liability company is the option for foreign companies to enter in Finland when subsidiary is setup into Finland.
Taxation in Finland
Corporate income tax rate is 20% flat for limited liability companies. Income taxation for salaries is progressive. Capital income tax for private persons is 30% up to 30 000 euros per year and 24% above that.
VAT rates in Finland
Standard Rate 25,5%
This standard rate applies to most goods and services. This includes general merchandise, electronics, clothing, household items, and many services.
NOTE: Standard rate was raised from 24% to 25,5% 1.9.2024.
Reduced Rate 14%
is applied to foodstuffs, restaurant and catering services, and animal feed.
- Pharmaceutical products
- Passenger transport services
- Accommodation services (e.g., hotel stays)
- Admission to cultural and entertainment events, such as concerts, movies, and museums
- Physical exercise services, including gym memberships and sports activities
Reduced Rate 10%
applies to specific items and services, including:
- Newspapers
Changes to reduced rate started 1.1.2025. Only newspapers would remain in 10% VAT category and remaining items would be transferred 14% category.
Zero Rate (0%)
Some goods and services are exempt from VAT or subject to a zero rate. These include:
- International transport of goods and passengers
- Exported goods
- Sales of goods and services to other EU countries under specific condition
- Certain health and medical services
- Education services
- Financial and insurance services
Tax exemptions
Certain activities are exempt from VAT altogether. These include:
- Healthcare and medical services
- Social services
- Educational services provided by authorized institutions
- Financial and insurance services
- Non-commercial activities conducted by non-profit organizations
We will take care as part of our service VAT calculation, employer withholding taxation and employer contributions.
Company registration and licences
The Finnish Patent and Registration Office (PRH) is the central body for business registrations. Companies must also register with the Tax Administration and obtain any necessary permits or licenses, which vary depending on the business sector.
Tax office registration is needed for prepayment tax register, VAT register and employer register. Valjas has specialist who can help to determine which registrations is needed.
Some examples of industries where licence is needed:
- Debt collection agency
- Healthcare
- Pharmacy
- Selling alcohol
- Transportation services
Restaurants for example need to inform local authorities and obtain certain permits from multiple authorities.
Employment and Labor Laws
Finland’s labour laws protect employees’ rights and promote a healthy work-life balance. Employers must adhere to regulations regarding working hours, annual leave, and employee benefits. Collective agreements are common and set industry-specific standards.
Daily working hours is 8 hours and 40 hours per week based on employment law. In many of the collective agreements daily working hours are reduced to 7,5 hours per day.
Social security insurances for employers
Employers in Finland are required to provide statutory social security insurances for their employees. These insurances are designed to ensure the well-being and financial security of employees in various situations. The key social security insurances for employers include:
Pension Insurance (TyEL)
Pension insurance is regulated by the government and ensures that employees receive a pension after retirement. Employers must contribute to this insurance, which is managed by authorized pension insurance companies. The contributions are calculated based on the employee’s earnings.
Unemployment Insurance
Unemployment insurance provides financial support to employees who become unemployed. Employers are required to pay unemployment insurance contributions, which fund benefits such as unemployment allowances. These contributions are collected by the Unemployment Insurance Fund (TVR).
Accident Insurance
Accident insurance covers medical expenses and compensation for employees who suffer from work-related injuries or occupational diseases. Employers must take out accident insurance with an authorized insurance company. The premiums are determined based on the employer’s industry and the level of risk involved in the work.
Group Life Insurance
Group life insurance provides financial security to the families of employees in the event of the employee’s death. Employers must arrange this insurance through an authorized provider, and the premiums are typically based on the total payroll of the company.
In addition to these insurances, employers are also responsible for paying social security contributions. These contributions are paid to the Finnish Tax Administration and include health insurance contributions and other social security-related payments. The total amount of social security contributions depends on the employee’s earnings and the specific rates set by the government.
Audit services in Finland and audit requirements
A limited liability company need to elect and auditor when following three thresholds are exceeded.
- Yearly revenue exceeds 200.000 euros.
- Balance sheet exceeds 100.000 euros.
- Three or more employees.
Accounting and audit companies are separated in Finland. Valjas for example doesn’t provide audit services. We have good network of local audit firms which we can recommend. We also work with the big4 audit firms.
Contact us
Feel free to contact us any time, to discuss how we can help you in getting smooth and modern accounting and payroll services for your business in Finland.
Sales and questions
Email:
[email protected]
Hannu Winberg
Business Director
+358 40 723 7330
Pasi Tasanen
CEO
+358 46 923 0449
