WHAT YOU SHOULD KNOW BEFORE DOING BUSINESS IN FINLAND · • Organisations or foundations from outside the European Economic Area (EEA) wishing to establish a branch in Finland have

STARTING A BUSINESS IN FINLANDWHAT YOU SHOULD KNOW BEFORE DOING BUSINESS IN FINLAND

Rantalainen Accounting Services Ltd

Member of the GGI-Geneva Group International

Content

1. The Finnish legal system2. Legal aspects: General3. Key legal dimensions of the Finnish corporate environment4. Subsidiary or Branch?5. Ways of doing business in Finland6. Taxation7. Establishment: Costs and length of time 8. Obligations9. Electronic corporate environment in Finland: Katso-ID10. Rantalainen accounting services

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1. The Finnish Legal

system

2. Legal Aspects

3. Key Legal Dimensions

4. Subsidiaryor Branch

5. Ways of doing

business6. Taxation 7. Establish-

ment 8. Obligations9. Electronic

corporateenvironment

10. Rantalainen Accounting

Services

1. The Finnish legal system

• the base of the Finnish legal system lies on civil law and it is close to German and Scandinavianpracticies

• as a part of EU, the Finnish system integrates domestic laws according to EU legistation• Domestic higher courts have a decision making power over the lower courts decisions but the Court

of Justice of the European Union (ECJ) can overrule the higher courts judgments when necessary

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District Courts (käräjäoikeus)

Courts of Appeal (hovioikeus)

The Supreme Court (korkein oikeus)

The Supreme Administrative Court (korkein hallinto-oikeus)


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2. Legal Aspects: General

GENERAL LEGAL

ASPECTS

CORPORATE LAW

MERCANTILE LAW

COMPETITION LAW


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2. Legal Aspects: GeneralØ Corporate Law

• companies are legally independent entities• corporate veil: in general no liability of shareholders • companies are free to operate in most of the industries

– Exceptions like healthcare, alcohol, tobak, fire arms, dangerouschemicals, banking, insurance etc. are more strictly regulated and needto be approved by the higher authority*

*The complete list can be red in the Entrepreneur Guide on page 25: http://www.uusyrityskeskus.fi/sites/uusyrityskeskus.fi/files/Opas_en_2014_web.pdf

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2. Legal Aspects: GeneralØ Competition Law

• Smaller mergers will be controlled by the domestic FinnishCompetition and Consumer Authority

• Larger mergers will be controlled by the European Comission• Antitrust acts such as anticompetitive agreements and abuse of a

dominant position are prohibited

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2. Legal Aspects: GeneralØ Mercantile Law

• International trade (UNIDROIT, CISG)• Marketing law• Consumer protection

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3. Key Legal Dimensions of The Finnish CorporateEnvironment

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LEGAL ENVIRONMENT

FINNISH COMPANIES

ACT

BUSINESS INCOME TAX

ACT

VALUE ADDED TAX ACT

LABOUR LEGISTAION

ACCOUNTING & AUDITING

ACT


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3. Finnish Companies ActØ Things to be considered

• Board of Directors is the only mandatory organ in the company and it is appointed bythe General Meeting

• Decisions in The General meeting must be documented to protocol and sended to shareholders

Rights and Duties• Shares and shareholders of the company• Distribution of assets

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3. Business Income Tax Act and Value Added Tax Act

• Taxes depend on the following characteristics of the business:– Type and purpose of the business– Scale of the business– Legal Form: Subsidiary or Branch– Presence: Permanent or Temporary

• Rules for permanent presence in income taxationØ http://www.vero.fi/en-US/Companies_and_organisations/Foreign_business_in_Finland/Permanent_establishments_in_income_taxat(21534)

• Rules for permanent presence in VAT taxationØ http://www.vero.fi/en-US/Companies_and_organisations/Foreign_business_in_Finland/Permanent_establishment_for_purposes_of_(30191)

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3. Labour legislation

Following laws set up minimum requirements for the companies and for their employees:

• Employment Contracts Act• Working Hours Act• Annual Holidays Act• Non-discrimination Act• Act on the Protection of Privacy

in Working Life

• Collective Agreements Act• Act on Job Alternation Leave• Study Leave Act• Pay Security Act

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3. Accounting Act & Auditing Act• All persons and entities engaged in business, as well as self-employed professionals, are obliged to keep books

• The management of an enterprise is responsible for arranging its accounting. The obligation to keep books starts when founding the enterprise

• Enterprises are obliged to submit their financial statements to the Trade Register administered by the National Board of Patents and Registration

• According to the Auditing Act a company must elect an auditor and carry out an audit of the accounts (see the slide: on-going obligations for auditing)

• Companies have monthly, quarterly and annual notification obligations to authorities. In addition, employer companies submit information on paid wages to their employment pension and accident insurance companies as well as apply for reimbursement for their occupational healthcare expenses

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4. Subsidiary or Branch?Ø Forms of Subsidiary:

• Limited Company (Osakeyhtiö, Oy)• Limited Partnership business entity (Kommandiittiyhtiö, Ky)• General partnership (avoin yhtiö)• Legal name (toiminimi)

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4. Subsidiary or Branch?Ø Subsidiary: Limited company (Oy)

Most popular legal form is osakeyhtiö (Oy)• Designed for private businesses with clear and stable shareholder structure.• Must have at least one shareholder. • 1-5 regular members in the board of directors• Minimum share capital: 2,500.00 EUR.• No obligation to appoint a Managing director.• Registration in the Trade Register (the company comes into existence).

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4. Subsidiary or Branch?Ø Branch• No separate legal entity from its foreign parent company.• Registration in the Trade Register. • Organisations or foundations from outside the European Economic Area (EEA) wishing to establish a branch in

Finland have to apply for a permit from the Trade Register (PRH).• No formal minimum capital.• Can be managed by foreign managing directors. • The branch must operate in the same line of business as the foreign trader.• The parent company bears ultimate legal liability for all liabilities and obligations of the branch.• Employment contracts with employees working in Finland might be subject to mandatory provisions of Finnish

labour law.• Contributions to social security system.

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4. Subsidiary or Branch?Ø Control

Subsidiary• This is a separate entity controlled by its Board of directors.

Branch• This is an extension of the company and is therefore directly

controlled by the company.

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4. Subsidiary or Branch?Ø Liability

Subsidiary• Shareholders in general not liable for acts of the subsidiary company • Liability limited to the share capital of the subsidiary • Directors may be personally liable

Branch• No legal entity: shareholders (parent) are fully liable • The directors of the parent are in general responsible for ensuring local law compliance

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4. Subsidiary or Branch?Ø Practical matters

A subsidiary is regarded as a more substantial presence – helpful for: • having a bank account in Finland • obtaining a lease/ leasing or other contracts like cars • attracting personal• entering into commercial agreements

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4. Subsidiary or Branch?Ø Group of Companies (UK), Concern (DE)

• Group of companies is build when a company (parent company) owns the majority of the other company´s (subsidiary) shares (voting rights)

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5. Ways of doing business in FinlandDirect sales or services from abroad

Ø to customersØ to retailers and clients

Sales via distribution intermediaries or agents in Finland Ø commercial agentsØ authorized dealers

Business with own presence in Finland Ø establishment of branch or subsidiaryØ acquisition of existing company

More information can be found on Finnish Champers of Commerce http://kauppakamari.fi/en/finnish-chambers-of-commerce/

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6. TaxationØ Corporate taxation

Both subsidiary and branch forms have an obligation for income taxation and VAT taxation in Finland. (http://www.vero.fi/en-US)Income tax rate: 20% (since 1.1.2014)VAT tax rates: 24%, 14% and 10%

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Type of tax Due days

VAT (if period is month) 12th of 2nd following month

Payroll 12th of following month

Corporate tax report Four months after closing


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6. Tax administration`s registers

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VAT register If turnover is max. 8.500 EUR per period of 12 month, the company is not liable to VAT; but voluntary registration possible. However, VAT registration is needed for international trade.

Employer register Needed, if two or more permanent employees or six short-term employees.

Prepayment register If you are registered, buyers of your services do not have to withhold 13% of your total invoice sum.


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6. TaxationØ The Finnish Business Information System (BIS)

• BIS enables businesses to report their company information to the Trade Register and the registers kept by the Tax Administration in a single notification.

(see KATSO-ID in Electronic Corporate Environment)

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7. EstablishmentØ Costs and length of time

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Processing time Subsidiary BranchTrade Register*

Ca. 3 weeks*Tax Administration

Trade Register`s fee (6/2014) 380 EUR 380 EURChanges 80 € 80 €*Processing time of the Trade Register means the time from the filing of a notification or an application to the first communication from our office to the client.


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8. Obligations (bookkeeping)

• Monthly obligations– tax related declarations to tax authority

(among others e.g. VAT, payroll taxes, dividend etc.)

• Annual obligations– Financial statement including balance sheet, income statement,

balance book

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8. Obligations (auditing)

No obligation to appoint an auditor for a corporation where not more than one of the following conditions were met in both the past completed financial year and the financial year immediately preceding it:

1. the balance sheet total exceeds 100.000 euros;2. net sales or comparable revenue exceeds 200.000 euros; or3. the average number of employees exceeds three.

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8. Obligations for subsidiary

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Due daysAuditing Recommanded before filing corp.tax report

Corporate tax report* Four month after closing

General Shareholder meeting No later than six months after closing

File financial statements to Trade Register Within two months from the adoption of the profit and loss account and the balance sheet

*same obligation for branch*same obligation for branch


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8. ObligationsØ The norms of employment in Finland

• compulsory employment legislation: working hours, vacations, parental and sick leaves, safety at work etc.

• two kinds of collective agreements: compulsory depending on the field of the company and agreement-based depending on the company belonging to the employer union

• employment contract: salary, weekly working hours, term of notice etc.• common convention: whatever becomes a common convention at a work

place it cannot be changed without negotiations

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8. ObligationsØ Employment and mandatory fees

• social security fee• accident insurance fee• group life insurance fee• pension insurance fee• unemployment insurance fee

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9. Electronic corporate environment in FinlandØKatso-ID• is an electronic right to sign and act on behalf of a company• Master user of a company can manage sub user rights• Enables to monitor company tax account

• Faster and more cost efficient way for monthly obligations• Enables the representative of the company like Rantalainen Accounting Services to log in to the web pages of

government agencies like for behalf of the company:

ü Finnish Tax administrationü Customsü Kela (Social Insurance Institution)ü Kevaü City of Helsinki

ü Ministry for foreign affairs of Finlandü Policeü The Finnish Centre for Pensionsü The Unemployment Insurance Fundü Finnish forestcentrum

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10. Rantalainen Accounting Services

• Rantalainen has a strong international experience and network to offer. We have over 80 partnership companies abroad

• Apart from accounting and payroll services, we also offer reporting and administrative services to international companies and their subsidiaries in Finland

• Rantalainen is a member of Geneva Group International (GGI). GGI is a global Alliance of independent professional firms

• We provide our services in several languages including Finnish, Swedish, English, German, Russian, Spanish and Estonian

http://international.rantalainen.fi/

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10. Provided Rantalainen Accounting services

• Establishment• Administrative services incl protocols• Accounting• Payroll• Business taxation• Controller services• Reports• Auditing• Expert services

http://international.rantalainen.fi/

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Thank you!

Rantalainen Accounting Services -Your Partner in Business

More information: Jussi Ala-Risku +358-10-321 6746

[email protected]

Documents

WHAT YOU SHOULD KNOW BEFORE DOING BUSINESS IN FINLAND · • Organisations or foundations from outside the European Economic Area (EEA) wishing to establish a branch in Finland have