Finland has a population of 5.4 million people with a capital of Helsinki. There are several forms of business organizations including general partnerships, limited partnerships, limited companies, cooperatives, and private entrepreneurs. Accounting is compulsory for all businesses and follows good practice standards. Auditing requirements depend on the size of the business. Taxes include 20% corporate tax for limited companies and cooperatives and progressive income tax for individuals. VAT applies at standard 24%, reduced 14%, and reduced 10% rates on various goods and services.

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FINLAND 2016

2. CAPITAL: HELSINKI
POPULATION: 5,4 MILLION
POLITICAL SYSTEM: REPUBLIC
GEOGRAPHY AND POPULATION

3. The forms of Finnish companies are a general partnership, limited partnership, limited company and
co-operative. A foreign company may also run a business in Finland through a branch.
• Private Entrepreneur - A natural person who is resident in the European Economic Area (EEA) may
carry out the trade in the form of a private enterprise. If a person willing to set up a private
enterprise is residing outside the EEA, he/she needs to have a trade permit which can be granted
by The National Board of Patents and Registration (NBPR).
• A general partnership has to have at least two partners. The partners (ie the founders) can be a
natural or legal person which means that another general partnership may act as a founder. At
least one partner of a general partnership should be a resident or have the registered office in the
EEA.
• To incorporate a limited partnership, there must be at least two partners. At least one partner has
to be a general partner and at least one partner has to be a silent partner. A limited partnership
must have at least one general partner and at least one silent partner. A general partner (also
called an active partner) does not need to invest cash or other capital to the partnership, but a
silent partner should invest cash or other capital input.
FORMS OF BUSINESS ORGANIZATIONS

4. • A limited company can be incorporated by one or more founding subscribers of shares,
who can be natural or legal persons. A founding subscriber of shares does not need to
reside in the EEA, ie they may reside or have a domicile outside the EEA. In limited
companies, there are only shareholders, not general partners, and a private limited
company must have a minimum of EUR 2,500 of share capital.
• A co-operative can be incorporated by a minimum of three persons. The founders can
be natural or legal persons and the nationality or the places of residence of the
founders are not significant.

5. In Finland, accounting is compulsory for all entities carrying on a business or a trade.
The management of a company is liable to arrange the accounting and bookkeeping, which must be
prepared according to good accounting practices. The National Accounting Board in Finland gives
general instructions and issues opinions and decisions regarding good accounting practice. Listed
companies must prepare their consolidated financial statements according to the International
Accounting Standards (IAS) and the International Financial Reporting Standards (IFRS).
The financial statement includes the balance sheet, the income statement and the notes. Public and
large limited companies are also required to give a cash flow statement. Other companies must prepare
a cash flow statement if they exceed at least two of the limits of a small company in the previous
accounting period and the accounting period immediately preceding it.
The thresholds of a small company are as follows:
 Turnover of EUR 7.3 million
 Balance sheet total assets of EUR 3.65 million
 The company employs 50 persons on average
ACCOUNTING

6. In Finland there is no general obligation to have an audit conducted. The auditing obligation is
subject to the size of the business. If a corporation meets no more than one of the following
conditions in both the closing accounting period and in the accounting period preceding it, it
does not need to appoint an auditor:
• The balance sheet total assets in excess of EUR 100,000
• Net sales of more than EUR 200,000
• There are more than three employees on average.
AUDITING

7. • INCOME TAX OF A GENERAL OR LIMITED PARTNERSHIP - A general or limited partnership is
not separately liable for tax and is fiscally “transparent”. The net income is divided between
the partners in accordance with their shares as stated in the partnership agreement.
• INCOME TAX OF A LIMITED COMPANY - Corporate tax is imposed on the company’s profit,
which consists of business income, passive income and capital gains. The corporate tax rate
is 20%. Capital gains are generally treated as ordinary income and taxed at the standard
corporate rate of 20%. However, gains on qualifying holdings are exempt if certain
conditions are satisfied.
• INCOME TAX OF CO-OPERATIVE - All the income of a co-operative is taxed at the income tax
rate of 20%.
• INCOME TAX OF BRANCH OF A FOREIGN ENTREPRENEUR - A foreign undertaking can carry
out business activity in Finland without establishing an independent subsidiary and in these
cases the result of these fixed business facilities is taxed in Finland under Finnish taxation
legislation.
CORPORATE TAXATION

8. • INCOME TAX OF PRIVATE ENTREPRENEURSHIP - Finland operates a dual income tax
system for individuals, under which income is divided into earned income and capital
income. Earned income is subject to national income tax (at progressive rates),
municipal income tax, Church tax and social security contributions. Income from
capital is subject to national income tax at a flat rate of 30% on income up to EUR
30,000 and 33% for income exceeding this amount. The net result of a business or
trade activity is added to other income of an entrepreneur. The result of the
undertaking is taxed so that a 20% annual yield calculated on the net property of the
previous year is considered capital income.
INDIVIDUAL TAXATION

9. The value added taxation system (VAT) in Finland is very similar to other EU countries
because of the harmonisation of VAT procedures in Europe. There are three VAT rates in
Finland and some sales of goods and services may be exempted from VAT.
The standard VAT rate is 24%. It is applicable to all commercial sales of goods and services
where no reduced tax rates are applicable. A reduced rate of 14% is applicable to food
and animal feed (excluding live animals), drinking water, alcoholic beverages and tobacco
products.
A reduced rate of 10% is available for items such as books, medicines, passenger
transportation services, accommodation services and admissions to cultural and sporting
events. Exemptions are provided e.g. for health and medical care, social welfare services,
education, financial and insurance services, performing artists’ fees and certain
copyrights and lotteries, as well as other money games.
VAT

10. This publication must not be regarded as offering a complete explanation of the taxation and
corporate matters that are contained within this publication.
This publication has been prepared on the express terms and understanding that the publishers are
not responsible for the results of any actions which are undertaken on the basis of the information
which is contained within this publication.
The publishers and the authors expressly disclaim all and any liability and responsability to any person,
entity or corporation who acts or fails to act as a consequence of any reliance upon the whole or any
part of the contents of this publication.
Accordingly no person, entity or corporation should act or rely upon any matter or information as
contained or implied within this publication without first obtaining advice from an appropriately
qualified professional person, and ensuring that such edvice specifically relates to their particular
needs.
DISCLAIMER