Foreign companies entering the Finnish market will benefit from the country's prominent position in leading global economic groupings - such as the European Union (EU), European Economic Area (EEA), Organization for Economic Cooperation and Development (OECD), the World Trade Organization (WTO) and the Nordic Council.
Finland also offers EU-funded incentives for companies setting up in certain sectors or locations, while small and medium enterprises (SMEs) are a robust part of the economy. However, incoming companies will find these attractions balanced by the complexities of employment, tax, payroll, and corporate legislation while ensuring their employees are working productively and efficiently.
There are speedier and cost-effective alternatives, with Bradford Jacobs opening the door to a hassle-free route into the French economy for your company. Work alongside our Professional Employer Organization (PEO) recruitment specialists, then our Employer of Record (EOR) in-country experts to handle every aspect of compliance. Employers can depend on our in-depth knowledge of Finland, its work culture and business practices.
Here we have set out some basic summaries of what you need to make the transition into the Finland market, whichever sector you operate in.
Starting a Business in Finland
Finland has borders with Russia and Scandinavian neighbors Sweden and Norway, and a third of the country is inside the Arctic Circle. Economically, it is a hotbed for small and medium businesses, with a predicted Gross Domestic Product for 2021 of 300 million US dollars, ranking it 44th in the world.
Metals, chemicals, electronics, machinery, shipbuilding, pulp, and paper are among its major sectors. Encouragingly, the World Bank ranks Finland 20th out of 190 nations in its ‘Ease of Doing Business’ report.
Foreign companies who wish to expand into or start their business in Finland usually prefer the option of a Private Limited Liability Company, known as an osakeyhtiӧ. All companies, foreign-owned or local, come under the Finnish Companies Act and must register with the Trade Register, as well as enroll on various registers with the Tax Administration, including the VAT Register, Pre-Payment Register, Employer Register, and the Social Insurance Institution (Kela).
Other procedural requirements include:
- Choose a unique company name with the suffix ‘oy’ for a private limited liability company
- Open a local business account if the company has share capital (but this is optional).
- Incorporation documents including Memorandum of Association, Articles of Association and Trade Register notification
- Obtain a 12-digit tax number for employees and tax card
- Obtain the Business Identity Code (YTJ)
- Documents filed to the Central Tax Administration and Trade Register must be in Finnish or Swedish
Expanding Business into Finland
Foreign companies moving into Finland are entering a robust economy, ranked an impressive 41st in Gross Domestic Product for a relatively small nation with a population of just 5.5 million. Finland is a multi-sector economy with services taking the major proportion, while manufacturing and refining are also key factors.
Leading business opportunities feature electronics; motor manufacturing concentrating on tractors, truck, buses, and military vehicles; chemicals; forestry producing pulp and paper to account for 20% of exports; energy and metals mining.
Finland welcomes foreign investment, but the employment market is complicated by its mix of laws, collective and trade union agreements affecting employee benefits and entitlements. There are other questions too: where will you find distributors, manufacturers, and offices?
Possible expansion locations for businesses include Helsinki, Espoo, Tampere, Vantaa and Oulu.
Finland Business Facts
- Capital city – Helsinki
- Population – 5.5 million
- Major cities – Helsinki; Espoo; Tampere; Vantaa; Oulu
- Official languages – Finnish and Swedish
- Economy/GDP (2020) – $US278.86 billion, 41st
- World ranking: Ease of Doing Business – 20th out of 190 countries (World Bank, 2020)
- Leading sectors – service sector (60% GDP); industry sector (24.2% GDP); agriculture sector (2.3% GDP). Largest industries: Machinery, vehicles, and metal products; forest and timber products; IT, communications, and biotechnology; chemicals
- Main exports – include telecommunications equipment; machinery including computers; trucks, tractors, and buses; forestry and timber, paper, and paper products; mineral fuels and oil
- Main imports – include food stuffs, crude petroleum; cars and transport equipment; chemicals, iron, and steel
- Main trading partners – Germany, Russia, Sweden, Netherlands, USA, China
- Government – Parliamentary system, federacy, and republic
- Currency – Euro
Advantages and Challenges of the Finland Economy
Advantages of expanding into the Finnish economy include:
- Corporate Tax: Finland has the lowest rate among Nordic countries and below the European Union average
- Politics: Finland is politically stable
- Economic Attitude: Globally minded, welcomes foreign investment with incentive opportunities
- Language: English is usually language of business
- Logistics: High-class Road and rail links, international airports, ports opening onto Baltic Sea, easy access to rest of Europe
- Ease of Business: The World Bank ranks Finland 31st out of 190 nations for ease of starting a business, 10th for paying taxes and No. 1 for resolving insolvency
- Trade: Member of the European Union with whom it has around 50 preferential trade agreements
Challenges facing Finland include:
- Reducing labor cost
- Improving demand for its exports
- Ageing population
Limited Company / Subsidiary or Branch in Finland
A subsidiary established in Finland is a totally separate legal entity from the parent company, with independent management and can have a different company name and follow its own business activities. The subsidiary can use this freedom to explore markets and build credibility.
A branch, however, is an extension of the parent company and is not considered a separate legal entity.
Main characteristics of a subsidiary:
- It is an entirely independent legal entity from the parent company
- A shareholder’s liability is only limited to the value of their shares
- Incorporation documents include Memorandum and Articles of Association and Trade Register notification
- Subsidiaries require a board of directors and a managing director
- Subsidiaries are subject to Corporation Tax on bot Finnish and worldwide profits
Main characteristics of a branch:
- A branch has no separate legal identity from the parent company
- The parent company has complete liability for the actions and activities of the branch
- Documentation includes resolution to establish a branch, Trade Register Notification, and extract from parent company’s register
- A branch must have a local representative from the parent company
- Branches do not require Finnish directors
- Branches in Finland are included in the tax liability of the parent company
Legal Structures for Finland Market Entry
All companies in Finland are regulated by the Companies Act and must comply with certain legal requirements.
Legal Structures for a Private Limited Liability Company:
A private limited liability company (osakeyhtiӧ) is the usual choice for foreign companies expanding into Finland. Board members do not need to be Finnish citizens and if at least one is a European Economic Area (EEA) resident, no extra permit is needed. The managing director must be an EEA resident. If not, however, a separate permit is required.
There is no minimum requirement for share capital. The company does not need to appoint an auditor if only one of the following conditions applies: balance sheet does not exceed €100,000 (US$118,000) or the net sales or comparable revenue does not exceed €200,000 (US$236,000). The company can have between one and five directors, but if there are only two, a deputy must be named.
Legal Requirements for a Branch:
Legally, the branch must follow the same business as the parent company. If the parent company is located outside the European Economic Area (EEA) the branch will need a permit from Finland’s Patent and Registration Office. The branch must have a registered office and a named representative to deal with local authorities on the branch’s behalf.
Opening a Business Bank Account in Finland
Companies starting a business in Finland need a corporate bank account to keep business transactions separate from personal finances, as part of the company’s accounting system.
The corporate bank account for a foreign, private limited liability company needs to register before opening the account and there are no requirements regarding minimum investment or share capital.
The next step is to gather all relevant documents for the preferred bank according to their services, fees, language spoken and number of branches perhaps. Documents required for the bank, bearing in mind that each bank will have its own policies with regards to Know Your Customer and money laundering checks, are:
- A document with reasons as to why the company is opening a corporate account
- Information about owners or shareholders
- Paperwork from the Trade Register (90 days old or less)
- Articles of Association or Memorandum
- Authority to open the account from officers of the company and signatories of those signing on the account (board minutes)
- Reference from bank where company has an account in country of residence (no more than 90 days old)
- Details of company’s financial dealings / transactions / budget
- Business plan or details of business operations
- Details of bank account operators including signatures and passport copies
- Personal details and ID of responsible manager opening the account
These documents may need to be translated into Finnish, Swedish or English, so check when choosing your bank. Remember to ask for relevant tools to operate the account for your business e.g., online banking IDs, debit / ATM cards.
Limited partnershipust have a local bank account.However, it is not mandatory for foreign companies to have a Finnish account from which to pay employees’ salaries, but the payees must have a local bank account.
Company Formation in Finland
There are five main company types in Finland. They are:
- Limited company (osakeyhtiö) – of which there are three types – Private limited companies, Public limited companies, and European companies (societas europaea)
- Co-operative society (osuuskunta)
- General partnership (avoin yhtiö)
- Limited partnership (kommandiittiyhtiö)
- Branch office (sivuliike)
Private limited companies are the usual form to conduct business in Finland. Most company types are regulated by the Companies Act, whereas European companies are mainly regulated by the Finnish European Companies Act. European companies, however, are extremely rare in Finland.
Although registration procedures can vary slightly according to the company type, they generally include:
- Prepare Articles of Association and Memorandum and declaration by the founding company of their intention to form a subsidiary in Finland
- Register an office address and open a local business bank account if depositing share capital (optional for a private limited liability company)
- Provide incorporation documents and Trade Register Notification
- In addition to the Trade Register, companies must also enroll on various registers with the Tax Administration, including the VAT Register, Pre-Payment Register, Employer Register, and the Social Insurance Institution (Kela)
Finding an Office in Finland
Finland offers a wonderful work/lifestyle balance with a first-class working environment, which gives employees secure employment, excellent public facilities, and healthcare services. Finnish employers encourage remote working and embrace Flexi-work which offers agile working conditions in the pursuit of talent mainly due to the Working Hours Act.
There are many successful companies which have established roots in Finland, which is a key European Tech Hub and attracts thriving IT companies and entrepreneurial start-ups.
Finland offers a range of physical and virtual offices, space-sharing with meeting and conference rooms, office hotels and workspaces with shared facilities e.g., business centers, mail, and phone call handling.
For those who require more than ‘shared-space’, location is one of the most important aspects of ‘doing business’. Points to be considered:
- Where are business hubs or clusters located?
- Demographics of potential employees, ease of travel and good transport links.
- Is it attractive and functional to keep the work force happy?
- Is it affordable and does it have room for expansion?
- Are the areas around the office desirable, clean and good for mental health to attract the best workers and provide services and accommodation?
- What local support or government grants or tax breaks are available in the area?
- In other words, is your office ‘good’ for doing business?
Finding a Manufacturer in Finland
Manufacturing in Finland is dynamic and the mainstay of the Finnish economy, which contributes to around 50% of its exports and 30% of its GDP. Once you have set up your company, located your office and have developed your product then you will be looking towards a manufacturer to partner with, to kick start your business in Finland.
All of these steps can take time and money, but you can save on both by using a PEO service! Bradford Jacobs can assist from day one from recruiting to compliance, finding an office, manufacturer, and distributor. For those of you going it alone here are a few suggestions and links that may make it easier:
- Do they hold the relevant quality certificates?
- Can they demonstrate a sound knowledge of your product type?
- What businesses have they worked with? Ask about current clients!
- Can they deliver direct to customers?
- Can they keep up with demand? Or do they outsource?
- Can they source basic materials?
- Are they financially stable?
- How will local customs and language impact production?
- Do they have minimum order quantities, or can they produce in bulk?
- Discuss possible recompense for poor quality or late deliveries
- Payment options available
You may also want to consider:
- Market Research to avoid manufacturing a product in a saturated market
- Licensing to a company that can handle manufacturing, marketing, and distribution
- Can the manufacturer build and test a prototype?
- Protecting your intellectual property
Finding a Distributor in Finland
Although Finland has a relatively low population, it has access to a huge ‘common market’ in the European Union (EU) of over 450 million consumers. So, when looking to cover an area such as the EU, the Nordic countries, and the Baltic States, all of which are within easy reach and with whom Finland has trade agreements - you will need a top-line distributor who understands your industry’s distribution channels!
Finding the ideal partner who can help with realizing your objectives and putting your business plans into action is vital. First class distributors can also help with cultural differences, language, and local procedures in order to maximize your sales.
If you do not have help accessing companies, then check out the business directories, trade fairs as well as networking through business communities and social media, such as LinkedIn, to assist in familiarizing yourself with the region.
Also, you should consider approaching a department for commerce or international trade in your home country with regards to trade missions targeting Finland. Maybe they can focus on upcoming events or conferences and home in on the best companies for arranging one-to-one meetings.
Enter New Markets with Bradford Jacobs
Bradford Jacobs opens the door for companies like yours seeking to explore new markets in your new territory. Finland offers expansion into a variety of markets, as well as growth and development support.
Part of this exploration includes recruiting the right staff to assist with your expansion plans. Our Professional Employer Organization (PEO) specialist teams have in-depth global knowledge of how to expand into and recruit in new territories – and our Employer of Record (EOR) services will guarantee your company complies with local registration and recruitment law, taxation, and payroll.
Bradford Jacobs also provides ongoing consultation on human resources based on our understanding of individual cultures and customs of every country being targeted for global expansion. Work with Bradford Jacobs to expand your company and ensure the best people are on your team.