When setting up a company, one of the most important things to find out is the basic corporate taxation system, even more so if the territory is new for you. In Finland, the system of the taxation of businesses is rather simple and the sommunication with the tax administration is highly digitalized.
The Finnish corporate law enables different company forms and the taxation varies between them. The most common company established in Finland is a limited company, and usually, this is tje company form also the foreign business owners choose when expanding to Finnish markets.
Corporate tax in Finland
The basic corporate tax in Finland is rather competitive when compared to the average in other parts of the European Union. Corporate income tax rate in Finland is 20 % (since 2014). If the company is fully liable to pay taxes in Finland, then the Finnish taxation law is applied.
This is usually the case, as setting up a business in Finland establishes the main office as well to the same location, and the company is taxed accordingly. However, the company can also be in certain conditions liable to pay only limited taxes. In that case, the taxation contracts between Finland and other countries will apply.
Value-added tax – three tax brackets
Almost all of the transactions of goods and services are taxed in Finland with a value-added tax, of which there are three different tax brackets with varied rates, the most common one being 24 %. There are certain services and goods which are taxed according to a lower rate of 14 % and 10 %. For example, books and lodging services are taxed with 10 % rate. Some services are not taxed at all, for instance entertainment performance fees. You can find more information on different VAT tax brackets from the official tax administration homepage.
When founding a limited company to Finland, at least one member and one deputy member of the board must be a permanent inhabitant of European Economic Area. Otherwise nationalities do not matter when setting up a business in Finland and anyone can start a company in Finland. The taxation of dividends depends on many factors, such as if the company is enlisted or not, and the value of dividends. The tax at source, when dividends are paid out from the country, depends on the tax contracts between Finland and the country of destination.
Communication with tax administration
At the same when the company is announced to the trade register, it should be announced to the tax prepayment register and VAT payment register. This is possible when the announcements are made through the Finnish Business Information System, which enables to do the announcements with a single notification. If the company has two or more permanent full-time or at least six short-time employees, it should be also announced to the register of employers.
The communication with tax administration itself is highly digitalized in Finland as in all of the EU. Most of the announcements and payments can be conducted through digital communication channel. And this is the way the Finnish taxation is going at the moment: Finnish tax administarion aims at fully digitalizing all tax services in the near future.
Sometimes the company setting up a business in Finland does only have an office in the country, but no employees taking care of the everyday financial management as the company’s administration is located elsewhere. In that case, the company should name a tax representative in Finland. These tax representatives can receive announcements from and take care of the communication with tax administration. Taking care of the tax issues and matters are at its simplest with a professional partner even for those who do have company administration in Finland. Partner will help with the details of taxation and gives welcomed support in everyday financial management.