FINLAND 2016
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Web Site: www.shermannigretti.it E-mail: info@shermannigretti.it Tel. +39 (0)2 7722951 Mob. +39 335 6030346 Twitter: @ShermanNigretti Linkedin: Gianmauro Sherman Nigretti
GEOGRAPHY AND POPULATION CAPITAL:
HELSINKI
POPULATION:
5,4 MILLION
POLITICAL SYSTEM:
REPUBLIC
FORMS OF BUSINESS ORGANIZATIONS 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).
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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.
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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.
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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.
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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.
ACCOUNTING 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
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Balance sheet total assets of EUR 3.65 million
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The company employs 50 persons on average
AUDITING 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
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Net sales of more than EUR 200,000
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There are more than three employees on average.
CORPORATE TAXATION •
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.
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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.
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INCOME TAX OF CO-OPERATIVE - All the income of a co-operative is taxed at the income tax rate of 20%.
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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.
INDIVIDUAL TAXATION •
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.
VAT 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.
DISCLAIMER 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.