Finland is among the most developed countries, with a human development index of 0.94. The country ranks 20th among 190 countries in the Ease of Doing Business Index, which shows that setting up a subsidiary business in Finland is relatively easy. Since the nation is a part of Europe, opening a company, there will provide you access to all the continent’s marketplaces.
The country ranks 46th in terms of GDP. It has a mixed economy where agriculture and the service sector contribute to the country’s GDP. Incorporating a foreign subsidiary in Finland can help you make the best use of all kinds of resources like natural gas, minerals, etc., allowing you to venture out into different industries.
A massive section of the population is youth. They are skilled and trained and can take up all kinds of roles. Hence, there is a high level of talent if you plan to onboard people to your organization. Learn everything about setting up a subsidiary in Finland without any hassle.
What are the Types of Subsidiaries in Finland?
Finland is home to different kinds of subsidiary companies. Some of the most popular kinds of subsidiaries recognized in Finland are as follows:
Limited liability company
A limited liability company is Finland’s most common type of subsidiary. In these companies, the liability of the shareholders is limited to the amount of capital they bring in.
- The company must have at least one shareholder who must be legal or natural.
- The company’s shareholders must bring a minimum share capital of 2,500 euros during the company’s inception.
- The shares are allotted to the shareholders from the share capital, and the shareholders get voting power in the company based on the number of shares they have.
- The company must conduct an annual general meeting and submit the annual report to the Registrar.
Public limited company
Another popular form of a subsidiary in Finland is the public limited company. The shares of these companies are offered to the public on the stock market.
- The company must have at least one shareholder to start the business.
- All the listed companies are called public limited companies. The shares of these companies are traded in the stock market.
- The company’s owners must bring in a minimum share capital of 80.000 euros to start a company.
- A public limited company must have a CEO and three members as a part of its board.
A cooperative association is a unique entity found in Finland. The members of the company are its owners.
- Any laws in Finland do not govern the division of the shares and the minimum share capital.
- The primary objective of these companies is to provide the livelihood of the members and support all kinds of economic activities.
- Cooperative associations in Finland do not have any minimum capital requirements. The shareholders of a cooperative association enjoy similar rights as compared to that given to the shareholders of an LLC.
- At least two people must come together to start a general partnership firm. They sign a partnership agreement before the firm is established.
- A general partnership firm operating in Finland, too, has no minimum capital requirements.
- However, the partners must bring in their assets to meet any obligations and liabilities of the company.
- While at least two members must sign a partnership agreement, one of the two partners must be a limited partner.
- You do not need to bring in any capital to start a limited partnership company.
- At least one of the partners will be liable to pay all the debts and meet the company’s obligations.
Before you begin the incorporation of a foreign subsidiary in Finland, you must carefully read about these companies and the laws governing them.
How to Set Up Subsidiaries in Finland?
You need to follow a few steps to set up a subsidiary in Finland. These steps include:
Step 1: Decide on a name for the company
- Select a name for your company in Finland once you decide the kind of subsidiary you want to incorporate in Finland.
- Once you decide on a name, submit it to the Trade Register, a part of the Finnish Patent and Registration office.
Step 2: Fill out the business notification
- Fill out a notification for starting a business in the country.
- You must duly submit the notification to the Trade Register and the other Tax Administration registers.
- You can fill in all the details of the company using Form Y.
Step 3: Fill in all the company registers
- As per Finnish laws, the companies must enroll in a few registers that the Government manages.
- Companies must enroll the business in the prepayment register. The Finnish Tax Administration directly manages this register.
- They must add their business to the employer register maintained by the Finnish Tax Administration.
- Businesses must register with the Finnish Tax Administration via the foundation declaration to pay a value-added tax.
Step 4: Submit the necessary documents
- The company must submit essential documents like the Foundation deed, the company’s description, business and banking activities, and shareholders’ information to the authorities.
- Submit all the necessary documents to the Trade Register.
Step 5: Open a bank account
- To operate a subsidiary business in Finland, you must open a bank account there.
- Sometimes, you may need to open a bank account before registering the company in a Trade Register.
- The bank account is used for the payment of share capital and other fees that it may incur during the incorporation process.
The company must collect the certificate of incorporation and register with the authorities managing pension, accident, and medical insurance. A subsidiary business in Finland must complete all legal obligations before starting its operations.
Benefits of Setting Up a Finland Subsidiary
There are multiple benefits to opening a subsidiary business in Finland which include:
- There are no residency requirements for setting up a business in Finland. Hence, both ex-pats and nationals can start a subsidiary in the country.
- The documentation required to start a subsidiary business in Finland is minimal. Hence, you can start a business with less paperwork.
- Most kinds of subsidiaries in Finland do not have a minimum capital requirement. Even if they have one, the amount is relatively less.
- A subsidiary business in Finland is considered at par with all the other businesses. Hence, all the employees have access to the same benefits, and the same laws govern them.
Documents to Prepare When Opening a Subsidiary in Finland
Before you start with the subsidiary company formation in Finland, you must collect all the essential documents. Some of these documents include the following:
- A duly notarized Memorandum of Association
- A duly filled business notification
- Articles of Incorporation
- Foundation deeds
- Description of the company’s activities
- Notarized copies of shareholders’ passports
- Information of all the shareholders
You must submit the documents to the Finnish Patent and Registration office, and they will take it further. You must also register with the tax authorities to ensure you make all the tax payments timely.
What Business Forms can Finland Subsidiaries Take?
A Finnish subsidiary may take up any form of subsidiary business depending on the number of people and the amount of capital required. In Finland, you can establish wholly-owned or joint venture subsidiaries. There must be several foreign founders if an overseas subsidiary is partially owned.
Due to their adaptability and ease of formation, limited liability companies are Finland’s most widely used company structures. Nevertheless, depending on your requirements and financial position, you can consider other options while setting up a subsidiary in Finland.
Finland Subsidiary Laws
Following the Finnish government-imposed subsidiary regulations is essential while opening a business in Finland. These regulations are necessary as they safeguard the employees and their rights while working for a company.
Companies must obtain the Incorporation Certificate before registering with the nation’s tax authorities. It would be best to get all the required certificates once the incorporation process is complete. Finnish law applies to subsidiaries located in Finland. The laws of the country that your parent company is a part of are not binding on the employees of the subsidiary company.
You must also open a bank account to conduct all business and payroll-related transactions. As required by law, you must pay your staff in local currency i.e. Euro. You must duly follow the minimum share capital and shareholder regulations while establishing a subsidiary in Finland.
Post Incorporation Compliance
After establishing a subsidiary business in Finland, you must adhere to Finnish regulations for foreign subsidiaries. Here is a list of some of these requirements:
- You are responsible for paying all the employees’ taxes and VAT each year.
- You can appoint an auditor for it.
- You must specify each board of directors’ responsibilities in the rules of procedure if the company has multiple boards of directors.
- Additionally, you must make a private registry for every shareholder.
- The business must deliver full financial accounts to the Finnish authorities every year.
Taxes on Subsidiaries in Finland
Finland has one of the most well-developed taxation systems in the world. The entire system is digitized so that the companies can pay taxes to the Government without any hassle. The Finnish Tax Administration has a dedicated team offering businesses free tax advice.
The rate at which corporate tax is charged in Finland is 20%, which applies to the company’s total income, irrespective of the source. The taxation also depends on the type of company. For instance, the tax of a partnership company is based on the collective profits of the company.
Tax Incentives for Businesses Opening a Subsidiary in Finland
Certain R&D costs are deducted annually as per the new law. A 50% additional deduction is allowed on R&D subcontracting costs. While the minimum limit for these deductions is EUR 5,000, the maximum limit is EUR 500,000. Also, the country has a double taxation treaty with several countries that help companies save up taxes.
Other Important Considerations
It takes time to set up a subsidiary business in Finland. Take a few weeks off work to focus on the company’s expansion. You must also travel to Finland to fulfill all legal obligations. If your parent company keeps you busy, you can delegate the duty to another business executive or take some additional help in completing the tasks.
Additionally, you must finish every step of establishing a subsidiary company in Finland within a defined budget. Therefore, set a budget before incorporating a foreign company in Finland because it will help you stay in control of how much you spend in the process.
How Multiplier’s Employer of Record Can Help You Hire and Expand in Finland
You need enough time and energy to set up an international business. Understanding local business customs and labor laws may be complex when establishing a subsidiary abroad.
Why not use a service company like Multiplier to assist your company in overcoming this growth barrier?
Multiplier takes care of all the formalities in entering a new market, so you don’t need to worry about establishing a new business entity in the country. The best course of action would be to contact Multiplier, who has domestic and international expertise and will ensure that all Finnish labor laws and conventions are strictly adhered to. With a PEO like Multiplier, you can quickly create international teams and investigate new market opportunities.