Finland: the reliable “OY” in tax planning

Finland is a state in Northern Europe, a Nordic country and one of the most advanced economies in the world. Finland has been an EU member since 1995 and joined the Schengen community the following year.

The Finnish limited liability company (“Оsakeyhtio” or “Oy”) is the type of corporation in most demand. An individual or a legal entity is able to create a company with a €2500 minimum capital in shares. The liability of the shareholder, the right to vote and the share in profit/loss are limited by the size of the member’s capital contribution.

This is the basic form of ownership pertaining to business immigration. The value of the stated capital is the limit of liability in case of company bankruptcy.

Advantages of using Finland as your jurisdiction of choice

1. EU and Eurozone membership, and Schengen community member
2. Political and economic stability
3. Reliable tax system and attractive fiscal policy
4. Prompt registration with minimum red tape
5. Individuals and legal entities as shareholders
6. Resident permit possibility
7. Low-cost office rentals
8. Wide use of English

What documents will you receive upon company registration?

1. Company registration number (‘Y-tunnus’)
2. Tax registration number
3. Statement of inclusion on tax prepayments register
4. Statement of inclusion on register

Taxation and statutory requirements at a glance

Taxation

The corporate tax rate is 20%. Corporate tax prepayments are to be effected at the start of the tax year and calculated either on the average income rates in the industry or on the taxable income in the previous tax period. At the end of the tax period a recalculation is performed, resulting in either a surcharge or refund of excessive tax payments.

Withholding tax
• Dividends, interest payments and royalties payable to EU residents are not taxed. Royalties are subject to VAT.
• Dividends paid to non-residents are subject to withholding tax at the rate of 20%.
• Interest payments to non-residents are free from withholding tax except in some specified cases.
• Royalties paid to non-residents are taxed at the rate of 20%.

Value added tax
• All indirect taxes in Finland are subject to EU Directive 2006/112.
• The VAT basic rate is 24%. Public transit services, publishing, drug production, health services, food processing and fodder production are taxed at reduced rates of 10% and 14%.
• Export deliveries, shipbuilding and aerospace products are VAT-free.

Accounting, audit and filing requirements
Record keeping is obligatory. Accounting records are open to the public.
A statutory audit is required.

Bank accounts

A company founder shall appear personally in order to open an account with the bank.
The bank is committed to the ‘know-your-client’ principle and generally requires the shareholder register or any other legal document containing the registration numbers, as well as the both the list of owners and company officials.

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Eva PetrovskaFinland: the reliable “OY” in tax planning