Foreign business in Finland
This section describes the tax obligations of a foreign company if it operates a trade or business in Finland. Foreign companies may also own assets located in Finland. The obligations of a foreign company vary on the basis of what kind of business it operates in Finland, the type of assets owned, and whether or not the company has a permanent establishment in Finland. It should be noted that the Finnish permanent establishment rules are different for VAT and income tax purposes.
Starting up, making changes, and termination
The set of 'Y' forms is designed for registration and setting up businesses, for changing the address or making other changes in registration data, and for notifying the authorities that the business will close down. These forms permit filers to report information to the Tax Administration and to the trade register authority at the same time. The information submitted is utilized by the Tax Administration to determine what types of registration the new company should have, and also to determine whether the new business operation will make up a permanent establishment in Finland.
Paying income tax in Finland
The foreign company’s liability to pay income taxes in Finland is usually dependent on whether it is deemed to have a permanent establishment in Finland. By way of exception from this rule, certain types of income received by a foreign company will always entail tax liability, even though there is no permanent establishment in Finland. Examples of such income include rental income and capital gains related to holdings of real property and buildings.
Paying VAT in Finland
If a foreign company has a fixed establishment in Finland (for VAT purposes), entry in the Finnish VAT register is mandatory. Furthermore, a foreign company is in some situations expected to file a VAT registration application in Finland even if no permanent or fixed establishment exists. Examples of these situations include selling goods or services to consumers.
On application, a foreign company can be registered as a VAT taxpayer in Finland even in situations that involve no direct registration obligation.
Employer obligations
Foreign companies always have the obligation to submit an Employer payroll report to the Finnish Tax Administration if they have paid wages through their payroll system to a resident individual in Finland.
If a foreign company has a permanent establishment in Finland, and is paying out wages attributable to the business of the permanent establishment, it should apply for registration in the Tax Administration´s register of employers. In the same way as Finnish registered employers, the foreign company will then have the same employer obligations, including information reporting, payroll reporting and other requirements. Additionally, it should be noted that entry in the register of employers can also be based on a voluntary request at the initiative of the foreign company.
To begin operating a business in Finland, the Start-up notification form should be submitted to the registration authorities.
If a foreign company is paying wages to someone for work that is performed in Finland, the foreign company may have employer obligations related to taxation and to social security system.
Employer obligations for a foreign leasing company will arise if it has an employee-leasing contract with a Finnish service recipient company.
Permanent establishment rules in Finland are slightly different for VAT taxpayers, on the one hand, and for a nonresident's liability to pay Finnish income tax, on the other hand.
Fill out the appropriate 'Y' form to notify the Finnish Tax Administration of changes in the business operation.
If you ever go out of business, you should file a 'Y' form to notify the Tax Administration and other authorities.
Too much tax at source may have been withheld on a payment made to a foreign company. In this case, the company can send a request to the Finnish Tax Administration for a refund.
Foreign corporate entities must submit a tax return or an explanation of business when they have received a pre-completed tax return form, or the form or explanation has been requested.
If foreign self-employed professionals and businessmen are registered in Finland and have a Finnish Business ID, they should file a tax return in Finland.
If a foreign general and limited partnership is registered in Finland and has a Finnish Business ID, it has to file a tax return in Finland.