Starting up business in Finland – foreign company
Starting up business in Finland normally requires that the foreign company file a Start-Up Notification form. This facilitates entry in the appropriate Tax Administration registers. However, if the business operation in Finland only amounts to the handling of a one-off assignment, the foreign company may simply ask for a tax-at-source card instead of being entered in our registers.
When you start up a business in Finland you must file a form for reporting it. Fill in the 'Y' form for "Start-up notification". Both the Tax Administration and the Trade Register authorities use the same form.
Select the correct form for your company:
- Y1 + appendix 6204: foreign-registered corporate entities
- Y2 + appendix 6204: foreign-registered partnerships (similar to Finnish 'ay' and 'ky' legal form)
- Y3 + appendix 6206: foreign self-employed businesses or professionals.
- Forms are available at ytj.fi. Send completed form to PRH-Verohallinto, Business Information System, PO Box 2000, 00231 Helsinki.
- Foreign certificate from the trade register of the country of tax residence.
The Finnish Tax Administration examines the details submitted in the Start-up notification and its enclosures, and determines whether the company is deemed to have a permanent establishment in Finland. This cannot always be done at the registration stage of a new business operation. In that case, we re-examine the question of a permanent establishment in connection with the tax assessment of the company’s first tax year.
A foreign company that conducts business in Finland can be registered in the Prepayment Register if its country of tax residence has an income tax treaty with Finland, or if it is deemed to have a permanent establishment in Finland. If no entry in the Prepayment Register has been made, or if no zero-rated tax card has been issued to the company, the incoming payments from customers are subject to withholding at the rates of 13% to 35% depending on its legal entity form.
If the company has a permanent establishment in Finland, the Tax Administration instructs, upon registration, the company to pay a tax-prepayment which corresponds to the annual taxable income generated by the permanent establishment. The company has entered the projected income on its Start-up form. It is possible for the company to ask for a change in the prepayment.
Note: In itself, registration in the Prepayment Register does not make the company liable to Finnish income tax.
Tax-at-source cards for a single assignment
If the company only has a single assignment in Finland, it may apply for a 0% tax-at-source card for the duration of the contract instead of prepayment registration. The card can be issued on the condition that the activities of the company do not give rise to a permanent establishment.
The form to fill out is Application for a Tax-At-Source Card.
- foreign certificate from the trade register of the country of tax residence
- photocopy of the contract, proving that a construction job, an employee leasing arrangement, or other assignment has been agreed with the customer and this is the reason for your request for the card.
Register of VAT payers
Foreign companies must become VAT registered if VAT is to be charged on their sales of goods or services, and if the operation gives rise to a permanent establishment for VAT purposes. If the company is not deemed to have a permanent establishment in Finland, the general rule is that the buyer of goods or services must pay the VAT (within a VAT reverse-charge scheme).
However, reverse-charge VAT is not applicable in the following situations. Instead, the seller must always register for VAT in Finland if:
- The buyer is a foreigner with no permanent establishment and no Finnish VAT registration.
- The buyer is a private person.
- Distance sales of goods from another EU country to Finland are in question – for more information, click VAT regulations concerning distance selling to Finland.
- Services being sold are passenger transport.
- Services being sold relate directly to entry to events which involve teaching, science, culture, entertainment and sports, or to events such as fairs and exhibitions.
Register of employers
Permanent establishment in Finland
If a foreign company has a permanent establishment in Finland for income tax purposes, it is subject to the same employer obligations as any Finnish company. Changes were made at the beginning of 2019 to the reporting routines relating to wages paid out.
Registration as an employer is mandatory if wages or salaries are paid in Finland to at least two employees on a regular basis or to at least six employees at the same time on a temporary basis.
The company must withhold tax on the wages it pays to employees, following the instructions printed on each employee’s tax card.
- Employees staying for a shorter time than six months are issued a tax-at-source card (lähdeverokortti; källskattekort) at the local tax office. If the employee fails to show a tax-at-source card, the company must withhold 35% tax.
- Those staying longer get normal Finnish tax cards, and their withholding follows the usual, progressive income-tax scheme. If such an employee fails to provide a tax card, the company must withhold 60% tax.
No permanent establishment in Finland
If a company has no permanent establishment in Finland for income tax purposes, it does not have to seek entry in the Register of Employers, and it is not treated as having any employer obligations. However, it must provide a report on the wages that it paid out if its workers stay in Finland for longer than 6 months.
The report is also required in case the foreign company is a provider of leased employees for an assignment or job carried out in Finland, and for a Finnish party using the services of the leased workers, unless there is an international treaty that prevents Finland from collecting income tax on the leased employees' wages.
Changes were made at the beginning of 2019 to the reporting routines relating to wages:
- If wages were paid on or after 1 January 2019: File an earnings payment report to the Incomes Register by the fifth day after the day when you paid your workers.
- If wages were paid during 2018 or prior to 2018: File an employer payroll report to the Tax Administration.
However, the company is entitled to request for employer registration on a voluntary basis. When the company is registered, it must either withhold tax at source, or carry out normal Finnish withholding according to the instructions on each employee's tax cards.