Foreign business starting in Finland
Entering the Finnish market as a foreign company involves navigating a range of legal, tax, and administrative requirements. From mandatory registrations and VAT compliance to employer obligations and employee taxation, each step depends on your business structure and the nature of your operations. Whether you are establishing a subsidiary, setting up a branch, posting employees, or managing payroll and accounting, Tuokko provides comprehensive support throughout the entire lifecycle of your business in Finland.
Legal obligations in a nutshell
Starting business operations in Finland as a foreign company involves a variety of legal and administrative obligations. These include mandatory registrations, taxation requirements, and employment-related responsibilities from both the employer’s and the employee’s perspective when coming to Finland for work. The specific obligations and their applicability depend on several factors, such as the legal form of the business, and whether operations will be carried out temporarily, through a newly established Finnish legal entity, a branch, or a permanent establishment.
Please note that some business sectors such as construction, healthcare, finance, and other specifically regulated industries are subject to additional requirements for establishing a business in Finland.
The taxation of business operations in Finland is governed by Finnish tax legislation as well as by applicable tax treaties between Finland and the company’s home country. In general, non-resident companies are liable to pay tax only on income sourced from Finland. However, foreign companies may also be subject to corporate income tax, value-added tax (VAT), or real estate tax.
It is also important to note that if the company’s effective place of management is located in Finland, meaning that key decision-makers or management personnel operate from Finland—the company may become a tax resident in Finland and thereby liable for worldwide income taxation.
Employment-related obligations depend on several factors, including the employee’s country of residence, EU/EEA citizenship, the duration of the work period in Finland, whether the work is agency work, and whether the individual is self-employed or an employee. Such obligations for foreign employers may include registration requirements, withholding tax on wages, reporting to the Incomes Register, social security contributions, and compliance with Finnish labor laws.
Tuokko provides comprehensive assistance and services covering all of the aspects mentioned below, both at the start and throughout the lifecycle of your business operations in Finland.
Below, we provide a general overview of the key obligations and aspects to consider when establishing business operations in Finland. It is important to note that the applicability of these requirements should always be evaluated on a case-by-case basis with the help of a qualified expert.
Legal Registrations and setting up a business in Finland
Before starting any official short-term or temporary business operations in Finland, a company is required to submit a start-up notification form to the Finnish Tax Administration, along with additional documentation, to obtain a Business ID (business identifier number). A Business ID is required for many purposes, such as employee registrations, income reporting, and VAT. Additional required documents typically include an extract from the foreign trade register, the Articles of Association, and power of attorney if the registration is handled by a representative.
In addition, the company may need to register in other registers maintained by the Finnish Tax Administration, such as the VAT Register and the Prepayment Register. If the company does not register with the Prepayment Register, its customers must withhold tax from payments. If the company employs staff in Finland, it must also register in the Employer Register. These registrations can be done simultaneously using the same start-up notification form.
When the company ends its operations in Finland, it must submit a deregistration notification, ensure that all remaining tax obligations are fulfilled, and confirm the termination of its obligations.
Establishing a subsidiary or a separate legal entity for more significant and long-term business operations in Finland requires filing specific forms and submitting additional documents to the Finnish Trade Register (maintained by the Finnish Patent and Registration Office, PRH). These include the Articles of Association for the new company, the founding agreement, and information about the subsidiary’s representative in Finland. The company may also have to provide other relevant information, such as the field of business, details of board members, and information on auditors. If the parent company is from outside the European Economic Area (EEA), an additional permit from the authorities may be required for setting up a subsidiary. In this case, appointing a local representative in Finland is mandatory.
An alternative to establishing a subsidiary is to set up a branch (sivuliike). A branch is not a separate legal entity but an extension of the foreign company. Setting up a branch also requires registration with the Finnish Trade Register and appointing a representative residing in Finland.
Tuokko provides assistance with various company starting, registration processes, and other business law services, including transactions, family business advisory, and company law matters.
Employer registration and responsibilities
A foreign employer company operating in Finland and paying salaries on a regular basis must register with the Finnish Tax Administration’s Employer Register if the business is carried out through a Finnish company, a Finnish subsidiary, or a permanent establishment (see separate pages for more information on these business forms).
In such cases, the employer is obliged to report employees’ salaries and withholding taxes to the Finnish Incomes Register, and to comply with Finnish social security obligations if the employees are covered by Finnish social security. These obligations apply to employees who work in Finland and are tax liable in Finland for the work performed (see Section 5: Employee Tax Obligations for more details).
Even if the company does not have a permanent establishment in Finland, it must still submit the required salary notifications to the Incomes Register if the employees are covered by Finnish social security. If the employees are entitled to Finnish social security, the employer must also arrange for Employees’ Pension Insurance (TyEL), statutory accident insurance, and other applicable social security contributions. In most cases, the employer will need to apply for a certificate of coverage (residence or A1 certificate) to determine whether the employee remains under the home country’s social security system or is entitled to Finnish social security.
Tuokko offers extensive payroll and employer reporting services. Even if the company does not pay salaries regularly and belong to the employer register, all salaries paid must still be reported to the Income Register. Obligations and registration matter from the employee’s perspective are described below in the last section.
When Posting Employees to Finland
When posting employees to Finland for a temporary period for example under subcontracting, intra-group transfers, or the hiring out of temporary construction labor without establishing a separate legal entity in Finland (a practice especially common in construction and shipbuilding), the company must appoint a representative in Finland for the posted employees.
This representative ensures compliance with Finnish employment legislation and occupational safety regulations while the employees are working in Finland. The representative in Finland is also responsible for keeping the required documents available, including:
- Employee identity documents (e.g., ID cards, passports)
- Employment contracts
- Other relevant employment documentation
Tuokko provides extensive services related to posted worker documentation obligations and local representative services.
In general, the company is also obliged to submit a declaration of posted employees to the Regional State Administrative Agency (AVI) before the employees start working in Finland. The company must additionally keep updated records in Finland of employees’ work periods, work locations, and other relevant information.
Construction Sector Obligations
For companies operating in the construction sector, the following obligations apply regardless of the employee’s residency or social security situation:
- Apply for a Finnish Tax Number for each employee (if not already obtained)
- Apply for a Finnish Personal Identity Code (HETU) for employees who do not yet have one (this requires a visit to the local tax office)
- If operating as the main contractor, submit mandatory Construction Work Reports to the Finnish Tax Administration
- Submit a construction site notification before starting any work that requires a building permit
(Note: work subject only to an action permit or demolition permit does not require this notification.)
After the end of business operations in Finland, information regarding posted workers must be retained for at least two years after the end of the posting period.
VAT registration
If the company sells taxable goods or services in Finland, it is generally required to register for VAT. This can be done either with the same start-up notification as described in the section for legal registrations or separately in the internet service. The company must also submit VAT returns at the required intervals as determined by the Finnish Tax Administration.
Accounting, auditing, and reporting obligations
A foreign company that has its place of effective management in Finland is required to prepare financial statements in accordance with Finnish legislation and may also be subject to audit requirements similar to those of Finnish companies.
Permanent establishments (PEs) must maintain accounting records for business income earned in Finland in compliance with the Finnish Accounting Act, even if separate statutory financial statements are not required for the Finnish operations.
Other forms of business presence, such as subsidiaries, must also keep accounting records of income generated in Finland and provide these records to the Finnish Tax Administration upon request. If the company operates through a branch (sivuliike), it is also subject to financial reporting obligations under the Finnish Trade Register and may need to file its parent company’s financial statements in Finland.
Separate legal entities, such as limited liability companies (Oy), must maintain independent bookkeeping separate from their parent group and are subject to Finnish auditing requirements if certain thresholds are exceeded (for example, balance sheet total, net sales, or number of employees).
For more information on when foreign companies are required to maintain bookkeeping and undergo audits, see the relevant section on [Accounting and Auditing in Finland].
Income taxation of the business
The general corporate income tax rate in Finland is 20% on business income (for the years 2025–2026). A Finnish company, as well as a foreign company with its place of effective management or a permanent establishment (PE) in Finland, is required to file a tax return in Finland. Other foreign entities must file an account of their local operations.
Based on national legislation, Finland taxes all income earned from business activities carried out in Finland, or through a Finnish branch. However, if a tax treaty exists between the company’s home country and Finland, Finland typically has the right to tax income sourced in Finland and business income only if the business is conducted through a PE in Finland.
If no tax treaty exists between the foreign company’s country of residence and Finland, Finland’s taxing rights are broader and are not limited to income generated by a Finnish PE. Note that construction-related PEs and independent agents are often treated differently in tax treaties compared to other types of business activities.
See the page on Permanent Establishment for more information on when a company is considered to have a PE in Finland.
If a company has a PE in Finland, it must file a complete tax return in accordance with Finnish legislation. An appropriate income allocation method between the head office and the PE must be applied, and transactions between the head office and the PE must follow the arm’s length principle.
See our page on Transfer Pricing for more details. Tuokko offers comprehensive services in tax review, transfer pricing, advisory, and tax return filing.
If the company does not have a PE, it is usually required to submit a “No PE” return together with a clarification of its business activities in Finland.
When establishing a business in a new country or ceasing activities in one, asset transfers abroad, tax planning, and exit taxation may become relevant. Exit taxation may apply if significant assets or business functions are transferred from Finland to another jurisdiction, potentially triggering taxation on unrealized capital gains in Finland.
Tuokko is a member of the Praxity Global Alliance, enabling us to connect clients with international expertise when considering relocation or restructuring outside Finland.
Employees and personal tax obligations
Working in Finland less than 6 moths
When a foreign employee comes to Finland, they may have registration obligations related to immigration, visas, and tax registration. The employee needs a Finnish personal identity code, which is issued by the Digital and Population Data Services Agency (DVV) or, in certain cases, by the Finnish Tax Administration.
The registration obligations depend on several factors: whether the employee is an EU/EEA citizen, the length of stay in Finland, and whether the employee is coming to work for a Finnish employer, a foreign employer, or as a leased employee through a staffing agency. Citizens from outside the EU/EEA usually need to apply for a residence permit for work (not just a visa) even for short-term employment, whereas EU/EEA citizens can work in Finland for up to three months without registration. If their stay exceeds three months, they must register their right of residence with the Finnish Immigration Service (Migri).
In general, employees are tax liable in Finland for income earned from work performed in Finland. If the salary is paid by a Finnish company, a Finnish subsidiary, or a foreign company with a permanent establishment in Finland, the income is considered Finnish-source income and is taxable in Finland. Finland generally has the right to tax employment income unless restricted by a tax treaty. The employer must usually withhold tax at source from the salary on behalf of the employee.
Working more than six months
Employees who stay in Finland for more than six months continuously whether for work or other reasons become tax residents under Finnish national legislation. As tax residents, they are liable for tax on their worldwide income in Finland.
If an employee becomes a tax resident, a tax card or prepayment arrangement must be obtained, depending on whether the employer has a permanent establishment in Finland. If the employer is not registered in the Employer Register, the employee may need to apply for tax prepayments themselves.
For tax residents, salary income is taxed progressively based on total annual earnings. Capital income, such as dividends, is taxed separately at flat rates (30% or 34%, depending on the amount).
Our tax and legal experts have extensive expertise in international personal taxation and in resolving questions regarding the allocation of taxing rights between Finland (the source country) and the employee’s country of residence.
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