By Tuomo Kauttu , Aliant Finland. Investing in Finland requires careful consideration of corporate structures, taxation, and regulatory compliance. This article outlines key aspects of investment in Finland, including ownership structures, business regulations, and tax considerations.
Ownership Structures in General
The forms of enterprises in which a business may be conducted are sole proprietorships, partnerships and corporations. Finnish law does not recognize business entity form that combines elements of corporation to the elements of partnerships, such as a limited liability company (LLC) or other forms of noncorporate entities. Regarding partnerships, Finland recognized general partnership (Ay) and limited partnership (Ky) structures.
A corporation (Oy) refers to form of business entity that is duly incorporated with a corporate structure distinct from its owners (shareholders) having elements of centralization of management, continuity of life, free transferability of interests (shares), limited liability, objective to carry on business and divide profits.
As the sole proprietorship form is designed for micro business entrepreneurs and partnerships have almost disappeared from businesses,nearly all business enterprises have the corporation structure. The current corporation structure does not require a minimum share capital, allowing for flexible investment structuring.
By listing, typically through IPO, a corporation (Oy) may turn to public (Oyj). Shares of the public corporation are publicly traded and also, in highly regulated process, the shares may be subject to a public takeover bid.
Foreign companies can establish a branch office (Sivuliike) to operate in Finland without forming a Finnish corporation, such corporation generally being a subsidiary (Tytäryhtiö) in the foreign company’s group (Konserni) structure. While the subsidiary is as separate legal entity and distinct from the parent company (Emoyhtiö), the branch constitutes a registered business unit being part of the legal structure of the operating foreign company.
What is Investment
Setting up a subsidiary or branch results a presence and enables foreign businesses to operate and do business in Finland. Such expansion of business is not per se, an investment transaction nor is it necessarily related to investment in any manner. The investment generally refers to an expenditure to acquire property or other assets or placing capital intended to secure profit. Accordingly, the “foreign direct investment” herein, refers to investment transactions such as acquisitions and other transactions involving the placement of capital.
Investment Regulations and Restrictions
Finland imposes few restrictions on foreign investment, but certain sectors require government approval to ensure national security and regulatory compliance.
Nordic and EU Legal Harmonization
Finland operates within both the EU regulatory framework and the Nordic legal system, ensuring that corporate governance and business laws are aligned across the region. This alignment provides equal treatment for investors, providing cross-border operations with harmonized competition laws in the EU, and harmonized transparent corporate governance models that protect shareholder rights in the Nordic.
Strategic Sectors with Investment Restrictions
Government approval may be required for foreign investment in certain industries, particularly defense, energy, telecommunications, and financial services. Investments in these sectors must comply with national security regulations and EU directives.
Investment Structures
Real Estate Investments
The real estate investments can be made through acquisition of the shares in the real estate company (corporation), holding directly or indirectly the property (real estate assets) while it is also possible to buy or lease the property directly. Acquisition of shares may be more or less optional than buying or leasing the property.
Generally, a real estate investment/acquisition is a part of development project, involving several stakeholders and complex structural aspects among parties, interests often conflicting. The optional transaction structure depends on the goals and negotiation results of the project.
Also, the investing company’s line of business and worldwide corporate policy typically determine the transaction structure. The structures are different when shopping mall operators invest to shopping malls, technology companies invest to data centers, or car manufacturers invest to manufacturing plants.
Holding real estate through a corporation provides limited liability protection, simplifies ownership transfers, and offers transfer tax advantages. It also ensures compliance with Finnish real estate laws, particularly for foreign investors who may be subject to ownership restrictions in certain locations. Such benefits may be essential in some cases, while in other cases they are not important.
Business Investments
The optimal structure can be found through negotiation of the structure. Generally, this is a function of considering all of the issues that may influence the transaction and its structure.
Share Issue
When the transaction is driven by investment aspect rather than by acquisition aspect, the investment transaction is generally structured as a subscription and issue of shares of the target company (corporation). Such structure raises the capital of the target company in line with the amount of investment. While the investor gains a portion of the shares and control to certain extent, such transaction seldom provides investor with full or even clear majority control of the company. This structure is often used in start-ups and growth companies.
Stock Purchase
When the transaction is driven by acquisition aspect rather than by investment aspect, the share purchase transaction is often used to acquire the target company (corporation). When purchasing all or significant portion of the shares the investor acquires full or adequate control of the company, in most cases taking it over entirely.
In comparison to asset purchase, a share acquisition is generally simpler to implement than an acquisition of a business through an asset purchase.
Asset Purchase
Regarding acquisition transactions, an asset purchase is favored in many cases. While the asset transaction is typically more complicated than a stock purchase, the buyer in contrast will acquire only the specified assets and liabilities. Regarding investment aspects, the asset acquisition results in a direct transfer of the ownership of specific property that may originally be the investment target.
Simplified Tax Overview
Finland operates a competitive corporate tax system, offering attractive tax incentives for businesses.
● Corporate income tax is set at 20% for all corporations. In the near future, it will be decreased, being thereafter 18%.
● Capital income tax follows slightly progressive model, with rates ranging from 30% to 34%, depending on income levels. The “capital income”, subject to capital income tax, includes not only the capital gain, but also other income generated through the possession of wealth.
● Withholding tax on dividends is generally 30%, but this may be reduced under Finland’s double taxation treaties.
● Value-added tax (VAT) applies at a standard rate of 25.50%, with lower rates available for essential goods and services.
Investment Incentives
The Finnish government provides financial incentives to attract foreign investors, including R&D tax credits, grants for innovation-driven companies, and EU funding programs supporting renewable energy, infrastructure, and digital transformation. Businesses operating in specific geographic areas may also qualify for regional tax incentives.
Key Investment Considerations
While Finland offers a strong legal framework and open economy, investors should consider sector-specific regulations that may require government approval. Finland’s high cost of living and labor expenses are factors that could impact operational costs, particularly in industries with large workforce requirements. Businesses must also comply with EU and Finnish governance regulations, which mandate financial reporting and shareholder transparency.
Finland provides a transparent and investor-friendly business environment, characterized by strong legal protections, competitive corporate taxation, and access to the EU market. The country’s commitment to innovation, skilled workforce, and high-quality infrastructure makes it a highly attractive destination for corporate and real estate investments.
While Finland imposes few restrictions on foreign ownership, investors should ensure compliance with national regulations and optimize tax planning to maximize returns. By selecting the appropriate corporate structure and leveraging available investment incentives, foreign investors can establish a profitable and sustainable presence in Finland.
With stable economic policies and a strong focus on technology and innovation, Finland remains one of the most promising investment destinations in Northern Europe.