By Tuomo Kauttu , Aliant Finland. This article outlines updated key aspects of investment in Finland, including corporate and ownership structures, business regulations, and tax considerations.
Ownership Structures
The forms of enterprises in which a business may be conducted include sole proprietorships, partnerships, and corporations. Finnish law does not recognize business entity forms that combine elements of a corporation with those of partnerships, such as a limited liability company (LLC) or other non-corporate entities. Regarding partnerships, Finland recognizes general partnerships (Ay) and limited partnerships (Ky).
A corporation (Oy) is a business entity duly incorporated with a corporate structure distinct from its owners (shareholders), featuring centralized management, continuity of life, free transferability of interests (shares), limited liability, and the objective to carry on business and distribute profits.
As sole proprietorships are designed for micro-business entrepreneurs and partnerships have largely disappeared from business use, nearly all enterprises adopt the corporation structure. The current corporation structure requires no minimum share capital, allowing flexible investment structuring.
By listing, typically through an initial public offering (IPO), a corporation (Oy) may become a public corporation (Oyj). Shares of a public corporation are publicly traded and, in a highly regulated process, 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, which is generally a subsidiary (Tytäryhtiö) within the foreign company’s group (Konserni) structure. While a subsidiary is a separate legal entity distinct from the parent company (Emoyhtiö), a branch is a registered business unit forming part of the legal structure of the foreign company.
What is Investment?
Establishing a subsidiary or branch enables foreign businesses to operate in Finland but is not necessarily an investment transaction. Investment generally refers to an expenditure to acquire property or other assets or the placement of capital to generate profit. Accordingly, foreign investment herein refers to transactions such as acquisitions or capital placements for profit.
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 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, supporting cross-border operations with harmonized competition laws in the EU and transparent corporate governance models that protect shareholder rights in the Nordic region.
Strategic Sectors with Investment Restrictions
Government approval may be required for foreign investments in industries such as defense, energy, telecommunications, and financial services. Investments in these sectors must comply with national security regulations and EU directives.
Investment Structures
Real Estate Investments
Real estate investments can be made by acquiring shares in a real estate company (corporation) that directly or indirectly holds property, or by directly purchasing or leasing property. Acquiring shares may be more or less advantageous than buying or leasing property, depending on the circumstances.
Typically, a real estate investment or acquisition is part of a development project involving multiple stakeholders and complex structural considerations, with potentially conflicting interests. The optimal transaction structure depends on the project’s goals and negotiation outcomes.
The investing company’s line of business and global corporate policy also influence the transaction structure. For example, structures differ when shopping mall operators invest in shopping malls, technology companies invest in data centers, or car manufacturers invest in 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 face ownership restrictions in certain locations. These benefits may be critical in some cases but less relevant in others.
Business Investments
The optimal structure is determined through negotiation, considering all factors influencing the transaction.
Share Issue:
When the transaction is primarily investment-driven rather than acquisition-focused, it is often structured as a subscription and issuance of shares in the target company (corporation). This structure raises the target company’s capital in proportion to the investment. While the investor gains a portion of shares and some control, this seldom provides full or clear majority control. This approach is common in startups and growth companies.
Stock Purchase:
When the transaction is acquisition-driven, a stock purchase is often used to acquire the target company. Purchasing all or a significant portion of the shares allows the investor to gain full or substantial control, often taking over the company entirely. Compared to an asset purchase, a stock acquisition is generally simpler to implement.
Asset Purchase:
For acquisition transactions, an asset purchase is often preferred. Although more complex than a stock purchase, it allows the buyer to acquire only specified assets and liabilities. From an investment perspective, an asset purchase directly transfers ownership of specific property, which may be the primary investment target.
Simplified Tax Overview
Finland operates a competitive corporate tax system with attractive incentives for businesses.
- Corporate income tax is 20% for all corporations. The Finnish government announced plans in April 2025 to reduce it to 18% as part of a mid-term budget review aimed at boosting economic growth and investment attractiveness. This reduction is scheduled to take effect from the 2027 tax year.
- Capital income tax follows a slightly progressive model, with rates ranging from 30% to 34%, depending on income levels. Capital income includes capital gains and other income generated through wealth possession.
- Withholding tax on dividends is generally 30% but may be reduced under Finland’s double taxation treaties.
- Value-added tax (VAT) applies at a standard rate of 25.5%, with lower rates for essential goods and services.
Investment Incentives
The Finnish government offers 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 in specific geographic areas may also qualify for regional tax incentives.
Key Investment Considerations
Finland offers a robust legal framework and an open economy, but investors should note sector-specific regulations requiring government approval. The high cost of living and labor expenses may impact operational costs, particularly in industries with large workforce needs. Businesses must comply with EU and Finnish governance regulations, mandating financial reporting and shareholder transparency.
Finland provides a transparent, investor-friendly business environment with 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 an 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 incentives, foreign investors can establish a profitable and sustainable presence in Finland.
With stable economic policies and a focus on technology and innovation, Finland remains one of the most promising investment destinations in Northern Europe.