Corporate Tax in Finland
Corporate Income Tax in Finland
The corporate income tax rate in Finland is 20%. Corporate income tax is collected from companies based on their annual tax return. In addition to corporate income tax, Finnish resident companies are subject to public service broadcasting tax, which is 140€ + 0.35% of the taxable corporate income exceeding 50 000€.
All Finnish limited companies are subject to corporate income tax. Also, Finnish permanent establishments of non-resident companies are subject to Finnish corporate income tax.
What is a Permanent Establishment?
When a foreign or non-resident company operates in Finland, it may form a permanent establishment and be liable to pay income tax 20% on its income.
Permanent establishment refers to a fixed place of business through which the company conducts its operations. In order to be considered a permanent establishment, the place of business in Finland must be fixed both geographically and in terms of time.
A company is invariably treated as having a permanent establishment in Finland if the fixed place in Finland is where its management and business administration are. Additionally, the activity of a “dependent agent” may give rise to a permanent establishment even if the company does not have a fixed place of business in Finland. In this case, the dependent agent must have the authority to enter into contracts and to receive orders on behalf of the company.
Sites where a construction, installation or assembly operation is performed may also be considered permanent establishments. Such a site constitutes a permanent establishment only if the operations exceed the time limit set out in the tax treaty.
Tax Return of a Foreign Company in Finland
Foreign or non-resident companies must file an annual tax return (Form 6U) in Finland. The return must be filed within four months of the end of the last month of the accounting period.
All income generated by the activities of the permanent establishment is considered its income. Expenses for the production of income relating to the permanent establishment and for maintaining that income are tax-deductible. The income of a permanent establishment is determined by the “arm’s length principle”. The permanent establishment’s share of the company’s income and expenses is equal to what an independent and separate company would produce and incur by conducting similar activities in similar conditions. This principle is based on Finnish legislation as well as international tax treaties.
If you believe your activities in Finland do not give rise to a permanent establishment, you are still required to give an account of your Finnish business operations. If the company or a branch in Finland neglects its reporting obligation, Finnish Tax Administration may impose surtax and remove the company from the prepayment register. The Tax Administration may also estimate the company’s income.
Companies Make Tax Prepayments on Their Income
The Finnish Tax Administration usually imposes the prepayment for the first business year, based on the company’s estimation of the taxable income for the first accounting period. The estimate is filed along with a prepayment request in MyTax. Our accountants will help you to setup tax prepayments.
It may be difficult to assess revenues and expenses at the beginning of business operations. Our accounting service packages include annual tax prepayment check, where your accountant will suggest and make a change in MyTax if the amount of taxable income changes.