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Finland

Executive Summary

Finland is a Nordic country located north of the Baltic States bordering Russia, Sweden, and Norway, possessing a stable and modern economy, including a world-class investment climate.  It is a member of the European Union and part of the euro area. The country has a highly skilled, educated and multilingual labor force, with strong expertise in Information Communications Technology (ICT), shipbuilding, forestry, and renewable energy.  

Key challenges for foreign investors include a rigid labor market and bureaucratic red tape in starting certain businesses, although in June 2016 the Government enacted a Competitiveness Pact that aims to reduce labor costs, increase hours worked, and introduce more flexibility into the wage bargaining system.  An aging population and the shrinking working-age population are the most pressing issues that could limit growth opportunities for Finland.

Finland’s center-right government, headed by Prime Minister Juha Sipila, resigned in early March after failing to push through an overhaul of social and health care programs, the reform package known as SOTE.  The Sipila government intended the package to address the needs of an aging population while improving efficiency and reducing public spending by EUR 3 billion, about USD 3.4 billion, by 2029.

At the end of 2017, the total stock of FDI in Finland totaled USD 83.0 billion, of which equity accounted for USD 78.9 billion and the value of debt capital for USD 4.1 billion.  By country, Sweden contributes the biggest stock of foreign direct investment in Finland USD 29.3 billion (35 percent), followed by the Netherlands USD 16.5 billion (20 percent), Luxembourg USD 14.1 billion (17 percent), and Denmark USD 6.3 billion (8 percent).  According to a joint research conducted by Rhodium Group and Mercator Institute for China, investments from China increased approximately USD 282 million in 2017 and USD 236 million in 2018, totaling USD 8.6 billion.

The GOF has taken steps to attract additional investment by cutting the corporate tax rate from 24.5 percent to 20 percent in 2014, simplifying the residence permit system for foreign experts, and creating a network called Business Finland that promotes foreign investment and the country’s international image.  This one-stop shop brings together the services of a variety of state-funded agencies. Both foreign and domestic companies can benefit from GOF investment incentives, research and development support, and innovation systems.

The U.S. Embassy in Helsinki, through the Foreign Commercial Service and Political/Economic Sections, is a strong partner for U.S. businesses that wish to connect to the Finnish market.  Finnish companies are very active in the fields of information technology, energy, biotech, and clean technology, sectors that the government has selected – along with Arctic expertise – as priorities in their innovation policy.  With excellent transportation links to the Nordic-Baltic region and Russia, Finland can be a good hub for establishing regional operations.

The Finnish MyData initiative is a relatively new human-centric system that is designed to ensure that access to personal data remains under the control of the individual instead of organizations (such as businesses or the government, among others).  This initiative may impact foreign digital service companies, depending on how it is ultimately developed and implemented.

On January 1, 2018, Finpro, the Finnish trade promotion organization, and Tekes, the Finnish Funding Agency for Innovation, united to become Business Finland, which is now the single operator helping Finnish SMEs go international, encouraging foreign direct investment in Finland, and promoting tourism.  Business Finland has around 600 staff, nearly 40 offices abroad, and operates 20 regional offices in Finland. Business Finland is part of the Team Finland network and its website is https://www.businessfinland.fi/en/do-business-with-finland/home/.  Invest in Finland is the official investment promotion agency, and is part of Business Finland.

Table 1: Key Metrics and Rankings

Measure Year Index/Rank Website Address
TI Corruption Perceptions Index 2018 3 of 180 https://www.transparency.org/research/cpi/overview
World Bank’s Doing Business Report 2019 17 of 190 http://www.doingbusiness.org/en/rankings
Global Innovation Index 2018 7 of 126 https://www.globalinnovationindex.org/analysis-indicator
U.S. FDI in partner country ($M USD, stock positions) 2017 $3,318 https://apps.bea.gov/international/factsheet/factsheet.cfm?Area=306
World Bank GNI per capita 2017 $44,580 https://data.worldbank.org/indicator/NY.GNP.PCAP.CD

1. Openness To, and Restrictions Upon, Foreign Investment

Policies Towards Foreign Direct Investment

The Finnish government is open to foreign direct investment.  There are no general regulatory limitations relating to acquisitions.  A mixture of domestic and EU competition rules govern mergers and acquisitions.  Finland does not preclude foreign investment, but some tax policies may make it unattractive to investors.  Finnish tax authorities treat the movement of ownership of shares in a Finnish company into a foreign company as a taxable event, though Finland complies with EU directives that require it to allow such transactions based in other EU member states without taxing them.

Finland does not grant foreign-owned firms any special treatment like tax holidays or other subsidies that are not available to other firms.  Instead, Finland relies on policies that seek to offer both domestic and international firms better operating conditions, an educated labor force, and well-functioning infrastructure.  Companies benefit from preferential trade arrangements through Finland’s membership in the EU and World Trade Organization (WTO), in addition to the protection offered by Finland’s bilateral investment treaties with sixty-seven countries.  The corporate income tax rate is 20 percent.

On January 1, 2018, Finpro, the Finnish trade promotion organization, and Tekes, the Finnish Funding Agency for Innovation, united to become Business Finland.  Business Finland is now the single operator helping Finnish SMEs go international, encouraging foreign direct investment in Finland, and promoting tourism. Business Finland supports the Government’s objectives to spread the Finnish innovation system and double SME export volumes by 2020.  Business Finland has around 600 staff, nearly 40 offices abroad, and operates 20 regional offices in Finland. Business Finland is part of the Team Finland network and its website is https://www.businessfinland.fi/en/do-business-with-finland/home/  .  Invest in Finland is the official investment promotion agency, and is part of Business Finland.

Limits on Foreign Control and Right to Private Ownership and Establishment

The Regulation of the European Parliament and the Council on establishing a framework for the national security screening of high risk foreign investments into the Union entered into force on April 10, 2019.  At the moment, 14 Member States, including Finland, have national screening systems in place. Although there are differences in their form and scope, they all aim to maintain security and public order at the national level.  Numerous Member States are currently updating their screening systems or adopting new systems.

The law that governs foreign investments is the Act on the Monitoring of Foreign Corporate Acquisitions in Finland (172/2012).  The Ministry of Employment and the Economy (TEM) monitors and confirms foreign corporate acquisitions. TEM decides whether an acquisition conflicts with “vital national interests” including securing national defense, as well as safeguarding public order and security.  If TEM finds that a key national interest is jeopardized, it must refer the matter to the Council of State, which may refuse to approve the acquisition.

In the civilian sector, TEM primarily monitors transactions related to Finnish enterprises considered critical to maintaining functions fundamental to society, such as energy, communications, or food supply.  Monitoring only applies to foreign owners domiciled outside the EU and European Free Trade Association (EFTA). More information is at https://www.finlex.fi/fi/laki/alkup/2012/20120172   (Available only in Finnish and Swedish).

For defense acquisitions, monitoring applies to all foreign owners, who must apply for prior approval.  “Defense” includes all entities that supply or have supplied goods or services to the Finnish Ministry of Defense, the Finnish Defense Forces, the Finnish Border Guard, as well as entities dealing in dual-use goods.  The substantive elements in evaluating the application are identical to those applied to other corporate acquisitions.

On February 26, 2019, the Finnish Parliament approved a law (HE 253/2018) that requires non-EU/ETA foreign individuals or entities to receive Defense Ministry permission before they purchase land in Finland.  Even companies registered in Finland, but whose decision-making bodies are at least of one-tenth non-EU/ETA origin will have to seek a permit. The law, which is set to take effect in 2020, states that non-EU/ETA property purchasers can still buy residential housing and condominiums without restrictions.

Right to private ownership

Private ownership is normal in Finland, and in most fields of business participation by foreign companies or individuals is unrestricted.  When the government privatizes state-owned enterprises, both private and foreign participation is allowed except in enterprises operating in sectors related to national security.

National Security Screening of FDI

TEM is the authority responsible for monitoring and confirming corporate acquisitions.  Filing an application/notification is voluntary, but the Ministry may request information connected to a foreigner’s corporate acquisition.  The law does not specify a time limit for filing, and a foreign owner may file either before or after the transaction. A transaction is considered approved if the Ministry does not request additional information, initiate further proceedings within six weeks, or refuse to confirm the transaction within three months.  The Ministry cannot render opinions before an application is filed. It is, however, possible for investors to contact the Ministry for guidance beforehand. There is no official template for the notification, but it must include information on the monitored entity’s pre-and post-transaction ownership structure and the acquiring entity’s ownership structure.  If known, an acquiring entity must also state its intentions relating to the monitored entity. There are no fees.

Other Investment Policy Reviews

Finland has been a member of the WTO and the EU since 1995.  The WTO conducted its Trade Policy Review of the European Union (including Finland) in May 2017:  https://www.wto.org/english/tratop_e/tpr_e/tp457_e.htm  .  The Organization for Economic Cooperation and Development (OECD) 2018 economic survey for Finland can be found here:  http://www.oecd.org/eco/surveys/economic-survey-finland.htm  .  The Research Institute of the Finnish Economy (ETLA) regularly publishes reviews of different sectors and factors that may affect investment:  https://www.etla.fi/en/publications/dp1267-en/  .

Business Facilitation

All businesses in Finland must be publicly registered at the Finnish Trade Register.  Businesses must also notify the Register of any changes to registration information and most must submit their financial statements (annual accounts) to the register.  The website is: https://www.prh.fi/en/kaupparekisteri.html  .  The Business Information System BIS (“YTJ” in Finnish, https://www.prh.fi/en/kaupparekisteri/rekisterointipalvelut/ytj.html  ) is an online service enabling investors to start a business or organization, report changes, close down a business, or conduct searches.

Permits, licenses, and notifications required depend on whether the foreign entrepreneur originates from a Nordic country, the European Union, or elsewhere.  The type of company also affects the permits required, which can include the registration of the right to residency, residence permits for an employee or self-employed person, and registration in the Finnish Population Information System.  A foreigner may need a permit from the Finnish Patent and Registration Office to serve as a partner in a partnership or administrative body of a company. For more information: https://www.suomi.fi/company/responsibilities-and-obligations/permits-and-obligations  .  Improvements made in 2016 to the residence permit system for foreign experts, defined as those with special expertise, a university degree, and who earn at least EUR 3,000 gross per month, should help attract experts to Finland.  An online permit application (https://enterfinland.fi/eServices  ) available since November 2016 has made it easier for family members to acquire a residence permit.

The practice of some trades in Finland requires only notification or registration with the authorities.  Other trades, however, require a separate license; companies should confirm requirements with Finnish authorities.  Entrepreneurs must take out pension insurance for their employees, and certain fields obligate additional insurance.  All businesses have a statutory obligation to maintain financial accounts, and, with the exception of small companies, businesses must appoint an external auditor.

Finland is the 17th best country in the world for doing business, according to the World Bank Group’s 2019 Doing Business Index; it ranked 43rd on “Starting a Business”  (http://www.doingbusiness.org/data/exploreeconomies/finland  ).  According to a 2016 study (FDI Attractiveness Scoreboard) by the European Commission, Finland is the most attractive EU country for FDI in terms of the political, regulatory and legal environment.

Gender inequality is low in Finland, which ranks fourth in the 2018 World Economic Forum Global Gender Gap Index.  The employment gap between men and women aged 15-64 is the third lowest in the OECD. According to the World Economic Forum, Finland’s Economic Participation and Opportunity gender gap widened slightly in 2018 due to a decreasing share of women among legislators, senior officials and managers.  However, Finland is currently one of the top-ranked countries that have reached parity in Educational Attainment.

Outward Investment

Business Finland, part of the Team Finland network, helps Finnish SMEs go international, encourages foreign direct investment in Finland, and promotes tourism.  Business Finland has a staff of around 600 persons and nearly 40 offices abroad. It operates 20 regional offices in Finland and focuses on agro technology, cleantech, connectivity, ecommerce, education, ICT and digitalization, mining, and mobility as a service.  While many of Business Finland’s programs are export-oriented, they also seek to offer business and network opportunities. More info here:  https://www.businessfinland.fi/en/do-business-with-finland/home/  .  In 2018, the Ministry of Education and Culture launched the Team Finland Knowledge network to enhance international education and research cooperation and the export of Finnish educational expertise.  North America will be one of the initial focus regions.

10. Political and Security Environment

There are no instances of political violence in Finland.  Some isolated anti-immigration incidents, including the September 2016 death of a Finnish citizen after an altercation with the neo-Nazi Nordic Resistance Movement (NRM), sparked large anti-racism rallies.  There have been some subsequent demonstrations calling for a stop to deportations of asylum seekers and counter-protests to these demonstrations in central Helsinki, but they have been rare and relatively small.  The NRM has since been banned in Finland, though that ban is being appealed. In August 2017, a stabbing attack took place in central Turku, in southwest Finland in which two pedestrians were killed and eight injured. Finnish authorities considered the attack a terrorist act and its perpetrator was convicted on terrorism charges, making it the first incident of its kind in Finland since the end of World War II.

The Fund for Peace (FFP) ranked Finland as the most stable country in the world again in 2019 based on political, social, and economic indicators including public services, income distribution, human rights, and the rule of law.  According to BMI Research, Finland will remain one of the most politically stable countries globally over the 10-year forecast period (2016-25) because of the well-established and functioning state bureaucracy, effective rule of law, personal freedoms and civil liberties, and some of the world’s most progressive gender equality legislation.

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