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 more than sixty-five 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 law that governs foreign investments is the Act on the Monitoring of Foreign Corporate Acquisitions in Finland. 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 confirm 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: http://www.finlex.fi/en/laki/kaannokset/1992/en19921612 .

For defense acquisitions, foreigners must apply for prior confirmation and monitoring covers all foreign owners. “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.

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 companies, both private and foreign participation is allowed except in enterprises operating in sectors related to national security.

Screening 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 can be found here: http://www.oecd.org/eco/surveys/economic-survey-finland.htm. The Research Institute of the Finnish Economy (ETLA) regularly publishes reports that review different sectors and factors that may impact 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 also appoint an external auditor.

Finland is the 13th best country in the world for doing business, according to the World Bank Group’s 2018 Doing Business Index; it ranked 26th 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 third in the 2017 World Economic Forum Global Gender Gap Index. The employment gap between men and women aged 15-64 is the second lowest in the OECD, and women are well represented among top politicians, and increasingly on the boards of companies and among entrepreneurs. However, the gender pay gap is wide, partly because women are under-represented in well-paid jobs. The government has set targets to increase the employment of minorities in fields where they were under-represented.

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 in 15 different regions in Finland and focuses on agrotechnology, 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. The United States will be one of the initial focus countries.

Table 2: Key Macroeconomic Data, U.S. FDI in Host Country/Economy

Table 3: Sources and Destination of FDI

Table 4: Sources of Portfolio Investment