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[ESTABLISHING A BUSINESS ENTITY IN FINLAND]
residence permit. Special rules apply to citizens from EU Member States, Iceland, Liechtenstein, Norway and Switzerland. Finland has tightened the criteria for granting residence permits to Russians because of Russia's invasion of Ukraine. FOREIGN INVESTMENT There are no general restrictions on foreign investment but, under the Foreign Corporate Acquisitions Act (2012/172), the Finnish Ministry of Economic Affairs and Employment monitors foreign corporate acquisitions and may restrict them, if key national interests require. These key national interests may concern national defense, security of supply or functions fundamental to society. The guiding principle of the Foreign Corporate Acquisitions Act is a positive attitude to foreign ownership. The Finnish authorities could, however, exercise control over the ownership of companies considered essential in terms of security of supply and national security and, if necessary, restrict foreign ownership in such companies. As regards the defense material industry, monitoring covers all foreign owners. In other sectors, monitoring only applies to foreign owners residing or domiciled outside the EU or European Free Trade Area. THIN CAPITALIZATION In Finland, interest limitation rules have been implemented instead of thin capitalization rules. The deductibility of a company’s net financing expenses is limited to 25 % of the adjusted taxable income of the company (‘EBITD’'). The restrictions on the deductibility of interests apply to all financing expenses, to both group undertakings and external parties. If the total net financing expenses exceed EUR 500,000, the interest deduction limitations will apply. When the total net financing expenses exceed the threshold of EUR 500,000, the deductible
net financing expenses are limited to 25% of the company's adjusted taxable income. It should be noted however that external net financing expenses are fully deductible up to EUR 3 million and will be deducted before internal financing expenses. RESTRICTIONS ON REMITTING FUNDS OUT OF THE JURISDICTIONS If the receiver is not a resident in Finland and gets dividends, interest or royalties, the Finnish payer must withhold tax at source. The tax at source is 30 percent. Depending on the provisions of different tax treaties, a lower rate - or even a full exemption from taxation - may be applied. Finland may be in an agreement with the foreign country to avoid double taxation, which means that the taxation depends on the provisions of the applicable tax treaty.
ILN Corporate Group – Establishing a Business Entity Series
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