English business owner moving to Finland

[darylknight]

Hi everyone,

I am an English freelance web developer, and I'm currently looking at starting an English limited company before I move to Finland for several years. I'd like to keep invoicing my clients in pounds even though I've moved, but some of the research I've been doing is concerning and I'm hoping someone can answer a few questions I've got (I've also emailed some accountants).

If I am the only employee (director) of my English limited company, and all of my source income is generated in England (all my clients will be English), I expect to be paying UK corporation tax on my company's profits, as it is not Finnish sourced income. I will be taking a salary from the company, which would be liable for Income Tax in Finland.

The research I've done seems to suggest that as I'm the sole director and living in Finland, the Finnish govt would require me to also register a company in Finland? This makes no sense to me at all?

Secondary questions:

If all of my business is conducted with English clients, but I live in Finland:
- Which accounting services will I require in Finland?
- Which taxes and insurances will I be responsible for paying?
- Which taxes and insurances will my company be responsible for paying?

The research I've done seems to say I must:
- register my company as an employer in Finland
- submit a start-up form
- withhold money on all wages paid out
- pay the employers health insurance contribution
- file reports of employer's health insurance contributions
- file annual information returns

However, as all of my business is conducted with English clients, and I will be an employee of an English company, it doesn’t make any sense to register a Finnish company too as it would duplicate all the accounting. I don't intend to start a business in Finland, rather I will be working for an English company where I am the Director and only employee. Could you please explain what I may have to do?

Thank you!
Daryl

[sinikala]

I can't believe you can be forced to start a company in Finland. You need professional advice, but before that there is some info here abt avoiding double taxation, which I think will be your main task

http://europa.eu/youreurope/citizens/wo ... pandable=1

http://ec.europa.eu/taxation_customs/in ... -states_en

https://www.gov.uk/government/publicati ... x-treaties

Seems the relevant document for you, if you haven't already seen it, is the tax treaty between the UK and Finland.

https://www.gov.uk/government/uploads/s ... _force.pdf

you need to find out where you are domiciled according to article 4, and established according to article 5.

[darylknight]

Thanks Sinkala. I'm aware of the double taxation agreement, which means the tax isn't really an issue. The specific page which has been worrying me is this one: https://www.vero.fi/en/businesses-and-c ... n_employe/

Which says, under "Businesses with a permanent establishment":
- You must register your company as an employer.
- You must submit Start-Up Form Y1, Y2, or Y3. Visit ytj.fi to download Y forms.

Could I be misunderstanding "register your company as an employer"?

[DMC]

For several years I worked as the owner and sole employee of a UK-registered company. I did not have a Finnish company at that time. I just filled out my tax returns in both countries as you would expect and it all came out in the wash. At least I don't recall any issues after the first year when the UK Inland Revenue took a while to get up to speed.

[Rosamunda]

Not an answer but rather a question...
Why would you prefer NOT to register as a limited company in Finland? What is the overriding advantage of running your business through a UK entity?

@DMC How did you solve pension contributions, health etc when you were operating through a UK company? Did you pay yourself a salary as an employee or dividends? (one is earned income the other is capital income so taxation is different I believe...)

[DMC]

Why would you prefer NOT to register as a limited company in Finland? What is the overriding advantage of running your business through a UK entity?

I don't know about the OP but for me there were 2 reasons. 1: I already had a UK-registered company with existing customer contracts and I saw no reason to cause any disruption to that. 2: My customers were at the time all UK-based companies. I felt they may have been reluctant to deal with a non-UK company, particularly as Finland was not in the EU at the time.

@DMC How did you solve pension contributions, health etc when you were operating through a UK company? Did you pay yourself a salary as an employee or dividends? (one is earned income the other is capital income so taxation is different I believe...)

I paid myself a salary from the company, and never paid dividends. I (theoretically the company but that was really the same thing) set up a private (UK-based) pension scheme. Initially I was also able to continue paying a national insurance contribution in the UK to provide a UK state pension but somewhere along the line the rules changed and that was no longer possible. I don't recall exactly what happened after that. By that time I was running the UK company alongside a regular job in Finland so my situation had changed anyway.
I always had a KELA card to provide health benefits.

[betelgeuse]

The research I've done seems to suggest that as I'm the sole director and living in Finland, the Finnish govt would require me to also register a company in Finland? This makes no sense to me at all?

It is correct that you are not required to create a new entity.

However, as all of my business is conducted with English clients, and I will be an employee of an English company, it doesn’t make any sense to register a Finnish company too as it would duplicate all the accounting. I don't intend to start a business in Finland, rather I will be working for an English company where I am the Director and only employee. Could you please explain what I may have to do?

Since the management and all work happens in Finland, it creates a permanent establishment that must be registered. There is no way for you to avoid also doing accounting according to Finnish rules.

I am an English freelance web developer, and I'm currently looking at starting an English limited company before I move to Finland for several years. I'd like to keep invoicing my clients in pounds even though I've moved, but some of the research I've been doing is concerning and I'm hoping someone can answer a few questions I've got (I've also emailed some accountants).

It's not a problem for a Finnish company to invoice in pounds. The paperwork will be easier if you incorporate a Finnish company instead.

[darylknight]

Ok so to answer Rosamunda's question, my situation is the same as DMC; all of my clients are UK companies, and I don't want to cause any disruption. It would also meant that my contracts are still governed by UK law, and I have English contracts written for that specifically. I don't want to learn Finnish corporate law and everything that I'd need to be aware of and put in to my client contracts.

So, to write it all out for my own sanity...

UK Limited company, living in Finland

- Move to Finland
- Register for a Finnish Personal ID
- Get a bank account
- Register with Kela
- UK company registers in Finland as an employer (Start-up notification form Y1 + appendix form 6204 of the Tax Administration) (€100)
- UK company registers for paying health insurance premiums, pension contributions, unemployment insurance, accident insurance premiums AND the employer's health insurance contribution
- UK company should "withhold money on all wages paid out"

Every Month
- In England - UK accountant does payroll (£25/m)
- In Finland - Finnish accountant files reports of employer’s contributions (€150/m)
- File and pay the amount of taxes withheld and employer's health insurance contributions to the Tax Administration
- UK company pays health insurance premiums (unknown cost), pension contributions (25% of salary, €625 based on 30,000 / year), unemployment insurance (5.7% of salary, €142 based on 30,000 / year) & accident insurance premiums (2%?) & employer's health insurance contribution (unknown cost)

Every year
- In Finland, file Annual Information Returns by the end of January (€360+)
- In England, UK accountant files company returns - balance sheet, profit/loss etc. (£900)

The alternative: being self employed

- Move to Finland
- Register for a Finnish Personal ID
- Get a bank account
- Register with Kela
- Finnish accountant registers me in the Trade Register as private trader, Prepayment registration, VAT registration (€520 + €110 handling fee paid to registration authority)
- Set-up of KATSO-ID (€100)
- Register for YEL insurance (covers pension insurance, healthcare and unemployment insurance)

Every Month
- In Finland - Finnish accountant does VAT (€104)
- YEL Insurance (€470 based on a salary of 30,000)

Every year
- In England, file a tax return (free)
- In Finland, Finnish accountant files yearly tax report (€200)

[HeidiLiang]

It looks really clear that the second option "being self employed" is way much cheaper than the first one.
I did the "private trader" registration and kasto ID registration all by myself

Do you have a recommendation of the accountant? Many thanks in advance.

[darylknight]

Bringing up an old thread HeidiLiang, but yes and no. I started using Rantalainen and am currently searching for a new accountant. Rantalainen have missed several tax deadlines and charged me way more than their original estimate.