Mida peab teadma Eesti ettevõte, kui teenuse osutamise asukoht on Soome?

If an Estonian company provides services in another country, for example Finland, it is important to review the tax agreement concluded with that country on the website of the Estonian Tax and Customs Board.

Estonia has a valid double taxation avoidance agreement with 64 countries, 62 of them are in force. An agreement was signed with Finland already in 1993.

This agreement regulates international trade, provision of services and international tax aspects, including possible tax disputes and double taxation. In order to avoid unnecessary tax risks when operating in Finland, it is recommended to review the company's business plan with our specialists and mitigate possible risks early on.

Tax withholding register (advance copy tax register)

Although there is no legal obligation to register your activities, it is still advisable to register in the tax withholding register. This is especially important for construction, installation and assembly work. In the case of registration, the client is not obliged to withhold the invoice from the contractor:

13% of income tax (for a company) or
35% of income tax (in the case of an individual entrepreneur or FIE).

Registration and reporting

A company can be registered in Finland on the basis of a so-called incorporation notice. Separate records are kept for registered companies, and the company has a reporting obligation in Finland. Failure to register may result in a higher tax burden.

Profit tax and permanent establishment

Profit tax (20%) is only calculated in Finland if the company incurs permanent place of business.

What is a permanent establishment?

According to the tax treaty, the company's income is taxed only in the country in which the company is located, unless the company operates in another country through a permanent establishment located there.

Characteristics of a permanent place of business:

Geographical persistence – premises, service points, construction sites.
Temporal persistence – the activity is continuous and lasts from 6 to 18 months.
Conduct of business – employees, equipment or even a stand-alone device (e.g. server, gaming machine, rental device).
Control Center – the board is located in Finland, where the company's main activities take place.
In the construction sector – a permanent place of business is created if the duration of the construction object exceeds 6 months.
Representative – an independent agent who is authorized to conclude contracts on behalf of the company. An independent agent may not create a permanent establishment.

Accounting and reporting

The accounts of a permanent place of business should be kept during the entire period of operation in Finland. This ensures timely reporting of expenses and income and effective tax planning.

A permanent place of business entails the obligation to:

register the company in the Finnish business register,
submit a Finnish tax return with a profit and loss statement,
keep records of assets and liabilities in accordance with Finnish law.

If the accounts have not been kept, the Finnish Tax Office can determine the income tax on the basis of a so-called assessment (assessment tax). In this case, the tax is calculated indirectly, for example as a certain percentage of the turnover.