Finland joined the European Union (EU) in January 1995 and was one of the founding members of the common currency eurozone. The monetary unit of the 19-country zone, the euro (EUR, €) is the second most frequently traded currency in the world, second only to the US dollar (USD, $). The country does not restrict incoming or outgoing international money transfers, and the euro is freely convertible to other currencies in line with eurozone policies.
As with all countries in the eurozone, Finland is required to comply with all EU directives regulating foreign investment, bilateral trade agreements, customs duties, agricultural agreements and other trade regulations, including those on overseas money transfers. Finland is open to foreign direct investment (FDI) and does not limit foreign acquisitions beyond standard domestic and EU competition rules. Credit is available to foreign investors under non-discriminatory policies, and the legal and accounting systems are transparent.
However, Finland has in place specific legal measures aimed at preventing money laundering and the financing of terrorism. Therefore, credit institutions (especially banks) are required to identify their customers and report suspicious transactions. Transactions exceeding €15,000 are required to be reported. In addition, individuals entering or leaving the European Community carrying over €10,000 in cash, or its equivalent in foreign currency, must declare this sum to customs authorities.
Finland was one of the 11 original countries to adopt the euro in January 1999. For the next two years, both the Finnish markka and the euro were accepted as legal tender, although the euro was only used in electronic payments. After the transitional period, euro banknotes and coins entered into circulation as Finland’s official currency in January 2002. The National Bank of Finland (Finlands Bank) continued to exchange markka banknotes and coins until February 29, 2012.
The EU has reduced barriers to the circulation of goods, people, and funds within the zone, which helps to encourage regional financial transfers and international payments within the EU. The eurozone has since expanded to include 19 member countries, with Lithuania the latest to join in January 2015.
A highly-industrialized country with a free-market economy and skilled labour force, Finland is firmly engaged in the global economy. Finland has historically been competitive in manufacturing, engineering, telecommunications and electronics. In the last few years, exports such as wood, mobile phones technology and gaming represented one-third of GDP. Finland closed 2013 with a GDP of US$267.3bn. In terms of imports, Finland primarily imports energy products, components for manufactured goods and raw materials.
With highly skilled and well-educated labor force, with its financial markets and banking system, Finland had been one of the top performing economies in the EU. The global financial crisis, however, did affect Finland, slowing down exports and affecting government finances and the debt ratio. In response to the crisis, Finland quickly took measures to meet EU deficit targets and maintain its AAA credit rating.
The Bank of Finland acts as the country’s national central bank, although domestic policy has been set by the European Central Bank (ECB) since its entry into the eurozone. The Eurosystem is formed by the ECB, headquartered in Frankfurt, and by member countries’ central banks. The ECB works to maintain price stability, manage foreign exchange reserves and monitor the health of the overall financial system in the EU. The ECB has adopted a liberal monetary policy and allows the value of the euro to be set by free-market supply and demand forces. The Bank of Finland is responsible for participating in the ECB decision-making process and implementing policy decisions within Finland, including implementing regulations affecting overseas money transfers.
Finland encourages foreign investment but, like many other countries in Europe, it has a relatively high tax burden that may deter some investment decisions. The movement of ownership of shares from a Finnish company to a foreign one is treated by Finnish tax authorities as taxable. The tax rate for resident corporations has been recently cut by the government from 24.5% to only 20%, while in EU the average corporate tax rate is of 22.4%.
Resident individuals in Finland are required to pay tax on capital income, health insurance tax, municipal and church taxes. Non-resident individuals are also required to pay tax on capital income.
The Bank of Finland has the sole right to issue banknotes and coins in Finland, and it is responsible for cash distribution across the country. Finland’s monetary unit, the euro (EUR), consists of 100 cents. Euro banknotes are printed in denominations of €5, €10, €20, €50, €100, €200 and €500. Coins are available in values of 1, 2, 5, 10, 20 and 50 cents, and €1 and €2. All euro currency from any country is accepted within the currency zone.
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