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Finnish Prime Minister Katainen Talks Tax Incentives For Angels And Startups

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The Finnish Prime Minister Jyrki Katainen opened Slush 2012 with great enthusiasm about the Finnish startup scene. Katainen has been popping up more and more around the entrepreneurship circles in recent weeks, first touring the renovated Startup Sauna co-working space with Russian Prime Minister Dmitri Medvedev.

Onstage at Slush Katainen started off his talk by jokingly showing off his multicolored painted nails, which Rovio’s Peter Vesterbacka (who also had his nails painted) later explained it signified how enthusiastic and accessible the Finnish Government was. Katainen seemed bemused about it onstage, but Vesterbacka (sort of) has a point – “When has Obama had his nails painted?”

But it wasn’t all a princess tea party. Katainen spoke about €200 million worth of tax proposals his government will implement to make Finland a better environment for startups.

“There are a couple of new tax incentives to come,” says Katainen in an interview with ArcticStartup. “The first is a Business Angel tax incentive that would help Business Angels find Finland a more encouraging surrounding for investments to startups. I think the innovation surrounding Finland is pretty good, but now we have to attract the Venture Capitalists to invest more often into Startups.

“The second big issue is that we will launch a new R&D tax deduction. We haven’t launched it this year because we have public money through technology centers where the money has been used for startups, but we’re trying to broaden the base so that everybody can benefit from R&D.”

More information can be found in his full speech, which can be found online. Here is a snippet with more detailed information on the proposed tax changes.

The Government has agreed to issue provisions that will provide substantial tax breaks to small and medium-sized enterprises investing in research and development. These incentives, accounting for some 200 million euros per year, will reduce the corporate tax burden of small, innovative businesses based in Finland.

The Government has also agreed on two additional tax incentives to attract investments in unlisted enterprises. In future, angel investors will receive tax breaks for minority investments in unlisted growth companies and the tax burden on capital gains from investments in unlisted enterprises will be reduced by increasing the presumed acquisition cost in taxation.
In addition, the Government is exploring possibilities to introduce an innovation box that would allow a competitive tax regime to intellectual property income.

These tax incentives demonstrate Finland’s commitment to enhancing a start-up-friendly business environment in Finland. During the past two years, Finland has introduced austerity measures worth more than 5 billion euros or 3 % of GDP annually to reduce public deficit and to stabilise the government’s debt-to-GDP ratio to a level well below 50 % per GDP. Given the current economic circumstances, a 300-million-euro tax break scheme to small businesses and start-ups may be considered a significant investment.

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