This April Leinonen, the Finnish accounting and tax advisory company with offices in eight Eastern European countries and in Scandinavia, held a series of seminars for Finnish companies explaining to new exporters the nuances of local markets.
Leinonen gathered small to medium-sized companies to share expertise on launching businesses in all of their markets: Norway, Sweden, Estonia, Latvia, Lithuania, Poland, Hungary, Bulgaria, Ukraine, and Russia.
About 20 to 25 companies were expected to attend each seminar, but the interest level turned out to be the highest in the Baltics, according to Tomi Bosnjak, the director of Tallinn office.
Three main topics were covered by the Baltic offices directors: How to start a company in the Baltics, what is the taxation system, and the labour law. “Estonia is one of the most logical places to start the business for a Finnish company without international experience”, says Tomi Bosnjak, “but there was quite a bit of interest in Latvia and Lithuania as well”.
Each of the Baltic countries seems to have its own advantage, whereas Estonia might be the easiest place to register and start a company, Lithuania boasts the lowest labour tax (15%).
But the bottom line was that there is no single point on which to judge which country is best. Entering a new market is not like entering a lottery and exporters won’t go somewhere simply because the taxes are low, since there is more than that to consider.
The Baltics are truly interesting for Finnish entrepreneurs. Historically we have a similar understanding about how business is done. We also have safe environments, low levels of bureaucracy, and lower taxation, labour costs and costs of living.
But while the challenges of entering a new market are always similar, an approach used on one country won’t necessarily work in another.
“We support companies by sharing our knowledge about general matters such as taxation, and specific information relevant to different industries where we already have experience, backed up by statistics and other relevant data” says Bosnjak.
Leinonen warns that while the Baltic market is familiar to many companies, many details of taxation and other legal technicalities remain challenging, so it would be a mistake to relax and treat the Baltics as an extension of the Scandinavian market.
“Outsiders tend to see the three Baltic countries as one, but it is not true, of course” says Julija Bajare, the director of Leinonen’s Latvian office. In taxation policy especially, Estonia stands completely separate to its near neighbours, especially its corporate income tax. Latvia and Lithuania are closer, but as each is trying to find its own way to attract investors, they are drifting apart more and more.
Nevertheless they do share similarities, for instance with regards to VAT. “Although it is early days, I feel that Latvia’s Eurozone entry in January 2014 has aroused the interest towards our countries. It seems that everyone is now waiting for Lithuania to trade its litas for euros”, says Julija.
The seminar on the Baltic countries was inevitably influenced by the current tense geopolitical situation.
“We were talking more about international relationships than about business. For instance, what do locals think about Finnish people?” Julia continues.
“Suddenly people wanted to understand not only how economically beneficial it is to work here, but how comfortable it is emotionally.”
The conclusion was not about whether Estonia, Latvia, or Lithuania is the best place to start.
As Julia Bajare noticed, “After all, it doesn’t matter, whether it takes three or five days to establish a company. The main thing is that the level of development across the Baltics is similar, and quite high”.
The next seminar in autumn will be for Latvian companies, allowing them to get acquainted with Norwegian and Swedish markets.