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Finland hopes to attract foreign startups with new entrepreneurs' residence permit

So far, Russian and Lebanese start-ups have received favourable business evaluations as part of the first phase of the application process.

Kasvuyritystapahtuma Slush Helsingin Messukeskuksessa viime vuonna.
Slush, the annual start-up carnival, seeks to bring together start-ups and investors. Image: Petteri Sopanen / Yle

From the beginning of April, Finnish authorities introduced a new kind of residence permit for start-up entrepreneurs. According to the government, the purpose of the scheme is to try and attract new entrepreneurial activity into the country and to put Finland on a steady footing to compete internationally for innovative growth firms.

“The aim is to remove barriers and get start-up entrepreneurs into Finland to accelerate economic growth and employment,” said inspector general Pekka Lindroos of the Finnish Immigration Service, Migri.

Countries such as Denmark already have a similar programme in place.

Applicants wishing to acquire the entrepreneurs’ residence permit will need to get a favourable business assessment from the Business Finland innovation centre, previously known as Tekes, the state research funding agency. Once the evaluation has been granted, applicants must then file a residence permit application with Migri, which will review issues such as projected income and the general grounds for granting the permit.

However Business Finland cautioned that not just any business idea will receive a favourable assessment. Start-ups will have to show that they have the potential to generate rapid growth in international markets.

“Often, we are talking about a new kind of innovative product or solution looking for markets,” explained Business Finland director Jukka Häyrynen.

The start-up residence permit is initially valid for two years, with the option to renew it.

Two-tier approach

Immigration has long been touted as the solution to ease the problem of Finland’s dependency ratio, which describes the ratio of non-employed to employed persons in the population. However the government does not see blanket immigration as the answer.

The start-up entrepreneurs’ residence permit is part of the government’s efforts to increase work-based immigration. At the same time, the authorities are turning the screws on asylum policy.

Data released last month indicate that the government has tightened its stance on granting international protection between 2015 and 2017. Essentially at the same time that the Interior Ministry was preparing the groundwork for the new entrepreneur residence permit. Officials began working on the proposal in April 2016.

“It was a purely political decision to develop this permit and as far as I can see it’s not a zero-sum game,” Migri’s Lindroos observed.

The new measure was also driven in part by a report produced in 2017 by the Social and Health Affairs Ministry, which cautioned against immigration on humanitarian grounds.

“Humanitarian immigration produces the most negative impact on public finances, while employment-based immigration produces the most positive effects,” the ministry declared.

It also noted that it is not rational to compare these types of immigration.

“Most countries experience humanitarian immigration as well as the kind of immigration motivated at least in part by a desire to boost the economy. I see no contradiction there,” Lindroos commented.

The government commissioned the analysis on the effect of immigration on the economy following a request by the Finns Party.

Monthly income or adequate funds necessary

Applicants seeking the entrepreneurs’ permits must be able to prove that they have a monthly income of about 1,000 euros. Alternatively, the applicants’ bank account must have adequate funds to support a two-year stay – the maximum duration of an initial permit.

“If applicants cannot demonstrate [they have] a monthly income, then for a one-year permit, they must have 12,000 euros, for example,” Lindroos said.

Lindroos acknowledged that a start-up entrepreneur might not necessarily have regular income during the early phase of business and that it would therefore be difficult to prove a steady stream of income.

So far, officials don’t know whether or not meeting the income criterion will be an obstacle for new businesses looking to set up shop in Finland. Migri said that it expects to receive the first applications under the new scheme in the next few weeks.

Last week, Business Finland issued positive assessments of the business prospects of a Russian and a Lebanese start-up as a prelude to applying for the residence permit.

Fast-track process promised

The official goal is for the application process to be as short as possible.

The usual processing period for a regular work-based residence permit is four months, but authorities hope to cut that down to a few weeks in the case of the new permit class.

According to Häyrynen of Business Finland, the permit could attract an entirely new kind of business activity – but students may also be tempted to stay in Finland to become entrepreneurs.

Officials have modest expectations when it comes to the popularity of the new permit type, however. The draft legislation mentions the number of residence permits to be granted under the scheme as a few dozen a year. According to Häyrynen and Lindroos, it is impossible to quote precise numbers at this stage.

Häyrynen said that there have been many enquiries about the permit since government introduced the measure. Business Finland has received just over a dozen requests for business evaluations over the past three weeks.

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