New policy measures for financing growth in Finland

Nordic Growth Entrepreneurship Seminar Helsinki 13.9.2012

Sakari Immonen Head of Growth Ventures Division

MEE/Enterprise and Innovation Department

Enterprise and Innovation Policy 2011 - 2015 General objectives to support growth enterpreneurship:

• The Government encourages companies to take more risks in their international

expansion and announces its readiness to expand public risk sharing.

• Broader use of taxation to facilitate access to financing.

• Securing the increased need of assets for public financing organisations and appropriations for business development agencies (Finnvera, Tekes, Finnish Industry Investment Ltd).

• In the MEE’s enterprise client strategy, high-growth enterprises are defined as a key enterprise client segment.

• Streamlining enterprise and innovation services: • Tekes will take overall responsibility for public financing intruments targeted

at growth enterprises (grants, loans, equity). • TeamFinland and Growth Track: new joint service models of public

business development agencies to support enterprises’ growth and internationalisation.

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Enterprise and Innovation Policy 2011 - 2015 New measures for financing growth:

• New tax incentives to be introduced at the beginning of 2013.

• New tax incentives under consideration.

• Asymmetric profit sharing model in public-private VC funds to be tested.

• (Higher risk acceptance by Finnvera for SME loans and guarantees and by Tesi for VC investments).

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R&D TAX CREDIT Main features:

• Tax credit against corporate income taxes. • Targeted only at SMEs (limited liability companies). • The amount of tax credit would be a fixed percentage (25% - 50%) of salary and

wage costs of R&D personnel. There will be a maximum credit amount per company (EUR 100,000 - 150 000) annually. • R&D work as defined in the Community Framework for State Aid for R&D and

Innovation (OJ C 323/1, 30.12.2006).

Assessed impacts: • Substantive increase in the number of companies that would receive direct or

indirect public R&D&I support. • New high-paid and knowledge-intensive workplaces. • SME growth and export based more on their own innovations.

Estimated fiscal costs:

• 180 -190 million euros in the first year.

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TAX INCENTIVE FOR PRIVATE INVESTORS Main features:

• Targeted at private individuals to encourage their investments in small enterprises (according to EU SME definition).

• Relief from the capital incomes of the investor. • Relief will be 50% of the amount of the investment (a maximum amount of relief per

investor per year will be set (250,000 euros?)). • A limit will be set for how much a single company can receive such investments

annually (2.5 million euros?). • The relief will be recaptured in the case of exit. (The deduction (=relief) from the

capital income at the moment of investment will cut the acquisition cost of the shares in full when they are sold.)

• To be formulated according to the Community Guidelines on Risk Capital • It is open as to whether this will cover investments made through private investors

own small funds.

Estimated fiscal costs: • ln effect, this incentive would only lead to tax deferral of taxable capital income and

would not cause fiscal losses in the longer term.

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TAX INCENTIVES UNDER EXAMINATION IPR BOX

• Study underway at MEE on alternative models based on international benchmarking. The study will be completed by the end of 2012.

• Political decision on possible introduction in Spring 2013. • Simply means lower tax rate (in relation to corporate tax rate) on revenues coming

from patents and/or other intellectual property. • In European countries where IPR tax is in use, tax rate varies between 5 and 10%.

Lowering the threshold for going public

• Under scrutiny at the Ministry of Finance. • Would lighten the dividend taxation of companies that are listed on First North (the

multilateral trading facility of NASDAQ OMX Helsinki). • At present, First North companies are subject to the same dividend tax rules that

are applied to common stock companies. The amendment would mean that they would get softer tax treatment just like private unlisted companies.

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ASYMMETRIC VC FUNDS

• An asymmetric profit sharing model of public-private VC funds

would facilitate accelerator teams to raise their own venture funds.

• According to the planned model, a public fund investor (Finnvera) would be satisfied with a maximum profit level of 8%, and the exceeding profit would go to private investors.

• The model would not distort competition if its use is limited to small

funds (<€10 million).

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TeamFinland

• The Team Finland concept refers to a new, networked way of arranging more coordinated export promotion and internationalisation services for companies. Close collaboration between diverse service providers is intensified to make the services more customer-oriented.

• The Team Finland model of operation is based on the action plan for external economic relations that the Government adopted in the spring. It supports employment and the internationalisation of small and medium-sized enterprises in particular.

• Team Finland is a joint effort between the Ministry of Employment and the

Economy, the Ministry for Foreign Affairs, the Confederation of Finnish Industries, the Central Chamber of Commerce of Finland, the Federation of Finnish Enterprises and Finpro.

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GROWTH TRACK • Growth Track is a new service provided jointly by the MEE and business development

organisations in the administrative sector. This service is intended for highly motivated SMEs with the prerequisites for rapid growth and internationalisation.

• Growth Track matches companies’ needs and stage of development with the most relevant and suitable public services (expert and financial services).

• The most important element is a key account manager (‘Growth Pilot’) who is responsible for the company addressing its needs and for creating a toolkit from all service providers.

• Service providers: MEE, Tekes, ELY centres, Finnvera Plc, Finpro, Finnish Industry Investment Ltd and the National Board of Patents and Registration.

• The number of companies that participate in the programme will be increased from 50 to

150 by the end of 2012. • Each service provider has access to the files of common clients.

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THANK YOU

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