Swedish App Developers Sigh In Relief, Dodge Double VAT
A couple of months ago we reported that Swedish app developers were facing a double value added tax in the EU market. Once implemented, the tax would have put several Swedish startups at a competitive disadvantage.
With pressure from Per Strömbäck, spokesperson for the Swedish Games Industry, and others, the Swedish authorities finally caved in last week and announced that they will put the double tax on indefinite hold until EU member states can agree on common guidelines for the taxation of electronic services.
Tax Exemption For Finnish Startups
Today The Finnish Software Entrepreneurs Association issued a press release (here in Finnish) demanding tax exemption for Finnish startups. Jaakko Salminen, head of the Association, argues that the current Finnish tax legislation is not fair for startups in comparison to the BigCo. To fix this the Association proposes that those startups that fund their operations from their own profits and are owned by the entrepreneurs themselves should be exempted from the corporate income tax. This of course means that those startups are profitable. Further, the tax legislation should promote all the measures that lead to M&A activity that increases the size of the company. The Finnish Software Entrepreneurs Association also go on to argue that such measures push up the employment figures and increase the tax revenue in the long run.
Currently the heaviest burden from the Finnish taxation is felt by the early stage startups that don't use debt leverage as much as BigCo, are owned by the entrepreneurs themselves and fund their day to day straight from the accrued revenues. Salminen goes on to argue that being exempted from corporate income tax would incentivise exactly these types of companies to leave the money in the company to fuel the growth, instead of taking out every last penny through dividends.
We concur, but can't see how this helps the pre-revenue stage companies that are not profitable, which is the type of startup where the need for tax, or any break, is the biggest. Profitable and promising startups should not have trouble getting investors interested in the. Conversely, even the promising, but riskier pre-revenue ones do.
