Finland Country Profile EU Tax Centre March 2013
Key factors for efficient cross-border tax planning involving Finland EU Member State
Yes.
Double Tax Treaties
With: Denmark
Kazakhstan
Norway
Tajikistan
Armenia
Egypt
Rep. of Korea
Pakistan
Tanzania
(a)
Australia
Estonia
Kosovo
Philippines
Thailand
Austria
France
Kyrgyzstan
Poland
Turkey
Azerbaijan
Georgia
Latvia
Portugal
UAE
Barbados
Germany
Lithuania
Romania
UK
Belarus
Greece
Luxembourg
Russia
Ukraine
Belgium
Hungary
Macedonia
Serbia
Uruguay
Bosnia & Herzegovina
Iceland
Malaysia
Singapore
US
Brazil
India
Malta
Slovakia
Uzbekistan
Bulgaria
Indonesia
Mexico
Slovenia
Vietnam
Canada
Rep. of Ireland
Moldova
South Africa
Zambia
China
Israel
Montenegro
Spain
Croatia
Italy
Morocco
Sri Lanka
Cyprus
Jamaica
Netherlands
Sweden
Japan
New Zealand
Switzerland
(b)
Czech Rep. Notes:
(a) (b)
Residence
(b)
Argentina
Treaty between Finland and Yugoslavia will become applicable to relations between Finland and Kosovo with retroactive effect after the formal procedures are finalized. Treaty signed but not yet in force.
A company is resident in Finland if it is incorporated under Finnish law. Residents are subject to tax on their worldwide income. Non-residents are subject to Finnish tax on their Finnish source income.
Compliance requirements for CIT purposes
Tax return should be filed within four months after the end of a fiscal year, e.g. if financial year ends on December 31, 2010, the corporate income tax return needs to be filed no later than April 30, 2011.
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Tax rate
The standard corporate income tax rate is 24.50 percent.
Withholding tax rates
On dividends paid to non-resident companies 0 / 24 / 30 / DDT percent. On interest paid to non-resident companies 0 percent. On patent royalties and certain copyright royalties paid to non-resident companies 0 / 24 / 30 / DDT percent.
Holding rules
Dividend received from resident/non-resident subsidiaries? Tax exempt (100 percent) if the subsidiary is a non-listed company resident in the EU. Partially taxable (75 percent; 25 percent tax exempt) (i) if the subsidiary is a listed company resident in the EU and the recipient holds less than 10 percent of its share capital or (ii) if the subsidiary is a non-EU treaty resident company (if not exempted in the applicable tax treaty). Taxable income (100 percent) if the subsidiary is a non-EU and non-treaty resident company. Capital gains Exempt, if participation exemption requirements are met. Otherwise taxable. Deductibility of costs
■ Interest costs: Generally, interest expenses are tax deductible. However, new interest expense limitation rules came into force on January 1, 2013, but the rules will be applied to taxation only from 2014 onward. The new interest expense limitation rules restrict the deductibility of interest expenses of related-party loans. Furthermore, certain back-to-back arrangements and collateral arrangements can result in a third-party loan being deemed as a related-party loan. A full deduction is allowed for interest expenses up to the amount of interest income. Limitations are based on the company’s taxable business profits before interest, depreciation and other losses and increases/decreases in value of financial assets (EBITDA), to which interest expenses, tax-deductible depreciation, losses and changes in value of financial assets;
■ Acquisition costs: Deductible at disposal, if the capital gain is taxable income;
■ Costs on disposal: Deductible, if the capital gain is taxable income. Tax losses
Tax losses can be carried forward for 10 tax years. Carry-back is not allowed. Tax loss carry-forwards are forfeited if more than 50 percent of the company’s shares are subject to direct or indirect change of ownership (dispensation can be requested).
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Tax consolidation rules/Group relief rules
Group consolidation possible via group contributions.
Registration duties
Small administrative registration fee.
Transfer duties
On the transfer of shares Yes, if the seller or buyer is resident in Finland for tax purposes. 1.6 percent Transfer tax rate on the transfer of shares of a real estate company or a jointstock property company will be increased from 1.6 percent to 2 percent. The increase in transfer tax rate will also be levied on the transfer of shares in group companies holding the group’s property as well as on transfer of shares in real estate investment companies. The amendments proposed to the Finnish Transfer Tax Act will expand the international scope of the law. On the transfer of land and buildings Transfer tax of 4 percent, based on the purchase price of the property.
Controlled Foreign Company rules
Yes. Generally, if Finnish entities or individuals hold at least a 50 percent stake in a Controlled Foreign Company (“CFC”), or its foreign branch, which is subject to a low level of taxation and does not carry out business activities in certain lines of business, the Finnish CFC rules must be applied. CFC rules are not applied to companies effectively established in EEA Member States or treaty countries not on the black list.
Transfer pricing rules
General transfer pricing rules Yes. Generally, the provisions of the OECD Transfer Pricing Guidelines are followed when determining the arm’s length prices. Documentation requirement? Yes.
Thin capitalization rules
No, but earnings stripping rules in place.
General AntiAvoidance rules (GAAR)
Yes.
.
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Specific AntiAvoidance rules/Anti Treaty Shopping Provisions
Yes.
Advance Ruling system
Yes.
IP / R&D incentives
Yes.
Other incentives
The Budget Bill for 2013, which was presented to parliament on September 18, 2012, proposes, with effect from January 1, 2013, to (re)introduce the accelerated depreciation for qualifying new industrial investments acquired and taken into use between 2013 and 2015. This accelerated depreciation will be available for a maximum of 2 consecutive tax years.
VAT
The standard rate is 24 percent, and the reduced rates are 14 and 10 percent.
Hybrid Instruments
Are you aware of any instruments in your country that are treated differently in another country (i.e. PPL, etc)? No. Does your jurisdiction have special rules for Hybrid Instruments? No.
Hybrid Entities
Are you aware of entities/partnerships in your country that are treated differently in another country? No. Does your jurisdiction have special rules for Hybrid Entities? No.
Other relevant points of attentions Source:
No.
Finnish tax law and local tax administration guidelines, updated 2013.
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Contact us
Jussi Jarvinen KPMG in Finland T +358 20 760 3077 E
jussi.jarvinen@kpmg.fi
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