1 Basic framework
1.1 Is there a single tax regime or is the regime multi-level (eg, federal, state, city)?
In Finland, the tax authorities collect both federal and city taxes under the same regime.
1.2 What taxes (and rates) apply to corporate entities which are tax resident in your jurisdiction?
The tax rate for corporate entities is 20%.
1.3 Is taxation based on revenue, profits, specific trade income, deemed profits or some other tax base?
Taxation is based on profits. Accounting profits are adjusted for various tax add-backs and allowances to calculate the taxable profits.
1.4 Is there a different treatment based on the nature of the taxable income (eg, gains on assets as opposed to trading income or dividend income)?
Agricultural income is taxed differently from other business income. However, the previous separation of sources of income into passive and active income (ie, the ‘income basket system') was abolished in 2020. There are also some tax exemptions concerning, for example, dividends between unlisted companies and certain capital gains (ie, the participation exemption).
1.5 Is the regime a worldwide or territorial regime, or a mixture?
It is a worldwide regime.
1.6 Can losses be utilised and/or carried forward for tax purposes, and must these all be intra-jurisdiction (ie, foreign losses cannot be utilised domestically and vice versa)?
Losses may be carried forward and offset against profits for the following 10 years. Losses are utilised on a first-in, first-out basis. Capital losses may have a set-off period of five years. Certain changes of control in the loss-making company will result in forfeiture of the losses, unless permission to utilise losses is successfully obtained from the tax administration, subject to certain conditions. Only intra-jurisdiction losses may be utilised. However, based on recent case law, certain foreign losses that qualify as final losses originating from another EU/European Economic Area country may also be utilised, under certain conditions.
1.7 Is there a concept of beneficial ownership of taxable income or is it only the named or legal owner of the income that is taxed?
The concept of beneficial ownership in tax treaties limits the application of tax treaty provisions. Under domestic law, there is no definition of ‘beneficial owner'. The general anti-avoidance rule may be applied, according to which the substance over form principle will apply. In addition, Finland has adopted controlled foreign corporation legislation.
1.8 Do the rates change depending on the income or balance-sheet size of the taxpayer?
No.
1.9 Are entities other than companies subject to corporate taxes (eg, partnerships or trusts)?
Yes – for example, foundations, funds and cooperative associations are also subject to corporate taxes. Partnerships are taxed at the level of the owners. There is no concept of a trust under Finnish law.
2 Special regimes
2.1 What special regimes exist (eg, for fund entities, enterprise zones, free trade zones, investment in particular sectors such as oil and gas or other natural resources, shipping, insurance, securitisation, real estate or intellectual property)?
There is a special tax regime for the shipping industry.
2.2 Is relief available for corporate reorganisations or intra-group transfers of companies and other assets? Please include details of any participation regime.
Under certain conditions, the sale of shares in associated companies may be tax exempt. This applies where:
- the shares are part of the seller's fixed assets; and
- the seller has owned at least 10% of the share capital of the company, directly and continuously, for at least one year.
As an EU member state, Finland has provisions on cross-border mergers, divisions, transfers of assets and exchanges of shares in accordance with the EU Merger Directive. These rules also apply to domestic transactions.
A change of company form is possible without immediate tax consequences in many cases. For example, a partnership may be transformed into another kind of a partnership or into a limited company. However, a limited company may not be transformed into a partnership.
2.3 Can a taxpayer elect for alternative taxation regimes (eg, different ways to calculate the taxable base, such as revenue-based versus profits based or cash basis versus accounts basis)?
No.
2.4 What are the rules for taxing corporates with different functional or reporting currency from that of the jurisdiction in which they are resident?
There are rules on the exchange rates that should be applied to translate different currencies used into euros.
2.5 How are intangibles taxed?
The tax rate for corporate entities is 20%. No patent box rules or similar beneficial regimes are available for intangibles.
2.6 Are corporate-level deductions available for contributions to pensions?
Yes, employee pension insurance payments may be deducted.
2.7 Are taxpayers from different sectors (eg, banking) subject to different or additional taxes or surtaxes?
No.
2.8 Are there other surtaxes (eg, solidarity surtax, education tax, corporate net wealth tax, remittance tax)?
No.
2.9 Are there any deemed deductions against corporate tax for equity?
No.
3 Investment in capital assets
3.1 How is investment in capital assets treated – does tax treatment follow the accounts (eg, depreciation) or are there specific rules about the write-off for tax purposes of investment in capital assets?
There are some differences between the depreciation rules for taxation and accounting purposes.
3.2 Are there research and development credits or other tax incentives for investment?
No. However, certain temporary regimes have been adopted concerning faster depreciation for investments, for example.
3.3 Are inventories subject to special tax or valuation rules?
No.
3.4 Are derivatives subject to any specific tax rules?
No.
4 Cross-border treatment
4.1 On what basis are non-resident corporate entities subject to tax in your jurisdiction?
Non-resident corporate entities are tax liable if they have a permanent establishment in Finland. The permanent establishment rules follow the Organisation for Economic Co-operation and Development model. A ‘permanent establishment' is a distinct place for conducting business of a permanent nature, or a place where special arrangements to conduct such business have been made. Examples given in the legislation include a place of management, a branch, an office, an industrial plant, a factory, a workshop, a shop or any other permanent place at which transactions may be effected.
4.2 What withholding or excise taxes apply to payments by corporate taxpayers to non-residents?
There are withholding taxes concerning, for example, dividends and royalties.
4.3 Do double or multilateral tax treaties override domestic tax treatments?
Yes, tax treaties limit Finland's right to tax.
4.4 In the absence of treaties, is there unilateral relief or credits for foreign taxes?
Yes.
4.5 Do inbound corporate entities obtain a step-up in asset basis for tax purposes?
This will depend on the structure of the inbound migration.
4.6 Are there exit taxes (for disposed-of assets or companies changing residence)?
Yes. As an EU member state, Finland has exit tax rules for companies according to the EU Anti-Tax Avoidance Directive.
5 Anti-avoidance
5.1 Are there anti-avoidance rules applicable to corporate taxpayers – if so, are these case law (jurisprudence) or statutory, or both?
Yes, there are statutory anti-avoidance rules.
5.2 What are the main ‘general purpose' anti-avoidance rules or regimes, based on either statute or cases?
The main rule is the general anti-avoidance rule, according to which the ‘substance over form' principle will apply.
5.3 What are the major anti-avoidance tax rules (eg, controlled foreign companies, transfer pricing (including thin capitalisation), anti-hybrid rules, limitations on losses or interest deductions)?
In addition to the general anti-avoidance rule, other major anti-avoidance tax rules are based on, for example, the EU Anti-Tax Avoidance Directive. There are also separate anti-avoidance rules on disguised dividends.
5.4 Is a ruling process available for specific corporate tax issues or desired domestic or cross-border tax treatments?
It is possible to apply for an advance tax ruling from the Finnish tax authorities if it is unclear how the legislation might apply to a specific case. However, it is not possible to obtain special tax treatment that is not based on the legislation applicable to all taxpayers.
5.5 Is there a transfer pricing regime?
Yes. According to the Finnish transfer pricing rules, all related-party transactions must be effected on an arm's-length basis.
5.6 Are there statutory limitation periods?
Yes. The general statute of limitations allows for a tax adjustment for a three-year period. However, there are several exceptions to this.
6 Compliance
6.1 What are the deadlines for filing company tax returns and paying the relevant tax?
Company tax returns must be filed within four months of the end of the accounting period. Advance taxes must be paid during the tax year.
6.2 What penalties exist for non-compliance, at corporate and executive level?
The penalties include a tax increase, late payment fees and penalty interest. Criminal sanctions are also possible in severe cases.
6.3 Is there a regime for reporting information at an international or other supranational level (eg, country-by-country reporting)?
Yes, country-by-country reporting is mandatory for groups with a turnover of €750 million or more.
7 Consolidation
7.1 Is tax consolidation permitted, on either a tax liability or payment basis, or both?
Tax consolidation is not permitted, but it is possible to make a deductible group contribution under certain conditions, where the parent company owns at least 90% of the share capital of the affiliated company. The legislation concerns domestic situations and also group contributions made to affiliated companies in other EU/EEA states to the extent that these cover final losses.
8 Indirect taxes
8.1 What indirect taxes (eg, goods or service tax, consumption tax, broadcasting tax, value added tax, excise tax) could a corporate taxpayer be exposed to?
Indirect taxes include value added tax, broadcasting tax and excise taxes. Excise taxes are levied on products such as alcohol, tobacco, sodas, beverage packs, fuels, electricity and waste.
8.2 Are transfer or other taxes due in relation to the transfer of interests in corporate entities?
Transfer taxes are due, for example, on the transfer of shares which are not publicly listed.
9 Trends and predictions
9.1 How would you describe the current tax landscape and prevailing trends in your jurisdiction? Are any new developments anticipated in the next 12 months, including any proposed legislative reforms?
The Finnish tax landscape is conservative. Finland follows EU rules and Organisation for Economic Co-operation guidelines. No major reforms are expected.
10 Tips and traps
10.1 What are your top tips for navigating the tax regime and what potential sticking points would you highlight?
In case of uncertainty, it is advisable to discuss the matter with the tax authorities and obtain an advance ruling.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
