The Finnish Large Taxpayers’ Office (Konserniverokeskus in Finnish) has sent authority-initiated guidelines to several Finnish large-scale enterprises, in which it has provided further instructions on the following issues:
- Deduction of VAT on transaction costs incurred on the sales of shares and real estate;
- Interests received from group companies;
- Treasury functions and other financial services supplied to group companies, and;
- Impact of these activities on the deduction of overhead costs.
VAT deduction on transaction costs has been an area of interest in recent tax audits in Finland. These new guidelines are in line with the views presented by the Large Taxpayers Office in recent VAT audits in which the Large Taxpayers Office has referred to the case law of the Supreme Administrative Court. However, it is problematic that the case law referred to by the Large Taxpayers Office does not apply to companies solely carrying out VAT taxable activities. As a result, there are currently several appeals pending before the courts. However, published case law of this issue is to be expected soon.
Furthermore, it is provided in the guidelines that costs incurred on interests are not deductible for VAT purposes. In addition, the same applies to treasury functions and other inter-company financial services. In the Large Taxpayers’ Office’s view, these services are not subject to VAT even if they were charged as part of a management fee. Moreover, these activities should impact the deduction of overhead costs of the group company receiving the interests and charging for treasury functions and other financial services.
These guidelines are not in compliance with the established tax practice in Finland. In our view, these guidelines are not supported by any recent ECJ case law either. Therefore, we recommend that companies which have received similar guidelines, or any other companies carrying out the activities described above, should carefully consider the VAT treatment of these activities. Taking into account that these guidelines are not in compliance with the previous tax practice, companies should avoid making any rushed decisions based on these guidelines. We are happy to discuss this issue in more detail.