Legal Alert – The Government Proposes Changes to Tax Legislation

The Finnish government has recently proposed the following amendments to Finnish tax legislation.

Income Taxation

The limits of the highly progressive income tax scale are proposed to be increased by 1.2 percent In addition, the bottom line of the highest income bracket on the scale is reduced from EUR 90,000 to EUR 72,300 meaning that more taxpayers would be subject to the highest marginal tax rates.

Higher Tax Rate on Capital Income

The higher tax rate on capital income is proposed to be increased from 33 percent to 34 percent.

Deductibility of Interest related to Housing Loans

The deductibility of housing loan interest is proposed to be gradually limited so that in 2016 the deductible amount of loan interest is 55 percent, in 2017 45 percent, in 2018 35 percent and in 2019 25 percent.

Capital Loss on Transfer of Assets

The capital loss on transfer of assets is proposed to be deductible from other capital income as well. Primarily, capital loss on transfer of assets would still be deducted from capital gains. The changes apply to taxation of individuals and estates.

Withholding Tax for Foreign Wage Earners with Special Expertise

The validity of the Finnish Act on Withholding Tax for Foreign Wage Earners with Special Expertise-is proposed to be continued in 2016–2019.

Increased Taxation concerning Tobacco, Waste, and Energy

Taxes on tobacco, waste, and energy are proposed to be increased in 2016–2017.

Car and Vehicle Tax

Certain changes are proposed to the taxation of cars and vehicles, which will lighten the overall tax burden of cars and vehicles from 2018 onwards.

Other Changes

The proposal also includes changes to deductible donations made by private individuals, to the basic deduction in municipal taxation, to earned-income deduction and to the Finnish Inheritance and Gift Duty Act.