Legal Alerts/7 May 2021

How Finnish Government’s Mid-Term Policy Review Affects Taxation?

The Finnish government published its mid-term policy review at the end of last month. It contains several policy positions that concern taxation that may affect your business as well. We have put together a brief summary of some of the most significant trends that these new positions will emerge in terms of corporate, personal and indirect taxation.

1. Corporate taxation

New machinery and equipment

The government will extend the current possibility for accelerated depreciations on new machinery and equipment until 2025. Under the current legislation, spanning from 2020 to 2023, double depreciations are allowed on new machinery and equipment purchased within the aforementioned tax years.

Corporate tax rate

The government also plans to take a look into a possible structural change concerning corporate tax rate by the end of May 2022. The proposed change would lead to two different corporate tax rates – one for profit left in the company and another for profit distributed out of the company.

As of 2023, yet unannounced measures will be taken to ensure that profit from foreign funds’ real estate investments will be broadly taxed in Finland.

2. Personal taxation

Index adjustments will be made to the tax basis of personal income taxation in order to keep the taxation from rising due to general growth in income.

Municipalities’ tax revenues

Some of municipalities’ tax revenues will be redirected to central government due to the creation of wellbeing service counties. However, this requires that certain measures will be taken in order to prevent situations where this change would lead to higher taxation.

Tax credit for household expenses

Several positions concern the tax credit for household expenses. The government has given an incentive to households to replace oil-fired heating during the period of 2022–2027 and raised the maximum tax credit of these households from EUR 2,250.00 to EUR 3,500.00.

In addition, the compensation percentage for the share of the expenses charged for household work will be raised from 40 percent to 60 percent.

The government also plans to look into ways to extend the tax credit for household expenses into other energy renovation options and energy renovations conducted by housing companies.

3. Indirect taxation

The excise duty on tobacco products will be raised by a total of EUR 100 million during the period of 2022–2023. In addition, the tax expenditure on synthetic diesel will be removed by 2023.

How these will affect your business?

A comprehensive analysis of the actual effects of these on your business requires further discussion in terms of all aspects involved in your taxation. If you have any questions or you are uncertain how to proceed or value a second opinion, Borenius’ tax lawyers are happy to assist you.

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