Legal Alerts/27 Aug 2021

Proposal to widen the scope of the Finnish Transfer Pricing Adjustment Provision

The Finnish Ministry of Finance issued a draft government bill concerning the revision of the Finnish transfer pricing adjustment provision on 23 August 2021 (“Bill”). Should the Bill pass in the proposed schedule, the new transfer pricing adjustment provision will take effect as of 1 January 2022. As for now, the Bill is being circulated for comments until mid-September. During the previous plan to revise the transfer pricing adjustment provision in a similar way, the amendment was deemed problematic in many ways and the observed legislative issues stopped the plan.


Pursuant to the current transfer pricing adjustment provision, it is not possible to disregard a business transaction that has been agreed and implemented by the parties. The Supreme Administrative Court has stated in several rulings that making such transfer pricing adjustment would require an explicit authorisation, which is not included in the Finnish transfer pricing adjustment provision. In general, when assessing whether a certain business transaction follows the arm’s length principle, the evaluation must be based on the business transaction actually implemented in the manner structured by the related parties. Thus, the OECD transfer pricing guidelines cannot be applied in full in relation to transfer pricing adjustments in Finland.

The Bill highlights that, based on the recent case law, it is obvious that the current national transfer pricing legislation should be clarified and specified.

Proposed changes

The proposed legislative amendments would allow making transfer pricing adjustments to the full extent permitted by the OECD Transfer Pricing Guidelines. As proposed in the Bill, the analysis of whether the actual transaction executed between the associated enterprises complies with the arm’s length principle should always include an accurate delineation of the transaction based on the economically relevant characteristics of the transaction. In exceptional circumstances, the transaction between the parties could be disregarded for transfer pricing purposes.

The Bill also notes that the proposed revision could cause some pressure for the Finnish Tax Administration to add tax supervision in situations that have been difficult to address due to the restrictions set by the current case law.

The changes proposed in the Bill would mean a significant shift in the Finnish tax system that is based on the rule of law and respecting the legal form of transactions.

Next steps

The final government bill is expected to be issued in mid-October. The suggested legislative changes are planned to take effect as of 1 January 2022. During the previous attempt to revise the transfer pricing adjustment provision, several concerns were expressed with regard to the legal certainty and predictability of taxation. It would not be surprising if similar concerns are presented during the current circulation of the proposal for comments. However, any multinational groups that have operations in Finland should now analyse their transfer pricing model and its arm’s length nature. If considered relevant, the arm’s length nature of the model can be ensured e.g. in a pre-emptive discussion procedure with the Finnish Tax Administration.

We will continue to monitor any developments as the proposal proceeds towards implementation. If you have any questions regarding the matter, please feel free to contact any of Borenius’ attorneys listed in this alert or those with whom you usually work.

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Additional information

Sampo Viding

Senior Associate


Einari Karhu