Legal Alerts/21 Apr 2023

New Supreme Administrative Court Ruling on the VAT Deduction Right of Stock Market Listing Costs

Borenius successfully represented a client in a matter concerning the right to deduct VAT for stock market listing costs. Our client’s case involved a listing where most of the sold shares were existing shares sold by the existing shareholders. The only new shares issued during the listing process were shares issued to the employees.

The case before the Tax Adjustment Board and the Helsinki Administrative Court

The Tax Adjustment Board and the Helsinki Administrative Court both ruled that the company was entitled to deduct VAT for the stock market listing costs only for that proportion of all shares that the issued employee shares would comprise after listing.

In practice, this would have resulted in only 0.6% of the costs being deductible. The reasoning for the decision was that the rest of the costs related to the sale of shares by existing shareholders and, therefore, the costs were not deductible for the company.

The Supreme Administrative Court’s ruling

In its new yearbook ruling KHO:2023:33, the Supreme Administrative Court (the SAC) overturned the decisions issued by the Tax Adjustment Board and the Helsinki Administrative Court. The SAC accepted our argument that the costs should be considered deductible based on their use in taxable business activities.

The SAC ruled that the stock market listing benefits the VAT-taxable business of the company and that the listing gives rise to new obligations that the listed company must abide by. For example, the legal obligations of a listed entity, bookkeeping matters, investor communications, and financing arrangements may require the use of advisory services. These costs do not relate to the sale of shares by existing shareholders but rather belong to the company.

Furthermore, the SAC held that the right to deduct VAT for the listing costs should be determined based on the purposes for which the services had been acquired. Any services retained in connection with the sale of the shares held by existing shareholders are not deductible for the company, but the proportion of 0.6% was clearly too low considering the circumstances.

The SAC referred the matter back to the Tax Administration to have it determine the deductible proportion based on the purposes for which the services in question had been acquired.

The impact of the Supreme Administrative Court’s ruling

The new ruling confirms that the actual use and purpose of the acquired goods and services is the determining factor when deciding whether a taxable person is entitled to deduct VAT in relation to costs it has incurred.

We consider the SAC’s ruling to be in line with the basic principles concerning VAT deduction rights outlined in the case law of the Court of Justice of the European Union. The ruling also confirms that, insofar as the VAT deduction right is concerned, the determining factor is not the proportion between new shares issued as part of the listing process and the amount of existing shares sold during the listing.

If you have any questions about the ruling, please contact the undersigned or your regular Borenius contact.

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Additional information

Heikki Wahlroos



Henna Jovio



Anna-Riikka Nummi

Senior Associate