Legal Alerts/20 Jun 2023

The Newly Formed Finnish Government Introduces Its Tax Policy for the Upcoming Parliamentary Term

The newly formed Finnish Government published its Government Programme for the upcoming four-year parliamentary term on 16 June 2023. The Government’s general tax policy objectives are to refrain from raising the overall tax rate and to promote employment, entrepreneurship, and investments. A moderate shift from income taxation to indirect and real estate taxation is expected. Corporate and capital income taxes will not be increased.

The trend in tax policy

The general trend and focus of the Government’s general policy is to address the cumulative public deficit, factors that restrict economic growth, and the expected growth in public expenditure due to unfavourable demographic development. The Government’s general policy aims at balancing the public finances and improving long-term fiscal sustainability by reducing public spending and improving conditions for economic growth, employment, and entrepreneurship.

On that account, the Government’s tax policy aims to refrain from increasing the overall tax rate. The focus will be on preserve and improving the incentives for economic growth, employment, entrepreneurship, and investments. In general, the tax policy could be characterised as a moderate shift from income taxation to indirect and real estate taxation. The taxation of workers and families will be reduced in order to achieve the policy objectives. Corporate and capital income taxation will not be increased. International corporate tax developments will be monitored and addressed by applying additional tax measures if required by reasons related to tax competitiveness.

Key takeaways of the planned tax measures

Some of the most notable tax measures that the Government has planned to implement during the parliamentary term are the following:

  • The taxation of workers and families will be reduced by increasing tax deductions. The tax cuts will mostly concern low- and middle-income earners.
  • A payment period of 10 years will be granted for paying inheritance tax regardless of the inherited assets. Currently, a 10-year payment period is only available when enterprises are inherited in connection with generational shifts.
  • The maximum investment amount in equity savings accounts will be raised to EUR 100,000 from the current maximum of EUR 50,000.
  • The tax-at-source taxation applied to foreign key employees will be amended by extending the maximum working period to seven years, during which their salary will be taxed at source with a fixed tax rate.
  • The reduced VAT rate of 10 percentage points will be raised to 14 percentage points in respect of all goods and services that are currently subject to 10 percent VAT rate except for newspapers and periodicals. This means, that the VAT rate applied for example to passenger transport, accommodation services, pharmaceutical products and entrance fees to cultural and entertainment events would increase. In addition, the VAT rate applicable to female sanitary products and diapers will be reduced from 24 percentage points to 14 percentage points.
  • Excises on tobacco products, alcohol, and beverages will be raised except for certain product categories.
  • The real estate tax reform concerning real estate valuation will be continued and finalised. The minimum real estate tax rate applied to land areas will be raised to 1.30 percentage points.
  • The tax on mining minerals will be reviewed and adjusted at the halfway of the parliamentary term.

The Government Programme also addresses various potential tax measures that will be studied during the parliamentary term. As the intention at this stage is only to study such measures, the potential legislative preparations resulting from the studies remain to be seen. Some of the interesting topics that will be covered include for example the possibility to replace inheritance taxation with capital gains taxation, the taxation of investment funds and its conformity with EU law, the real estate taxation of offshore wind farms, and the introduction of real-time VAT reporting.

Conclusive remarks

In overall, the Government Programme does not entail any profound systemic changes to the Finnish tax system. The moderate shift from income taxation to indirect and real estate taxation is mostly warranted by the objective of refraining from increasing the overall tax rate and easing income taxation in circumstances where budgetary restraints play a major role.

The studies that the Government will commence may result in legislative preparations, but it remains to be seen what kind of conclusions and proposals the studies might entail. We will monitor the situation and report on any progress and legislative preparations that the studies may lead to.

If you have any questions about this legal alert and what it could mean for your business, please contact the Borenius Tax team or your regular Borenius contact.

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Additional information

Einari Karhu



Anna-Riikka Nummi

Senior Associate