Legal Alerts/3 Sep 2025
New Supreme Administrative Court Precedent Confirms Partial VAT Deduction of Acquisition Costs
The Finnish Supreme Administrative Court (SAC) has issued a new precedent, SAC 2025:61, on VAT deductions for costs related to corporate acquisitions by companies indirectly held by private equity investors.
Background
The case concerned a Finnish company established in connection with a change of ownership within a corporate group. Its purpose was to acquire the group’s parent company and to serve as the new parent entity. The majority of its shares were held by a private equity fund through foreign holding companies.
After the acquisition, the company began providing management services to a subsidiary indirectly owned through the transaction but did not provide services to the directly acquired subsidiary.

The Supreme Administrative Court’s decision
The Court confirmed that acquisition-related advisory fees can, in principle, be treated as overheads of the acquiring company, provided the company participates in managing the acquired business through taxable management services.
The SAC held that it makes no difference whether services are provided to an indirectly held subsidiary rather than to the directly acquired one. Services sold to an indirectly owned subsidiary place the parent company in the same position as if services had been provided to the directly held subsidiary. Consequently, the group structure alone does not restrict deductibility.
Regarding the scope of the VAT deduction, the SAC confirmed that the acquiring company should be allowed to deduct VAT on the services it acquires and which directly relate to the acquisition, such as services related to drafting the sales and purchase agreement, advisory services on financing of its own activities, and services related to planning of its business activity. To the extent the advisory work is linked to the investors, such as private equity funds, the costs are not even partially deductible as company overheads. These costs include services acquired for investors’ investment decision, planning of wider group structure, such as the structure above the acquiring company, financing of these entities and drafting their partnership agreements.
Some acquisition-related services may also serve both the acquiring company and its owners or investors. Examples include due diligence on the target company, market research, valuation services, project management and strategic advice, assessments of future prospects and industry risks, and support with closing the acquisition and securing regulatory approval. In such cases, only the portion of costs demonstrably linked to the company’s taxable business activities may be deducted.
The SAC also addressed the evidentiary requirements. For VAT deductions, the company bears the burden of proof and must demonstrate, with sufficient detail, how costs are allocated between its own taxable activities and the non-deductible investment activities of its owners.

Impact of the precedent
The decision raises three key points for assessing VAT deduction in acquisitions:
General rule: Acquisition-related advisory costs can qualify as deductible overheads if they are connected to the company’s taxable activity, namely supplying management services to subsidiaries.
Link to taxable activities: The nature of the services and their relevance to taxable activities are decisive for the deduction right, and their benefit to other parties may be considered.
Burden of proof: Companies must document and demonstrate, through contracts, invoices, and records, how the costs support their taxable operations.
This precedent is particularly significant for private equity and fund structures. While it confirms the acquiring company’s partial VAT deduction right, it notes that to the extent the costs are linked to investors’, a portfolio company cannot claim a VAT deduction. This makes clear documentation and careful cost allocation more important than ever. Companies must be able to show that their acquisition costs are tied to their own taxable business activities.
In practice, this is not easy. It is often difficult to separate costs incurred for the benefit of owners from those that support the company’s own business. The SAC’s decision leaves room for interpretation, so disputes are likely to continue. For businesses, the judgment highlights the need for early planning, clear contractual arrangements, and detailed records to protect VAT deductions on acquisition-related costs.
If you have any questions concerning this Legal Alert, please contact the undersigned or other members of our Tax team.