This is an important year on the taxation front. New rules restrict interest deductions and increase the transfer tax related to the sale of shares in housing and real estate. Additionally, two tax incentives support research and development activities, as well as innovation and growth.
The Finnish legislature has restricted interest deductions applied in taxation starting in the 2014 taxation year. If your company operates on other than a calendar-year basis for financial accounting purposes, the restriction may apply already in 2013.
The limitation concerns corporations and partnerships carrying on business activities in Finland. Entities carrying on other than business activities, such as real property companies, in general, are excluded from the scope of the limitation, as well as banking, insurance and pension institutions.
According to the main rule, net interest expenses are tax deductible for income tax purposes up the amount of EUR 500,000. Net interest exceeding EUR 500,000 is deductible to the amount corresponding to 30% of adjusted profit of the entity before depreciations, interest costs, losses related to financial assets and group contribution. However, interest paid to a non-related party is tax deductible as a whole.
The restriction is not applied in instances where the ratio of equity to the total balance sheet is not below the corresponding ratio of the whole group.
Transfer tax on transfers of shares of housing and real estate is raised to 2% (the current amount is 1.6%). The new rate is applicable to transfers made on 1 March 2013 or later. Regarding all transactions, the tax base is extended to liabilities transferred to the transferee and benefitting the transferor. Pro rata loans of housing and real estate companies are allocated to the shares transferred and counted to the tax base.
While Finland has not been in favour of the EU financial transaction tax, it introduced a temporary tax for Finnish deposit banks to be applied in tax years 2013–2015. Branches of foreign banks located in Finland are excluded from the scope of the tax. The amount of tax is 0.125% of the risk weighted items, as determined for solvency accounting purposes at the end of previous year.
There are also incentives in the new tax package. The incentives are currently temporary, which means you can apply them for the 2013–2015 taxation years.
One of the incentives provides an additional deduction on salaries related to research and development activities, which is introduced in income taxation. You can use the deduction no matter the size of your company. The amount of additional deduction is in the range of EUR 15,000–400,000.
Additionally, individual investors (so-called business angels) are allowed to deduct half of their monetary investments in a small non-listed enterprise that employs fewer than 50 persons and whose annual turnover or annual balance sheet total does not exceed EUR 10 million. The amount of deduction is EUR 5,000–75,000, and it can be made from capital income. The deduction is considered as income to the investor, among others, when the investor disposes of the investment. Thus, the deduction is not a final benefit. There are several further conditions for the tax deduction.
This regime is conditional and needs still be approved by the EU Commission. It is applied to investments made after the notification.
Another incentive allows corporations to make double depreciations on new plant and equipment in plants taken into use in the tax years 2013–2015.
In addition, the Finnish legislature has introduced several taxation amendments that impact individual persons and estate death-taxation. The Finnish value-added tax has also increased in all classes by 1%.