New tax incentives available
Finland has the lowest corporate tax rate among the Nordic countries and one of the lowest in the EU. In addition to moderate taxation rates, Finland now offers new tax deductions for companies operating in Finland.
No unwanted surprises in taxation
The Finnish Tax Administration has a unique, company friendly and predictable approach. The Tax Administration strongly focuses on modern, pre-emptive approach instead of retrospective traditional tax audits. The Tax Administration has also a dedicated team helping foreign companies in tax matters – free of charge.
The corporate tax rate for company profits in Finland is 20% – the lowest among the Nordic countries. And did you know that Finland has one of the lowest industrial electricity prices in the EU? From the beginning of 2021, the industrial electricity tax in Finland was lowered to the EU minimum level to c/kWh 0,063.
Corporate taxation in a nutshell
- Loss carry forward up to 10 years
- Group companies may even out their taxable profits and losses (Group contribution)
- Tax free dividends to parent company if both companies are in the EU/EEA area
- Capital gains from the sales of shares are with some exceptions tax free (Participation exemption)
- No surtax or wealth tax
- Real estate tax is set by the local municipal (range 0,93%–2,00%)
- Wide tax treaty network in order to eliminate double taxation
- Predictable interpretation of Transfer Pricing Guidelines rules (OECD, all methods accepted)
- VAT tax rates: 24% (standard rate), 14%, 10%
- Exceptions from VAT (VAT 0%): social, healthcare, medical services, public education and similar services, financial and insurance services
Machinery
Temporary double depreciation rules for machinery and equipment 2020–2025
The law on accelerated depreciation on machinery and equipment for tax years 2020-2025 entered into force on 1 January 2020.
Under the new legislation, a business may annually deduct up to 50% instead of 25% of the tax carrying value of newly acquired machinery or equipment in tax years 2020-2025.
R&D Deduction
2021–2027
Deduction for R&D sub-contracting 2021–2027
The new super-deduction is available for all companies operating in Finland, both domestic and international.
What?
- An additional tax deduction of 150% (normally 100%) on the costs of research and innovation projects carried out in collaboration with universities and research institutes
- Straightforward and simple incentive form that makes the whole concept easy to understand (which is not the case in many countries – in some cases difficult to understand even by a tax professional)
- In a Finnish way, targeted to a very wide range of businesses and business forms with equal terms
How?
- Multiply your R&D sub-contracting invoice by 2,5
- For example: If your Finnish corporate unit has paid 100 000 euros for a R&D project to a University or Research institute inside European Economic Area (EEA), multiply that 2,5 x 100 000 = 250 000 EUR. This is what you can deduct from your taxable income.
- If your year was negative, possibility to carry forward and deduct the costs in following 10 years in loss making situation
- The minimum threshold for tax deductible costs per fiscal year is EUR 10,000 and the maximum limit is one million euro, meaning that the actual additional tax deduction is between EUR 5,000-500,000 per fiscal year
Tax-free shares to employees
Tax-free shares of non-listed company to employees
Ownership engages employees. Employee share issue means a directed share issue in which the company offers its own shares to its personnel. Usually, shares are not given free of charge, but typically at a price below the market price to provide a greater incentive to subscribe for the shares. The aim of the employee share issue is to engage employees in increasing the value of the company's share. A long awaited improvement came into force 1 January 2021.
When non-listed limited liability companies issue shares to employees in Finland, the subscription price may be lower than the shares' market value. However, if the subscription price is at least equal to the share's mathematical value, an individual employee who buys such shares will not be treated as having received a taxable benefit.
Learn more about the incentive from the Finnish Tax Administration website