Limitations to be introduced on Companies? right to make tax deductions on in...
The Government proposes that the right of corporate bodies, general partnerships and limited partnerships to deduct interest expenses be limited in business taxation. This aims to safeguard the tax base in Finland and to dampen tax planning of companies where the group’s interest is directed to jurisdictions with low taxation.
Based on the proposal, interest expenses could be deducted in full to a sum equivalent to interest income. Where net interest expenses, meaning interest expenses that exceed interest income, are no more than EUR 500,000, they could also be deducted in full.
Interest expenses exceeding EUR 500,000, would be tax deductible to the amount corresponding at most 30% of the business income tax result. Net interest expenses exceeding the 30% amount would non-tax deductible. However, the sum of non-tax deductible interest expenses based of the 30 % limit would be at the most an amount corresponding to intra-group net interest expenses.
The restriction on the right to deduct interest expenses would be a general restriction. It would apply to both domestic and foreign corporate bodies and partnerships, and would be imposed on both national and cross-border interest payments.
Where a business provides documentation that the ratio of equity to the financial accounts balance sheet total is higher or equal to the same ratio in the confirmed group balance sheet, the restriction on the right to deduct interest expenses would not be imposed.
These restrictions would not apply to credit institutions or insurance and welfare institutions or, to a certain extent, to their affiliated bodies. Non-tax deductible net interest expenses could be deducted from taxable income of successive fiscal years within the yearly limits of tax-deductible interest expenses.
It would be possible to make an appeal on non-tax deductible net interest expenses for the fiscal year to which the decision on non-tax deductible net interest expenses pertains.
These amendments would enter into force at the beginning of 2013 and would be applied for the first time in fiscal year 2014.
These amendments are calculated to increase tax revenue by approximately EUR 70 million a year.
Inquiries: Ms Marianne Malmgrén, Legislative Counsellor, tel. 358 2955 30163