On August 16, 2023, the Ministry of Finance published a draft amendment to the Finnish Transfer Tax Act. In terms of M&A deals, real estate transactions and capital markets transactions, the key proposals can be summarized as follows:
- Loan receivables purchased in connection with a share purchase will be subject to transfer tax in the future when the consideration for the purchase will be paid for the benefit of the seller of the shares. This is a significant change, because after the decision of the Supreme Administrative Court in 2019, it has been possible to acquire shareholder loans without transfer tax. The change will increase the buyer’s tax costs in M&A deals and real estate transactions.
- In the future, a business transfer can also be made to an operating company without transfer tax on the transferred securities and real estate (previously the business transfer had to be made to a company established for the purposes of the transfer). This is a positive change, as it facilitates group structure reorganizations and, for example, preparing for the sale of a business line.
- In the case of a squeeze-out following a public tender offer, transfer tax will be paid on all the shares for which the purchase price is determined in an arbitration procedure. Today, the tax is imposed only on those shares, the ownership of which is transferred in an accelerated manner by placing a security deposit. The tax burden of a squeeze-out will increase to some extent.
- When distributing shares as dividend in kind, the tax liable will be the distributing company instead of the shareholders, as is the case today. This facilitates in-kind dividend distributions made by listed companies. Due to this new concept of reverse tax liability, the tax paid by the company will not any more generate taxable income for the shareholders in the future either.
The draft law is open for comment until 20 September 2023, and the new law is intended to enter into force from the beginning of 2024 except for the provisions regarding the dividend in-kind which would enter into force from the beginning of 2025.