Market overview

Although transfer pricing has become one of the hottest topics in mainstream media and public discussion in Finland, uncertainty remains around the subject of the impact of the OECD's BEPS project. There have been no regulatory changes as a result of BEPS, however, in December 2015 the Ministry of Finance published a draft bill outlining the project to implement updated TP documentation requirements including country-by-country reporting (CbCR). The bill would require companies to also file master and local files on financial years on or after January 2016, with effect from January 2017.

Advisers suggest the proposal will be implemented later this year but that before regulation changes, the authorities' attitudes are already aligning with BEPS. "The Finnish tax authorities have been actively involved in the OECD's BEPS project and therefore the different approaches presented in the BEPS discussions drafts and reports, final or not, have already been applied retroactively in the daily monitoring, ongoing audits and assessment processes," said Petteri Rapo, senior associate and acting CEO at Alder & Sound.

One major area that has felt the effect of the project is audit and assessment processes. The number of transfer pricing auditors has significantly increased over the past years and there has been a crackdown on transfer pricing practices. Multinationals are particularly feeling the pressure as the authorities challenge their structures more. "The biggest thing in the Finnish tax market is that the Finnish tax administration has been very aggressive in tax audits and in the court cases that are pending," said Janne Juusela, head of tax at Borenius, Taxand Finland.

While Finnish taxpayers in general are feeling a growing aggressive trend from the authorities, it is especially evident in transfer pricing cases. Advisers reported there have been an increase in audits in recent years as well as questionnaires relating to TP issues during the yearly tax assessment. "In some cases, the eagerness to act on the topic has not had support from the facts of the case, resulting in significant assessments and disputes without proper substance or sufficient argumentation to back up the adjustment measures," said Rapo.

Apart from the increase in audits and aggressive tax authorities, it has been a stable year in Finland. Juusela said: "The current government have been very passive on tax legislation so there hasn't been any major proposals." Transfer pricing professionals expect BEPS actions to be implemented later this year or next year.

Tax authorities

Finnish Tax Administration
Finnish Tax Administration, OCR Service, Corporate, PL 200, 00052 VERO
Tel: 020 697 051 (from inside Finland); +358 20 697 051 (from outside Finland)

Tax rates at a glance

(As of April 2016)

Corporate income tax 20%
Capital gains tax 20%
Branch tax rate 20%
Withholding tax
Dividends 0/15/20% (b)
Interest 0/20% (c)
Royalties 20% (d)
Net operating losses (years)
Carryback 0
Carryforward 10

  1. The withholding taxes apply only to payments to non-residents. The rates may be reduced by tax treaties.
  2. No withholding tax is imposed on dividends paid to a parent company resident in another European Union (EU) country if the recipient of the dividends satisfies the following conditions:
    • It holds directly at least 10% of the capital of the payer.
    • The recipient of the dividend is a company qualifying under Article 2 of the EU Parent-Subsidiary Directive. Companies resident in EU or European Economic Area (EEA) member states are generally eligible for the tax exemption for dividends under the same conditions as comparable Finnish companies if the Finnish withholding taxes cannot be credited in the company's state of residence and if sufficient exchange of information may take place between Finland and the state of residence of the recipient. Dividends paid to a company resident in an EU/ EEA member state are subject to withholding tax at a rate of 15% if the shares constitute investment assets of the recipient company and the recipient owns less than 10% of the Finnish company.
  3. Interest paid to non-residents is generally exempt from tax unless the loan may be deemed comparable to an equity investment. In general, interest paid to resident individuals is subject to a final withholding tax of 30% if it is paid on bonds, debentures and bank deposits.
  4. No withholding tax is imposed on royalties paid to non-residents if all of the following conditions are satisfied:
    • The beneficial owner of the royalties is a company resident in another EU country or a permanent establishment located in another EU country of a company resident in an EU country.
    • The recipient is subject to income tax in its home country.
    • The company paying the royalties, or the company whose permanent establishment is deemed to be the payer, is an associated company of the company receiving the royalties, or of the company whose permanent establishment is deemed to be the recipient.
    A company is an associated company of another company if any of the following apply:
    • The first company has a direct minimum holding of 25% in the capital of the second company.
    • The second company has a direct minimum holding of 25% in the capital of the first company.
    • A third company has a direct minimum holding of 25% in both the capital of the first company and the capital of the second company. Royalties paid to resident individuals are normally subject to salary withholding.

Source: EY 2016 Worldwide Corporate Tax Guide