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Amends Made To Inheritance & Gift Duty Tax
A temporary new tax scale
A new tax scale shall become applicable on inheritance and gifts exceeding EUR 1 million. Tax on the exceeding amount is subjected to 19% tax within the first tax bracket and 35% in the second tax bracket. The new tax scale shall only be in force for 2 years, although the government's temporary measures have a tendency to become permanent.
Abandonment of the tax exemption with regards to insurance gifts of up to EUR 8,500
Insurance compensation paid on the basis of the benefit clause is a gift in accordance with the Inheritance and Gift Tax Act. Gifts of this sort have been exempted from tax as long as the total amount has not exceeded EUR 8,500 during a period of 3 years. This benefit is now being withdrawn. The tax exemption has been an exception from the general duty to pay taxes on gifts. According to the bill, there are no grounds for the tax exemption.
Estate taxation when the intestate has passed away abroad
The amendment to the Inheritance and Gift Tax Act makes it possible for the inheritors to deduct costs, which are not connected to certain property, from the estate as a whole, including the proportional value of the assets located in Finland. Costs and obligations in relation to property abroad, which will not be taxable in Finland, must not be deducted from the value of the property taxable in Finland. The place of the intestate's or inheritor's residence shall consequently have no effect on the inheritance tax.
Closing the loopholes in the taxation of inheritance and gifts is one way of increasing tax revenue. This is common in many countries who are looking to raise captial while not scaring off potential investors. These new amendments to the Inheritance and Gift Tax Act will apply to the majority of Finnish taxpayers, therefore it is important to take note when will writing and asset distribution planning.