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Changes to taxation of cooperatives
The Finnish Government recently released a proposal to amend the taxation of cooperatives, with the aim of bringing taxation of cooperatives closer to that of corporations. Taxand Finland takes a look at the proposed amendment.
The purpose of the amendment is to direct the focus of taxation of cooperatives from taxation of surplus within the cooperative to the distribution of the surplus to cooperative’s members. The need for change relates to the fear that, in connection with the introduction of the new Cooperative Act, unbeneficial tax avoidance and planning situations could arise.
The proposed amendment includes the following stipulations:
- The repatriation of surplus from a cooperative would be fully or partially taxable if the recipient is not a corporation
- Distribution of funds from the non-tied equity would be taxed primarily as repatriation of surplus, apart from situations specifically stipulated by law. In some instances, the distribution could also be taxed as transfer between parties
- Surplus received by a corporation would usually be tax exempt
- The cooperative could deduct any surplus repatriation only under specific circumstances
- The possibility to deduct surplus would require that the recipient was an open member of the cooperative
- Surplus deducted shall be taxable income of its recipient
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In taxation, during the years 2010-2012 cooperatives deducted €23-35m worth of repatriation of surplus funds. The Government Bill still awaits parliamentary discussion and review, but it is proposed to be handled in connection with the budget proposal for the year 2015.