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Deduction and VAT treatment of interests
The Finnish Large Taxpayers’ Office has sent authority-initiated guidelines to several Finnish large-scale enterprises, in which it has provided further instructions on VAT issues. Taxand Finland gives further explanation.
VAT deduction on transaction costs has been an area of interest in recent tax audits in Finland. These new guidelines are in line with the views presented by the Large Taxpayers’ Office in recent VAT audits in which the Large Taxpayers’ Office has referred to the case law of the Supreme Administrative Court.
Furthermore, it is provided in the guidelines that costs incurred on interests are not deductible for VAT purposes. The same applies to treasury functions and other inter-company financial services. In the Large Taxpayers’ Office’s view, these services are not subject to VAT even if they were charged as part of a management fee. Moreover, these activities should impact the deduction of overhead costs of the group company receiving the interests and charging for treasury functions and other financial services.
Companies which have received similar guidelines should carefully consider the VAT treatment of these activities. Taking into account that these guidelines are not in compliance with the previous tax practice, companies should avoid making any rushed decisions based on these guidelines.