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Final proposal issued to update Finnish taxation
The Finnish Government released the final proposal introducing remarkable changes to the taxation of Finnish companies and individuals. As a result of the feedback received during the consultation stage, the draft proposal was revised to a certain extent. Taxand Finland highlights the key suggested rules in the proposal and the new updates made during the consultation stage.
General income tax rate and dividend taxation
The bias of the taxation will generally be shifted from the taxation of companies to the profit distribution. In connection with this, the corporate income tax rate will be lowered from 24.5% to 20%. Taxation of dividends received by companies was suggested to be renewed. The possibility to receive tax exempt dividends from companies in the EU countries would expand, as the exemption would apply to dividends distributed by all such companies tax resident in the EEC area which are subject to corporate income tax of at least 10%.
As a difference to the draft proposal, the taxable part of a dividend received based on the shares belonging to investment assets of financial, insurance or pension institutions would remain as 75%.
Repatriation of funds from non-restricted equity capital
One of the major systematic changes related to change of repatriation of funds from non-restricted equity capital, which currently decreases the remaining acquisition cost of the shares of the repatriating entity and is treated as capital gain. The situation will substantially change, as according to the proposed main rule, the repatriation would be taxed similarly to dividend income. Compared with the draft proposal, changes have been made with regard to the time limit set for the contribution and the deductible amount of acquisition cost.
Amendments concerning cooperatives
The taxation of cooperatives would be, according to the suggestion, amended as regards the deductibility of refund of excess funds. The excess tax-deductible for cooperatives would be limited to the part of excess which is created in the trade between members of the cooperatives and the cooperative. As a difference to the draft proposal, the final proposal does not suggest any changes to the taxation of cooperative members. However, the proposal states that a separate proposal on the subject will be issued later on.
Also published in Thomson Reuters' Taxnet Pro, 29 November 2013