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Key Finnish Taxation Updates for Corporates
The Finnish Government has reached an agreement on central government spending limits for 2014-2017. The Government emphasises that the solution to the challenges in public finances lies in economic growth and new jobs. Taxand Finland takes a look at the key corporate taxation changes aimed at reaching this target.
Corporate income tax rate
The corporate income tax rate will be lowered to 20% from the current rate of 24.5%. After the drop, the Finnish CIT rate will clearly be below the EU and European average CIT rates.
Broadening of corporate income tax base
Companies will no longer be entitled to deduct representation costs in their income taxation. Currently, 50% of representation costs has been deductible. The change will no doubt emphasise the distinction between representation and marketing/sales/advertising costs.
Dividends received from listed companies
85% of dividends received by private individuals from listed companies will be taxed as capital income. The remaining part of the dividend will be tax-exempt. The tax burden on the individual will be 25.5% / 27.2%, and taking into account the CIT, the total tax rate on the profit distributed by a listed company as dividend will be 40.4% / 41.76%.
Tax rate on captial income
Even though the tax rates applicable to capital income will remain the same as currently (30% and 32%), the progression limit of the capital income taxation will be lowered to EUR 40,000. In other words, capital income exceeding EUR 40,000 is taxed at 32% instead of 30%, which is applicable to lower amounts.
Discover more: Key Finnish taxation updates for corporates
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The Finnish Government aims to encourage inward investment, therefore the changes decided upon are designed to decrease the tax burden of companies. At the same time, fiscal revenue is to be sought from tightening taxation on profits taken out of the companies, raising taxes on certain excise duties, as well as from abolishing certain tax incentives. Multinationals should research these new updates in order to keep afresh of the current Finnish market.