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The Finnish government has issued a draft government proposal of changes to the Finnish interest deduction limitation rules. Most significantly, the draft proposal includes changes to the balance sheet exemption (equity/assets test). In addition, certain changes would be made to expand the public infrastructure exemption to entities established by public law bodies and certain technical corrections would be made to the way non-deductible interests from previous years can be deducted.
As to the most significant changes, currently the equity/assets ratios of the company and the group are both calculated similarly, by taking the amount of accounting equity and comparing it to the total assets. According to the draft proposal, when calculating the group equity ratio, any debt to a stakeholder with at least 10 % share of ownership of the group would be treated as equity for the purposes of the calculation.
As a technical addition, the financial statements and the group financial statements would need to be audited prior to applying the balance sheet exemption test. However, since the balance sheet and group balance sheet need to be prepared using the exact same accounting standards to be eligible for the exemption test, the taxpayer often needs to prepare a so-called conversion balance sheet or conversion group balance sheet. The draft government proposal does not clarify if this conversion balance sheet would also need to be audited.
Partner, Corporate Taxation, PwC Finland
Tel: +358 (0)20 787 7841