Tax and Legal News, October 2021

Corporate taxation

SAC: Adjustments made to depreciation for previous years were considered non-deductible

A cooperative adjusted the acquisition cost related to certain investments in the balance sheet for previous years and sought to deduct the additional depreciation in the taxation of 2019. In an advance ruling, the Supreme Administrative Court considered that the depreciation was not deductible for tax purposes as the depreciation could not be made within the applicable maximum rates (in that case 25%).

SAC: Companies in a two-tiered holding structure set up by a PE investor were also considered to engage in PE investment - sale of target was taxable

A PE investor had set up a two-tiered holding structure for the purpose of acquiring the shares in a target company. 

The Supreme Administrative Court had in its previous case law already decided that a single holding company set up by a PE investor was also considered to engage in PE investment business. Therefore, the participation exemption was not applicable and a sale of the target company was considered taxable. In the present decision, the SAC extended the same logic to a two-tiered holding structure. 

The administrative court considered interest on late payment of taxes as non-deductible 

A Finnish taxable company was ordered to pay interest on late payment related to VAT by the German Tax Authority. The administrative court regarded the interest as non-deductible for income tax purposes, as punitive payments are generally considered non-deductible, despite the fact that German law does not consider the interest as a punitive consequence and that the interest rate was considered normal.

Changes to the Finnish Interest Deduction Limitation

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.

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Losses of a Spanish subsidiary were not considered to be final for the purposes of group deduction

After repeated requests from the European Commission, the Finnish government enacted a law that would allow a Finnish parent company to deduct the amount of so-called final losses of its foreign EU/EEA resident subsidiary in Finland, by way of a group deduction, should the losses be deemed final in accordance with EU case law. The law entered into force on 1 January 2021.

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Two additional mandatory fields must be reported in the Intrastat dispatches declaration

The Finnish Customs has informed that companies must report the country of origin and the VAT number of the trading partner in the Intrastat dispatches declaration starting from the reporting period 01/2022. We provide a summary of the change and look into possible ERP configuration changes needed. 

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