According to a draft Government Proposal issued on 16 August 2023 (“Draft Proposal”), the acquisition of shareholder loan receivables in connection with a Finnish share deal would be subject to Finnish transfer tax (1.6%) in cases where the consideration paid for the shareholder loan receivables is paid for the benefit of the seller of the shares. The proposed change would increase the Finnish transfer tax cost in typical share deal structures.
The Draft Proposal includes also certain changes that would provide a more favourable transfer tax treatment than the current rules. According to the Draft Proposal, transfers of business against shares could benefit from a transfer tax exemption even if the recipient company was an existing, not a new company. Further, under a temporary rule, certain transfers by a municipality, or a federation of municipalities, of real property against shares into a wholly owned company would be exempted from transfer tax.
In relation to squeeze-out procedures, the Draft Proposal provides that transfer tax will be payable in cases where the purchase price of shares is determined in arbitration proceedings, i.e., the shares are not transferred against a fixed cash consideration. Under the current rules, transfer tax is payable only where title to shares is transferred against the placing of security.
In relation to distributions of shares in kind, the Draft Proposal provides a new reversed transfer tax liability. In future, the company distributing shares in kind would be liable for the transfer tax. The transfer tax paid by the distributing company would not be deemed as taxable income of the shareholder.
The proposed new rules would come into force as of 1 January 2024. The provision regarding distributions in kind would enter into force as of 1 January 2025.
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