Vilho Lammi

Associate

Vilho Lammi

Associate

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Dittmar & Indrenius > People > Vilho Lammi

Focus on international tax and transfer pricing, especially on financing and intellectual property restructurings, operating model conversions, and related tax litigation.

Prior to joining Dittmar & Indrenius in 2017 Vilho has gained experience by working in EY (2014–2017).

 

 

Education

University of Helsinki (LL.M., 2015)

Aalto University (BSc. (Accounting), 2015)

Languages

Finnish and English

References

Latest Insights

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Draft Goverment Proposal on CFC Rules and General Anti-abuse Rule
8 Aug 2018 The Draft Proposal Ministry of Finance has issued a draft government proposal on controlled foreign company ("CFC") rules, implementing the CFC rules of the Anti-Tax Avoidance Directive (2016/1164, the "Directive"). Additionally the proposal addresses the general anti-abuse rule ("GAAR") of the Directive. The proposed CFC rules, which would enter into force at the beginning of 2019, are in many ways stricter compared to both the requirements of the Directive and to the currently applicable CFC rules. Overview of Proposed CFC Rules Controlled foreign company rules effectively re-attribute the income of a low-taxed controlled subsidiary to its direct or indirect parent company. Control Whereas the current CFC rules require that at least 50% of the CFC is controlled by Finnish taxpayers (related or unrelated), the Directive requires that a Finnish taxpayer together with its associated enterprises (foreign or domestic) holds at least a 50% participation in the CFC. The Finnish proposal takes this requirement further and proposes a participation threshold of 25% for the CFC rules to apply. Level of Taxation The Directive would classify entities with an effective tax rate ("ETR") of less than 50% of the domestic tax rate as being subject to low taxation (calculated in accordance with the rules of the Member State of the controlling company). The Finnish proposal imposes a stricter threshold of 60% (resulting in an ETR threshold of 12% with Finland's current corporate income tax rate of 20%). Taxable CFC Income The Directive provides member states with two alternative frameworks for determining the taxable CFC income, which would include: (a) specific passive income (such as interest, royalties and dividends); or (b) income arising from non-genuine arrangements which have been put in place for the essential purpose of obtaining a tax advantage. The draft proposal does not directly follow either of the models proposed by the Directive but instead applies a combination of the non-genuine arrangements rule with the currently applicable Finnish CFC rules. In brief, any low-tax entity that is controlled by Finnish taxpayers may be subject to the CFC rules, unless one of the exemptions applies. Exempted Activities The draft proposal follows the Directive's framework of excluding EEA resident companies with genuine economic activities from CFC taxation. However, outside the EEA, all genuine business arrangements are not outside the scope of CFC rules. The new rules would exempt only companies the income of which mainly arises from industrial or other comparable production activities, shipping activities, as well as sales or marketing activities related to such exempt activities. In addition, adequate exchange of information procedures need to be in place between Finland and other state for the exemption to apply. It is important to note that the current exemption applicable to tax treaty resident companies would be abolished. Consequently, the effective level of taxation of such non-EEA resident companies would need to be monitored. Contrary to the currently applicable CFC rules, which have required that the sales and marketing activities could only be performed in the company's state of residence in order for the exemption to apply, the new CFC rules would also exempt regional sales and marketing hubs from the applicability of the rules, provided that the operations relate to industrial production. This change will provide more flexibility for companies with regional activities. All in all, the new rules extend the scope of the current CFC rules and also include stricter rules than those required by the Directive. General Anti-Abuse Rule General anti-abuse rules feature in tax systems to tackle abusive tax practices that have not yet been dealt with through specifically targeted provisions. Pursuant to the GAAR of the Directive, for the purposes of calculating the corporate tax liability, Member States shall ignore an arrangement or a series of arrangements which, having been put into place for the main purpose or one of the main purposes of obtaining a tax advantage that defeats the object or purpose of the applicable tax law, are not genuine having regard to all relevant facts and circumstances. Finnish domestic legislation includes a GAAR which, despite its different wording and structure, has broadly the same purpose as the GAAR of the Directive. Despite ongoing discussions regarding the comparability of the two GAAR provisions, the Finnish Ministry of Finance concluded that the currently applicable domestic GAAR meets the requirements of the GAAR of the Directive, acknowledging that the domestic GAAR may be stricter in certain situations. Therefore no changes are proposed under the draft to the currently applicable GAAR due to the Directive. Implications Proposed amendments significantly expand the scope of application of the CFC rules and could lead to somewhat arbitrary CFC implications e.g. to companies with genuine business operations outside the EEA. Especially the inclusion of a specific list of exempted activities compared to the Directive's approach of exempting all genuine activities will likely cause issues to numerous taxpayers as in some cases also genuine business operations subject to low taxation in non-EEA countries may classify as CFCs under the new rules. The extension of the scope of the sales and marketing exemption would enhance structuring options for many groups operating with regional activities. The proposed rules, which would enter into force on 1 January 2019, are currently under public consultation and are subject to change. It is recommendable for companies to assess the impact of the proposed changes to their current structures. We are happy to discuss the proposed changes with you and keep you updated with the development of the legislative process.
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Draft Government Proposal on New Interest Limitation Rules
25 Jan 2018 The Draft Proposal Ministry of Finance has issued a draft government proposal on limitations to the deductibility of interest expenses implementing the interest limitation rules of the Anti-Tax Avoidance Directive (2016/1164). The Directive, aiming to provide for a comprehensive framework for anti-abuse measures, contains rules also on exit taxation, a general anti-abuse rule, controlled foreign company rules and rules to tackle hybrid mismatches, which will be separately implemented to domestic legislation. The new interest deductibility limitation rules would enter into force at the beginning of 2019. The new limitations to the deductibility of interest significantly expand the scope of the currently applicable limitation rules, affecting both tax payers and the economy. Limitations to the Deductibility of Interest Similarly as under the current rules, as a main rule, deductibility of net interest expenses would be limited to 25 % of EBITD (taxable business profit added with interest expenses, tax depreciations, and net group contributions). The most significant changes compared to the currently applicable rules include: the limitations would also apply to interest paid to third parties, such as interest on bank loans; the general threshold of EUR 500.000 would still apply, but a new safe harbor threshold of EUR 3.000.000 would be introduced in relation to interest expenses on third party debt; the limitations would apply to all Finnish resident corporate taxpayers, including financial undertakings, and also companies not conducting a business that are excluded from the application of the current limitation rules; the so-called balance sheet test exemption would be abolished; and the definition of interest is broadened to cover a wide range of considerations, such as interest components of financial leases and guarantee fees. Implications Proposed amendments significantly expand the scope of application of the deduction limitation rules, which are suggested to apply to, inter alia, real estate companies and other non-business companies as well as companies operating in the financial and insurance sector. The broadening of the definition of interest to cover a wide range of costs economically equivalent to interest expenses, such as financial leasing and guarantee fees will also broaden the scope of expenses potentially subject to deductibility limitations. Furthermore, in addition to extending the applicability to third party debts, the definition of related parties is also tightened. Interest paid to parties with 25 % direct or indirect ownership or profit share would be treated as related, meaning that also interests paid to non-controlling shareholders might be subject to the EUR 500.000 threshold. Among many sectors and structures affected, many private equity fund structures (e.g. including leveraged holding companies and profit participating loans) and real estate investment structures will be significantly impacted. Even though the current draft government proposal is subject to changes, a significant part of the new rules are based on minimum requirements set by the Directive and will therefore remain in the final draft. Therefore the changes related to e.g. applicability of the rules to third party interests and to a wider range of corporate entities will enter into force. The above mentioned changes would enter into force on 1 January 2019. It is recommendable for companies to assess the impact of the proposed changes to their current financing structures. We are happy to discuss the proposed changes with you and keep you updated with the development of the legislative process.

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