Finland introduces tax law changes simplifying M&A transactions
Insights|May 7, 2025
After Easter, the Finnish government announced the results of its midterm policy review.
To promote economic growth, the government has decided to propose several tax-related legislative changes.
The government intends to, among others:
- Decrease corporate tax rate from 20 % to 18 % as of 2027.
- Increase the carry forward period of tax losses from 10 years to 25 years starting from losses incurred in fiscal year 2026.
- Significantly decrease the highest marginal tax rates on earned income.
Among these changes, the government plans to introduce several major tax amendments which may have a significant impact for mergers and acquisitions and corporate restructurings in the Finnish market. One of these is the planned change to the Finnish share swap rules, which is discussed in further detail in the following.
Relaxed cash consideration limitations to alleviate tax neutral roll-over in transactions?
Currently, the Finnish share swap rules only allow a very limited portion of cash in a transaction in order for the roll-over investors to be able to defer their capital gains taxation. Specifically, the cash consideration is limited to a maximum of ten percent of the combined par value of the shares issued or of the increase in share capital recorded in connection with the share issue. The issue with the existing rules is that the 10 % threshold is applied on a transaction basis, not individually per shareholder or even on a per share basis.
While the details of the potential changes are yet unknown, the rules regarding use of cash consideration in share swaps may be relaxed already as of 1 January, 2026. This would be a long-awaited move, hopefully bringing our rules closer to e.g. the Swedish share swap rules, and ensuring that capital gains tax is paid only upon an actual exit. It would, for example, expand possibilities in public tender offers with simple share swap structures to cash out the majority of shareholders and allow certain anchor investors to roll over tax neutrally or enhance possibility to use mix and match offers. It would also simplify the tax neutral roll-over of management investors in e.g. private equity-backed buyout transactions.
US flip to become easier?
Currently, it is not possible for Finnish tax resident shareholders to defer capital gains taxation when a company resident in a jurisdiction outside of the European Economic Area acquires a Finnish company in a share deal. This feature of the Finnish tax system brings about unnecessary complexity to commercially motivated transactions which could profit the economy. As a related matter, relocating the parent company of a Finnish group to the United States (a so-called US flip) is currently a complex and lengthy transaction from a legal and tax perspective, and may result in heavy tax consequences, if at all practically possible.
The government now intends to propose a legislative amendment which would allow capital gain deferral even if the acquiring company is from a non-EEA jurisdiction, e.g. the US or the UK.
Other potential changes
In addition to the above, the government will assess the need to introduce changes e.g. to the existing tax regimes concerning incentivization of employees and investment funds.
What is the timeline for the changes?
Currently, it is not yet known when all the proposed changes would enter into force. Realistically, at the earliest, the changes could take effect as of 2026, if they are enacted as a budget-related tax law. A government’s legislative proposal on the share swap related amendments should be published later this year, meaning that it could become effective already as of 1 January, 2026.
Roschier lawyers monitor the government’s new tax policy initiatives closely and are always available to discuss how they could affect your business.