Tax Alert

If transfer tax was levied on refinancing of third party debt when the shares in a normal real estate company (REC) or in a real estate holding company was acquired, it should be refunded to the purchaser subject to application.

The above results from the rulings established today by the Finnish Supreme Administrative Court (SAC).

REC – no transfer tax on refinanced third party debt
In this case, it was agreed in the SPA that the purchaser was responsible for arranging a repayment of an external bank loan of the acquired company. The acquired company was a normal real estate company (REC), not a mutual real estate company (MREC). According to SAC, the refinancing of the external loan did not benefit the seller as the REC was able to service the loan with its rental income, nor was the loan similar to loans attached to shares in mutual real estate companies (where the seller can be seen to benefit from the transfer of such liability to the purchaser). Consequently, SAC concluded that refinancing of external bank loan was not subject to transfer tax. Ruling SAC:2019:136.

Holding company of MREC – no transfer tax on refinanced third party debt
The above also applies to situations where a third party debt in a holding company owning shares in a real estate rich company is acquired, i.e., refinancing of external loans in holding companies should not be subject to transfer tax.

MREC – transfer tax is payable on loans attached to the shares in MRECs
In this case, SAC ruled that the loan was considered to be attached to the shares in an MREC and subject to transfer tax because the MREC had charged a financing fee to its shareholder to service the loan and to cover other financing costs of the MREC. It had no relevance that there was no decision made by shareholders’ meeting on attaching the loan to certain shares in the MREC. The nature of this case was more confirmatory, i.e., transfer tax continues to be payable on debts of MRECs and housing companies. Ruling SAC:2019:135.

The purchasing company can request for a refund on transfer tax on acquisitions concluded in 2014 and onwards. The refund applications related to 2014 has to be submitted to the tax authorities by 31 Dec 2019.

We would be pleased to assist you with analysing the applicability of the above rulings to your transactions and filing the refund applications.

For further information, please contact:

Pia Stubb
Tax Partner
Deloitte Oy
M: +358 (0)40 534 3636
pia.stubb@deloitte.fi

Matti Urpilainen
Tax Controversy Specialist
Deloitte Oy
M: +358 (0)50 529 4125
matti.urpilainen@deloitte.fi