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Tax Alert

Two important transfer tax cases from the Finnish Supreme Administrative Court

The Finnish Supreme Administrative Court (SAC) decided on two important transfer tax cases on 23 September 2019, both in favour of the taxpayer. Deloitte assisted the taxpayer in all phases of the controversy process in the case SAC:2019:122.

Real estate transactions - No transfer tax on construction agreement – SAC:2019:122

SAC decided that the purchaser of the shares in a real estate company was not liable to pay transfer tax on the value of a construction agreement concluded by the real estate company. In this case, the construction agreement was concluded between a construction company, that was also the seller of the shares, and the real estate company just prior to the transaction. SAC concluded that the fact that the purchaser guaranteed in the sale and purchase agreement that the real estate company will be able to pay for the construction work to a bank to whom the construction company had transferred its receivables, was not to be treated as consideration paid for the shares.

According to the Finnish law, transfer tax is payable on transfer of real estate and transfer of shares only. According to SAC, transfer tax is not payable on future debts of the acquired real estate company that require counter-performance from the seller and that do not exist at the moment when the ownership is transferred.

The above-described arrangement is very common in the Finnish real estate market when constructing new buildings and, therefore, have a significant meaning for the real estate industry as a whole.

All transactions - No transfer tax on transfer of shareholder loans – SAC:2019:121

SAC ruled that the purchaser of the shares was not liable to pay transfer tax on the purchase price for the shareholder loans that it acquired together with the shares from the seller.

The Finnish Tax Administration claimed that the transfer tax should have been paid also for the purchase price of the shareholder loans because it benefitted the seller and, therefore, should have been treated as compensation for the shares in the same way as refinancing of a shareholder loan.

SAC noted that only the creditor changed from the seller to the purchaser, but there was not any other changes in the target company’s liabilities due to the transaction. According to SAC, the law does not allow interpretation where the purchase price of the shareholder loans would be included in the transfer tax base.

In practice, this ruling results in a situation where transfer tax may become payable on the refinancing of shareholder loans in the target company, but not on the acquisition of shareholder loans from the seller. Consequently, this gives room for the purchasers to plan the financing of a target company’s shareholder loans in a tax efficient way.


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

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