The Finnish Supreme Administrative Court published two landmark decisions on debt push-down structures on December 15, 2021

The Finnish Supreme Administrative Court (SAC) confirmed that the use of special purpose acquisition companies for purchasing shares from a third party cannot be regarded as tax avoidance (KHO 2021:179). However, the debt push-down that was connected to intra-group acquisition was considered tax avoidance, and the right to deduct the interest on the acquisition loan was denied (KHO 2021:178).

Jan 21, 2022

SAC decision 2021:179 confirmed that taxpayers may use special purpose acquisition companies for the external purchase of shares

In the SAC decision 2021:179, a Finnish holding company D Oy had purchased shares of the Finnish company E Oy from a third party and financed the acquisition with a group-internal loan. D Oy made interest deductions based on the acquisition loan and partly financed the interest payments with the group contributions it received from the target company, E Oy. The purchase was first negotiated by D Oy’s Swedish parent company, B AB. Under the terms of the signed sales and purchase agreement (SPA), B AB transferred the right to buy the shares to D Oy before the deal was closed. The SAC concluded that the ownership of E Oy was transferred directly from the third-party seller to D Oy and, thus, that the transaction was made between unrelated parties.  

The SAC confirmed that the deductibility of interest cannot be denied by applying the general anti-avoidance rule (Sec. 28 of the Tax Procedure Act). The SAC emphasized that the legislative intent is that possible restrictions to the deductibility of interest in third-party acquisitions must be based on necessary changes in legislation, not based on applying Sec. 28.

In SAC 2021:178, the general anti-avoidance rule was applied to the intra-group debt push-down structure and the right to make interest deductions on the acquisition loan was denied

In the SAC decision 2021:178, general anti-avoidance provision was applicable to an intra-group transaction where the Danish company E A/S’s direct ownership in a Finnish operative company, F Oy, was converted into indirect ownership through both a Swedish holding company and a Finnish holding company (G Oy). The reorganization was carried out within a short period of time as a series of share transfers and contributions in kind. An internal acquisition loan was pushed down to the Finnish holding company G Oy, which deducted the interest expenses against group contributions paid by the operative Finnish company F Oy. The reorganization was done three years after the C-group had acquired E A/S and its subsidiaries (including F Oy) from a third-party seller. However, the SAC treated the reorganization as a series of intra-group transactions.

The SAC noted that according to the case law of the Court of Justice of the European Union (CJEU), national restrictions (like the restrictions on deducting interest paid to another Member State) do not violate the freedom of establishment (i.e., Article 49 of the Treaty of the Functioning of the European Union (TFEU)) if the restricted arrangements are artificial in nature. The SAC held that the CJEU’s case “C-484/19 Lexel” has not changed these previously established principles.

The SAC held that when the intra-group reorganization was considered as a whole, its purpose was to achieve a tax benefit in the form of interest deductions. The SAC held that the transactions lacked business reasons and that they were artificial in nature. Hence, the deductibility of the interest that G Oy paid to the foreign group company could be denied by applying the general anti-avoidance rule (Sec. 28 of the Tax Procedure Act).


The use of holding companies in third-party acquisitions has been common in Finnish tax practice, and the prevailing view has been that the deductibility of the interest on the acquisition loan cannot be denied by applying the anti-avoidance rule of Sec. 28. This view is confirmed by the case SAC 2021:179. In its previous case law, the SAC has allowed the application of Sec. 28 to certain intra-group transactions. In case SAC 2016:72, the Finnish permanent establishment’s right to make interest deductions on an intra-group acquisition loan was denied. Case SAC 2021:178 is the first published case where the interest deduction has been denied in a setting where the acquiring company is a separate legal entity (i.e., a Finnish limited liability company). 

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