Proposed changes to real estate tax might lead to significant cost increase for wind parks

Under the current real estate tax regime, wind power plants are subject to the general real estate tax rate, which is determined by the municipality and ranges between 0,93 and 1,80%.

On the other hand, the specific tax rate for power plants, which is considerably higher (up to 3,10%), is typically not applied to wind parks. This is due to the fact that power plants with a nominal capacity of up to 10 MVA are exempt from this tax rate. When applying this limit, even if multiple turbines are located close to each other, each wind turbine is considered individually as long as it can function independently from the other turbines.

In a 2016 budget meeting, the Finnish Government decided that the possibility of including wind parks into the scope of the power plant real estate tax should be looked into. The Ministry of Finance has now published the draft governmental bill addressing this matter.

The draft proposes that, in the future, multiple turbines belonging to the same wind park would be considered as clusters when applying the 10 MVA threshold. The draft discussed several alternatives for determining which turbines belong to such a cluster. The proposed alternative is to treat all turbines that are connected to the grid at the same connection point as one entity.

If the proposed changes are adopted, the power plant real estate tax could be utilised by municipalities for wind parks with a nominal capacity of more than 10 MVA. In 2017, 173 of the 311 Finnish municipalities use the power plant real estate tax and 72 have set the rate at the maximum allowed 3,10 percent. If the power plant tax rate were to be applied to wind parks, the real estate tax for individual parks might double or triple depending on the tax rates applied in the municipality in question.

The proposed changes, which have already received their share of criticism, will now be reviewed by different stakeholders. The Ministry of Finance has opened the draft proposal for comments, which can be filed until 15 August 2017.