Loss carryforwards in Finnish share deals

If the SPV has carried-forward losses from previous financial years, the transfer of the SPV’s shares in a share deal involves the risk of forfeiting these losses for use in the current or future financial years.

The loss of all loss carryforwards is the general rule under Finnish law if more than half of the shares are transferred directly or indirectly. Upon application, the tax administration may grant an exemption “for special reasons, when this is necessary for continuing the corporation’s operations”.

Traditionally, the tax administration has been reluctant in granting exception permits. In the vast majority of share deals (outside of stock exchange listed companies), an exemption was not granted.

In recent years, Supreme Administrative Court decisions have led towards a more lenient practice, indicating that it should be sufficient if the company continues its operations after the transaction. The tax administration has largely adapted its practices and will now usually grant an exception permit if business continues and there is no indication that the carried-forward losses were a central motive of the transaction.

The exact criteria remain somewhat undefined. For individual transactions, insecurity can be reduced by applying for an exemption before entering into the actual transaction, outlining the same in sufficient detail in order for the tax administration to be able to make their conclusions.