Renewables Finland: Taxation

Corporate Tax

In Finland, corporate income is taxed at a general rate of 20%. Foreign players are taxable for their income originating from Finland, in particular certain revenue streams related to Finnish companies and real estate, as well for activities carried out from a permanent establishment. The specifics depend on the tax treaties in force for each country. In particular, land rights and SPVs, as well as having a fixed office or a sufficiently long construction, can cause tax liability and related registration, accounting and tax declaration requirements to realise.

The fiscal plan of the government provides for a tax credit for large-scale green investments that promote the transition to a net-zero economy. This includes sectors like battery production, hydrogen projects and clean steel manufacturing. The plan includes a 20% tax deduction from corporate tax up to 150 million euros.

Property Tax

One crucial component of the operational expenditure for renewable projects, and a significant incentive for local development, is the property tax that is payable to the municipality.

The property tax rate is determined by the municipality. The maximum rate is between 1 % and 6 % for real property in general (depending on the type of land), and 3.1% for power plants such as wind and solar farms with a capacity of 10 MVA or more.

The initial tax value is 75% of the construction costs of the taxable components, which is then depreciated by 2.5% annually down to 40% of the initial tax value.

For wind turbines, taxable components include the foundation, tower, and outer shell of the nacelle. Machinery and equipment (such as blades) are not included in the tax bases. For PV plants, taxable components include foundations and mounting structures.

Project M&A

Transfer Tax

Transfer tax is imposed on the transfer of real estate (tax rate 3%) and shares in Finnish companies (tax rate 1.5%). As real property includes land lease agreements, transfer tax is typically triggered in both asset and share purchases related to renewable energy projects. Share acquisitions between two foreign companies is only subject to Finnish transfer tax if the target is mainly engaged in real estate activities. Due payment of transfer tax is a prerequisite for registering the transfer of land rights, and for being added to the company’s list of shareholders.

VAT

Share deals are generally not subject to VAT. Assets deals, on the other hand, typically have VAT implications, notable exemptions being certain business transfers and the transfer of land rights. The tax rate is 25.5% as of September 2024. Liability for paying VAT lies generally with the seller, but reverse charge-mechanisms apply in certain cross-border applications. For M&A transactions including differently treated asset types, purchase price allocations should be provided.

Sales Profit

The Finnish fiscal system does not set out a separate tax rate for possible sales profit; rather profits from share and asset deals are taxed alongside other corporate income at the applicable rate (currently 20%). However, profits from the sale of shares pertaining to the operative assets of a business are exempt.

Carrying Forward of Losses

Acquisitions can impact the ability of the target to carry forward tax losses from previous years. Tax losses may become forfeited if there is an ownership change, but it is possible to apply for a dispensation ruling from the tax authorities that allows to utilise the carry-forwards also post-transaction. In practice, the dispensation is often granted if the operations continue substantially unaltered and there are sufficient business reasons behind the transaction.