What do the Mid-Term Government Tax Decisions Mean for Business Owners?
The mid-term government tax decisions announced yesterday have sparked discussion, especially regarding measures affecting businesses. Below is a summary of the most significant changes, along with an explanation of what impact these policy decisions are likely to have on companies and entrepreneurs in the future.
- Reduction in labor taxation: The highest marginal income tax rates will be lowered to 52 percent starting in 2026.
- Corporate tax cut: The corporate income tax rate will be reduced to 18 percent from 2027 onwards.
- Dividend taxation unchanged: No changes are currently planned for dividend taxation, meaning the tax cuts are expected to benefit not only companies but entrepreneurs as well, at least for the time being.
- Extended loss deduction period: The right to deduct losses will be extended from the current 10 years to 25 years, effective for losses incurred from the 2026 tax year onwards.
Share Exchange and Corporate Acquisitions
- Changes to dividends following share exchanges
Currently, the valuation of a company involved in a share swap can be carried out using various methods. Valuation methods that bring hidden reserves to light have increased the mathematical value of the shares in the new company formed through the share swap, thereby increasing the amount of preferential dividends.
The recent mid-term government decisions have aimed to prevent this form of “minimizing dividend taxation.” It is still unclear when these changes will take effect (most likely from 2026) and whether they will apply only to future arrangements or also to those already completed.
- Share Exchanges as a Corporate Restructuring Option and Taxation of Earn-Outs in Business Acquisitions
Share exchanges will continue to be a relevant option for entrepreneurs who, for example, want to establish a parent company for their operating company to better manage business risks. In business acquisitions, the taxation of earn-outs (additional purchase price payments) will be deferred until the year when the receivable and its amount are confirmed. Currently, income tax on earn-outs may have been deferred to years following the main purchase, but for transfer tax purposes, the final purchase price has had to be “estimated” in the year of the transaction. Going forward, income tax and transfer tax will be payable only on the confirmed purchase price.
Inheritance and Gift Tax
- The lower limit for inheritance tax will be raised from €20,000 to €30,000.
- The lower limit for gift tax will be increased from €5,000 to €7,500.
- The scope of the generational transfer relief will be expanded. According to current case law, a minor successor in business operations cannot receive the generational transfer relief. In the future, it is intended to allow minors to receive this relief, but only in inheritance situations.
For more information about these changes, you can read on the Ministry of Finance website:
More information about the changes can be found on the Ministry of Finance website: Orpo’s Government: Mid-Term Budget Decisions Strengthen Finland’s Competitiveness and Security – Ministry of Finance
