Ministry officials ready to close much-discussed tax loophole, wait for green light from Purra

By admin On Feb 20, 2025

Minister of Finance Riikka Purra (PS) spoke to STT about the upcoming county and municipal elections in Helsinki on 12 February 2025. Officials at the Ministry of Finance are according to Helsingin Sanomat ready to close a loophole in the tax code that has enabled business owners to use holding companies to dramatically reduce their tax burden. (Markku Ulander – Lehtikuva)

OFFICIALS at the Ministry of Finance are ready to close a loophole that has been marketed to social media influencers by tax consultants, according to Helsingin Sanomat.

The Ministry of Finance has drawn up an evaluation report that lays out the groundwork for the legislative amendments required to prevent business owners from using holding companies to take advantage of the preferential tax treatment of dividends paid out by unlisted companies.

The Finnish tax code enables unlisted companies to pay out dividends worth up to 150,000 euros a year, as long as dividends do not exceed eight per cent of their net worth, under preferential terms, with the recipient paying no taxes for 75 per cent and capital gains taxes for 25 per cent of the dividends.

A loophole linked to the tax treatment of unlisted companies was exposed by Finnwatch in September 2023. Business owners, the corporate responsibility watchdog reported, can take advantage of the provisions by handing over shares in their business to a holding company and inflating the value of the holding company by based on future revenue expectations.

Helsingin Sanomat on Monday revealed that the arrangement has been marketed to social media influencers by KPMG, together with influencers Natalia Salmela and Jasmin Hamid.

The newspaper highlighted in its investigative report that the loophole enables a business owner earning about 10,000 euros a month to lower their tax burden to the same level as that of a nurse earning about 3,000 euros a month.

Jari Salokoski, the head of corporate taxation at the Ministry of Finance, told the newspaper a day later that the loophole could be closed by valuing shares based on their mathematical value – the difference between assets and debts – during a dividend payout.

“It’d simply mean that during a dividend payout the shares that [the holding company] has taken over would be valued at their mathematical value. Then they wouldn’t inflate the margin of the holding company,” he said.

“The next step is to make a decision on whether to move forward with the preparatory work.”

Salokoski refrained from speculating on both likelihood and timetable of the legislative project until discussions have been had with the political leadership of the ministry, namely Minister of Finance Riikka Purra (PS).

“Given that this isn’t in the government programme, we’ll naturally need an assignment from the government.”

The loophole has drawn widespread criticism. The Confederation of Finnish Industries (EK) has described it as a design flaw that would be easy to rectify.

Aleksi Teivainen – HT

Source: www.helsinkitimes.fi