The headquarters of KPMG Finland, the Finnish limb of a multinational provider of audit, tax and advisory services, in Helsinki on Friday, 21 February 2025. Helsingin Sanomat revealed earlier this month that the consultancy has marketed a tax loophole involving holding companies to social media influencers in Finland. (Markku Ulander – Lehtikuva)
- Next Article Finnish Industrial Union settles for 8% pay rise over three years
THE POPULARITY of holding companies as a means of tax avoidance increased sharply in Finland in 2024, suggest data provided to YLE by the Finnish Tax Administration.
The data reveal that the administration issued a total of 1,152 advance rulings on proposals to transfer shares in an unlisted company to a holding company, signalling an over 100-per-cent increase from the 566 preliminary rulings issued in 2024.
The binding rulings can be requested from the administration for a fee, but they do not necessarily reflect the number of share transfers carried out, the public broadcasting company reminded.
A loophole in the tax code has the owners of unlisted companies to take advantage of the low tax levied on dividends paid out by unlisted companies by transferring ownership to a holding company and inflating the value of the share with profit projections. The code provides that dividend payouts not exceeding 150,000 euros and eight per cent of the company value are subject to the preferential tax treatment.
Finnwatch in September 2023 reported that the loophole has been exploited by numerous social media influencers, for example.
Helsingin Sanomat revealed earlier this month that the arrangement has been actively marketed to social media influencers by KPMG, a global provider of audit, tax and advisory services. Finnwatch has lodged a complaint about the consultancy with the national contact point of the OECD.
“[KPMG] has knowingly marketed and carried out arrangements that do not comply with the spirit of the tax code,” Saara Hietanen, a tax expert at the corporate responsibility watchdog, stated on Friday.
“Awareness of the loopholes in our tax laws has certainly increased. I’d guess that that people have also concluded that the [loopholes] will be addressed in the future because of the publicity. People have sought to complete the re-structuring as quickly as possible – while it’s still possible,” Hietanen said to YLE on Thursday, 20 February.
The Tax Administration similarly believes the publicity has generated interest in holding companies. The marked increase in preliminary rulings requested from tax officials is not necessarily a negative, however.
“The fact that customers want to determine in advance how the tax administration will interpret something is also a positive,” argued Sanna Savolainen, the director of compliance at the Tax Administration.
The administration has yet to finalise statistics on wrongdoings exposed by its auditing operations, but their incidence has also been on the rise in recent years. The share of audited companies that had clearly inflated their value to receive tax breaks rose from about 12 per cent in 2022 to 16.5 per cent in 2023.
The amount by which such companies were overvalued rose from 15 to 25 million euros, according to YLE. Finnwatch has estimated that, on the whole, the phenomenon has created annual tax revenue losses of some tens of millions of euros.
Both Finnwatch and the Tax Administration consider the current situation untenable and would welcome tools to close the loophole.
Aleksi Teivainen – HT
- Next Article Finnish Industrial Union settles for 8% pay rise over three years
Source: www.helsinkitimes.fi
