Changes to Finnish Restrictions of Interest Deductibility Published

The Ministry of Finance published the final government proposal for Finland’s new interest deductibility restrictions on 27 September 2018. The technicalities of the proposal are for the most part in line with the earlier draft proposal published for discussion purposes at the start of the year. However, the final proposal includes some changes and specifications that should make life for Finnish entities easier.

Main Rules

Key Changes to Earlier Draft Proposal


The interest deductibility restrictions set forth in the published government proposal include the kinds of relief that many of parties wanted, the most important of which are likely to be the exemption for defined finance companies and the retention of the balance sheet-based exemption.

However, there are still problems in the proposed provisions, such as possible difficulties in using intra-group net interest expenses carried over from previous years, and the narrow scope of the exemption for old loans. Furthermore, the definition of financial expenses that are considered interest in this sense is still quite unspecified. Application of the balance sheet test could also prove difficult for Finnish companies which are a part of multinational groups.

The government proposal will next move on to Parliamentary hearings. According to the proposal, the new regulations would first be applied to taxation for fiscal year 2019.