Government proposal on reducing transfer tax rates in Finland

Finnish Government proposes to reduce the transfer tax rates as follows:

– real estate: from 4% to 3%

– shares in housing companies and real estate companies: from 2% to 1.5%

– other securities: from 1.6% to 1.5%.

The law would enter into force on 1 January 2024, but the new tax rates would apply retroactively from the date of introduction of the government proposal, i.e. 12 October 2023.

The amendment is primarily aimed to boost the housing and real estate market, which has slowed down since the pandemic, but will also have an impact on mergers and acquisitions.

Until the law enters into force, the transfer tax must be paid in accordance with the current regulations and tax rates. In practice, this means that for transactions made in 2023, the transfer tax will first be overpaid, and the Tax Administration will refund the excess tax plus interest after the year end.

According to the Tax Administration’s press release, the excess tax will be refunded to taxpayers without a separate application. In practice, however, this requires that the Tax Administration has the taxpayer’s valid payment details.

The amendment is based on a high-level entry in the government programme, but its preparation was not announced in advance and the government proposal was not sent out for consultation. Although this amendment does not in itself increase the tax burden on taxpayers, such unexpected amendments may contribute to reducing the predictability of taxation in Finland. The amendment is also unlikely to have a significant impact on the state treasury, as the reduction in tax rates is estimated to reduce annual tax revenue by around EUR 70 million, taking into account the effect of the abolition of the tax exemption for first-time homebuyers. On the other hand, as desired, the amendment may brighten up the Finnish housing and real estate market at least temporarily.