Supreme Administrative Court Brings Clarity to Asset Transfer Taxation of Option Rights

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The Supreme Administrative Court ended the uncertainty relating to the asset transfer taxation of option rights in its yearbook decision of 9 March 2017 (KHO 2017/39). According to the decision, the granting of option rights was not a transfer of title subject to asset transfer tax. The Finnish Tax Administration previously held that a transfer giving rise to asset transfer tax occurs already at the moment the subscription right (option right) is granted. On the other hand, a subscribed option right is a security as defined in the Asset Transfer Tax Act subject to asset transfer tax when transferred.

The Supreme Administrative Court also took a position on the asset transfer tax of shares directed by a company to itself in a share issue. To date, the Finnish Tax Administration has held that the offering of shares by a company for subscription by itself is deemed a transfer of securities subject to asset transfer tax. According to the Supreme Administrative Court’s decision, if a company directs a share issue without charge to itself in accordance with Chapter 9, section 20 of the Limited Liability Companies Act, no asset transfer tax is payable on such transfers of securities. As no outside party has subscribed for such shares, the transfer of shares is comparable to the subscription for new shares, which is exempt from asset transfer tax. However, the transfer of other treasury shares possessed by the company is still subject to asset transfer tax. This decision is significant, for example, to share issues and capital markets arrangements, because it will allow companies to direct issues to themselves and then give these shares onwards without the delay involved in issuing new shares.

It is possible to seek repayment of groundlessly paid asset transfer tax. We will be happy to provide more information.