Finland: Taxation of crypto assets

There have also been certain clarifying court cases regarding tax treatment of crypto assets in the Finnish market. The decisions clarified that transactions on crypto assets are regarded as taxable transfers and the tax treatment should be similar as trading on other movable objects. Basically, this means that unlike in previous guidelines published by Finnish authorities, potential losses should also be deductible in the taxation of the party investing into crypto assets. However, exchanging crypto assets for other crypto assets or cash are also treated as transfers and all the transactions give rise to tax liability in Finland. In practice, the declaration of crypto trades in Finnish tax returns may be time consuming and special attention should be paid to documenting all transactions properly.

CJEU-Case regarding SICAV-funds

The CJEU recently issued its ruling in the case C-480/19 dated 29 April 2021. The case concerns the tax treatment of a SICAV fund (UCITS), incorporated under Luxembourg law, in Finland and the taxation of a Finnish private person receiving income from such fund. However, the ruling may also have an impact on the taxation of investment funds in general. In the preliminary ruling request to the CJEU, the Finnish Supreme Administrative Court posed a question on whether a Luxembourg SICAV open-ended fund should be comparable to domestic contract-based funds for Finnish tax purposes. The case concerned the old section 20 of the ITA, but it is expected to also have an impact on the interpretation of the current section 20 a of the ITA.

According to the CJEU ruling, the fund’s legal form is not a sufficient objective criteria to exclude a fund in statutory (incorporated) form from the scope of section 20 of the Finnish ITA, merely based on the fact that it does not entirely correspond to a Finnish contractual fund. Further, as the case concerns the comparability of SICAV funds, the ruling will most likely also have wider effect on the comparability assessment concerning SICAV funds. Finnish authorities have not yet issued their interpretations concerning the ruling.

Contractual funds and their tax treatment

The Finnish domestic provisions regarding taxation of investment funds were revised by clarifying the legislation which entered into force on 1 January 2020. The purpose of the legislative change was to further clarify the terms of “investment fund” and “special investment fund” and to further specify the criteria for tax exemption for investment funds and special investment funds as given in the Income Tax Act and in the Act on the Taxation of Nonresidents’ Income. The provisions regarding tax exemption for investment funds and special investment funds shall also apply to equivalent foreign contractual funds. Provisions on the tax treatment of sub-funds were also enacted in connection with the legislative change.

Based on experience, the provisions remain subject to interpretation and the tax treatment of certain foreign funds remains rather uncertain. The legislative change specifies the criteria for foreign funds to qualify as comparable to Finnish (tax exempt) funds but it appears that tax authorities are currently keen on receiving binding rulings from administrative courts, several cases are currently pending in the Finnish courts. Clarifying decisions are expected during the course of this year.

Potential WHT for real estate funds

Finnish government agreed in the budget negotiations that they are going to impose additional taxes to foreign real estate funds. This change would probably give rise to additional WHT in Finland. The amendments are supposed to enter into force from the beginning of 2023.

As imposing taxes only on foreign funds and foreign investors is naturally problematic, it is likely that the same additional tax could be imposed to Finnish institutional investors as well.

This change is currently a political high-level decision. There are no detailed draft provisions available, yet.

If you wish to discuss these topics, please contact: Castrén & Snellman, Helsinki

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