Finland: Real estate - modifications to transfer taxation

Several changes to the Finnish transfer tax legislation became effective on 1 January 2024. Transfer tax is payable in Finland for the purchase of real estate and shares in housing companies and other securities. The transfer tax amendments will have effect on the taxation of M&A transactions and real estate transactions, and they also have a broader impact overall as the changes also impact private individual homebuyers.

The transfer tax rates were reduced with the principle aim to boost the housing and real estate market, which has slowed down since the pandemic. The reduced rates entered into force on 1 January 2024. However, the reduced rates are applied retroactively to acquisitions made on or after 12 October 2023. The transfer tax rates were reduced as follows:

• real estate: from 4% to 3%;
• shares in housing companies and real estate companies: from 2% to 1.5%; and
• other securities: from 1.6% to 1.5%.
   

Effective as of 1 January 2024, the transfer tax base was also expanded to cover loan receivables purchased in connection with shares or other securities when the proceeds from the transfer of loan receivables is paid to or otherwise benefits the seller.

Furthermore, the transfer tax legislation was amended so that the tax exemption is also applied to qualified business transfers in which the recipient company is an existing company. According to the old wording of the law, the tax exemption was only applicable to business transfers in which the recipient company was a newly established company. The old provision unnecessarily restricted the possibilities for taxpayers to make appropriate corporate arrangements and new companies were often established simply to avoid transfer tax.  

In connection with the other transfer tax changes, the transfer tax exemption of first-time homebuyers was also abolished. 

If you wish to discuss these topics, please contact:

Castrén & Snellman Attorneys Ltd