Finland Introducing Focused Tax Reforms to Boost Economic Growth

Authors: Harri Vehviläinen and Isabella Kartila

Tailored tax policy reforms announced by the Finnish Government have been in the spotlight in recent weeks. These new significant initiatives are expected to improve Finland’s investment attractiveness. In addition to the new proposals, the Ministry of Finance has several other legislative projects in the pipeline. Amendments to real estate taxation, which have been awaited for years, are currently underway, and broader interest deduction rights are planned to be restored for critical investments related to Finland’s security of supply.

The Finnish Government negotiated and agreed on the General Government Fiscal Plan for 2026–2029 in its mid-term policy review session on 22 and 23 April 2025. The negotiations resulted in a significant growth package aimed at boosting long-term economic growth, attracting investments, and encouraging employment in Finland.  

As part of the growth package, the Government unveiled proposals on focused tax reforms in Finland. The proposals range from personal income tax reductions to corporate tax cuts, with a strong focus on making Finland more competitive and one of the most attractive countries in Europe for investments.

Below are certain key points from the proposed law amendments:

• The corporate tax rate has been suggested to be reduced from 20% to 18% from the beginning of 2027.
• The right to deduct tax losses is contemplated to be extended from 10 years to 25 years starting already next year. Therefore, any tax losses incurred in tax year 2026 or later would be subject to the extended utilisation period.
• Certain measures will be taken to improve Finland’s attractiveness for venture capital investments by both domestic investors (exemption, inter alia, for non-profit organisations) and international investors (more lenient tax compliance obligations). In addition, a new fund structure may be introduced in Finland.
• An overall assessment of the tax treatment of mergers and acquisitions will be initiated, and the tax neutrality of share swap transactions will be broadened to cover transactions outside the EEA. In addition, the cash restrictions applied in tax-neutral transactions will be reviewed.

In addition to the above, the Government announced that Finland is seeking to continue the currently available tax credit for large investments aiming towards a climate-neutral economy also in 2026, if enabled by the EU state aid rules. Based on information received by Hannes Snellman, the new tax credit is intended to become more broadly available for different kinds of investments in clean transition. The currently available tax credit covers i) investments in energy production from renewable sources (excluding electricity generation) and in energy storage, ii) investments in reducing greenhouse gas emissions and energy consumption in industrial processes, and iii) investments in certain sectors that are strategically important for the transition to a climate-neutral economy, such as the manufacture of batteries and their key components and critical raw materials. For more information on the currently available tax credit, see our previous blog post: State Aid Programme for Green Transition Investments Is Moving Forward, and the Government Proposal on New Investment Tax Credit Was Issued in Finland.

Other Pending Legislative Initiatives

Restoring of Interest Deduction Rights to Critical Investments for Finland’s Security of Supply

The Government has issued a draft proposal to restore broader interest deduction rights to investments that are critical for Finland’s security of supply. According to the proposal, if a long-term infrastructure project is deemed critical for Finland’s security of supply and the company making such investment is a critical entity under the EU’s Critical Entities Resilience Directive (CER), the company would be allowed to deduct the otherwise non-deductible net interest expenses paid to creditors not part of the company’s sphere of interest. A similar infrastructure exemption has been previously introduced to privately owned entities implementing a long-term public infrastructure project ordered by a public entity.

Similarly to the above-mentioned tax credit in clean transition, the new proposed infrastructure exemption is still subject to discussions with the European Commission to ensure that the amendment is in line with the state aid rules applied in the EU due to only being available to certain infrastructure investments. 

General Real Estate Taxation Reform

There has been a wider real estate taxation reform pending in Finland as a property tax development initiative was set back in 2011. A draft government proposal for legislation on property tax valuation reform was issued in 2018 but was then again postponed in September 2022 as the Government estimated that, under the current economic situation, there were no grounds to issue the reform proposal.

The current Government has decided to implement the real estate taxation reform in two parts. The first part concerned the separation of the land-based real estate tax rate from the general real estate tax rate, and the new rules were implemented in the law on January 2024. The second part of the reform is estimated to progress in May 2025, when the Government is scheduled to present its proposal regarding the valuation basis of real estate taxation. It remains to be seen whether lower property tax rates will be introduced to renewable energy and whether the special features of solar power plants will be considered in the real estate taxation reform. 

Expanded Income and Real Estate Taxation of Offshore Wind Farms

The Government is contemplating legislative amendments to enable income and property taxation of offshore wind farms located in the EEA. The goal is to also ensure that the taxation of offshore wind power in Finland’s EEA corresponds to the taxation of offshore wind power within Finland’s territorial area. Regarding property taxation, the intention is to prepare proposals for changes that would include buildings and structures in Finland’s EEA within the scope of property taxation, as well as proposals for the tax rate and the distribution of tax revenue. As for the income taxation, the intention is to ensure Finland’s taxation rights over activities conducted in the EEA. The Government is expected to issue a draft government proposal during the autumn of 2025.