Finland - Changes to CFC Rules are Expected
On 6 August 2018 it was announced that interested parties may submit their comments on a draft law amending CFC legislation. The purpose of amendments is to align current rules with the EU Anti-Tax Avoidance Directive 2016/1164. The main features of the proposal are listed below.
A CFC would be established:
(i) if the taxpayer by itself, or together with its associated enterprises holds directly or indirectly at least 25% of the voting power, or owns directly or indirectly at least 25% of the capital, or is entitled to receive at least 25% of the profits, or of the yield of the entity's assets (currently 50%); and
(ii) if the effective rate of tax in the entity's state of residence is less than 3/5 of the Finnish CIT rate.
The regime would not include CFCs resident in an EEA state provided that the CFC carries on a substantive economic activity. The same would apply also to CFCs resident in non-EEA states provided that the CFC is not resident in a jurisdiction listed in the EU list of non-cooperative jurisdictions or if there is an agreement in place allowing exchange of information for tax purposes.
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