The ECJ has on 31 January 2013 in its preliminary ruling C-123/11 confirmed that the Finnish provisions restricting the transfer and utilisation of the tax losses of a non-Finnish subsidiary by its Finnish parent company in a cross-border merger scenario are, in principle, acceptable, but only to the extent that the non-Finnish subsidiary has exhausted all possibilities to utilise these tax losses in its own country of residence and that there is no possibility of their being taken into account in its country of residence in respect of future tax years either by itself of by a third party (the exhaustion test).
The ECJ left, however, the question and determination of “final losses” to be dealt by the Finnish Supreme Administrative Court. The decision of the Supreme Administrative Court can generally be expected within the next six months.
FINNISH TAX LOSS FORFEITURE AND DISPENSATION PROCEDURE MAY CONSTITUTE ILLEGAL STATE AID
According to the opinion of the Advocate General on 7 February 2013, the Finnish rules governing the forfeiture and subsequent preservation of tax losses after a change in the ownership of a company, may constitute illegal State aid for EU law purposes because of their allegedly selective nature.
According to the Advocate General, however, insofar as these Finnish rules would constitute illegal State aid, they should be classified as a form of aid that existed before Finland’s accession to the EU. Hence, Finland may continue to apply these rules as long as the Commission does not adopt a decision to the contrary.
Accordingly, should the ECJ follow the Advocate General’s opinion, the question whether the Finnish rules constitute illegal State aid will ultimately be resolved by the Commission. A subsequent decision to such effect by the Commission could result in the beneficiaries being obliged to repay the aid.
TRANSFER TAX TO INCREASE ON THE PURCHASE OF SHARES IN REAL ESTATE COMPANIES
As of 1 March 2013, the applicable transfer tax payable on the purchase of shares in Finnish real estate companies and companies whose main purpose is to directly or indirectly hold real estate or shares in real estate companies has increased from 1.6% to 2% of the purchase price. In addition, also the scope of the tax base has been expanded to cover, for example, the value of any (loan) payments that the buyer makes on behalf of the seller or the company to a third party in connection with the sale or any commitments by the buyer to make such payments in the future for the company’s or the seller’s benefit and/or behalf.
Important for foreign investors is additionally the fact that transfer tax will also become payable on the transfer and purchase of shares in non-Finnish holding companies managing Finnish real estate investments if either the seller or the buyer is a Finnish tax resident.