Increase of Capital Income Tax Rate
The government has proposed to increase the higher tax rate for capital income from 33% to 34% (government proposal HE 31/2015). The lower tax rate for capital income will remain at the current 30%. The income threshold of the higher rate will also remain 30,000 euros.
Deducting Capital Losses from All Capital Income
The government is proposing that capital losses would in future be deductible not only from capital gains, but from all capital income. This amendment would only apply to the taxation of natural persons and estates of a deceased person.
Capital losses would primarily be deducted from capital gains. The portion not deducted from the gains for the tax year would be deducted from the amount of pure capital income before other deductions are made. If the losses cannot be deducted from other capital income, the undeducted portion would be used as the basis for confirming the capital losses for that tax year, and those confirmed losses would be deductible from capital gains and other capital income for the next five years. Losses would continue to be deducted in the order in which they were incurred. As is currently the case, no credit for deficit in capital income aimed at earned income would be granted based on the losses.
This amendment would apply to all losses incurred from the sale of property or assets in 2016 and thereafter. Losses incurred before 2016 would only be deductible from profit from the sale of property or assets during the same tax year and the five following years.
The deductible capital losses of other taxpayers, such as corporations, would continue to be deductible only from profit from the sale of property or assets during the same tax year and the five following years.
The government has proposed that an act on the adjustment of tax based on voluntarily submitted information in 2016 be enacted (government proposal 32/2015). The act would contain provisions on 'active repentance' in taxation. This act would only be in force for 2016, and would allow a natural person or estate of a deceased person to avoid criminal sanctions for tax fraud provided that it voluntarily submits information to the Finnish Tax Administration on assets subject to income tax or inheritance and gift tax that it has not previously declared in its taxation.
In income taxation, the government is proposing that the amount of the tax increase be set at 3% of the added income, but no less than 300 euros. However, the tax increase would be 5% for the portion of added income exceeding 60,000 euros, and 7% for the portion exceeding 100,000 euros.
The inheritance and gift tax to be imposed on added income would be increased by 15%.
In income taxation, the interest on back tax provided for in the Act on Assessment Procedure would be imposed as a consequence for late payment. The penalty tax provided for in the Act on Penalty Tax and Interest for Late Payment would not be imposed.
Consequences of late payment would not be imposed in inheritance and gift taxation.
Increase to Real Estate Tax
Amendments would also be made to the Real Estate Tax Act, as the government is proposing increases to real estate tax rates (government proposal 26/2015). The following changes to real estate tax would apply as of the 2016 tax year:
- The tax rate for residential buildings that are not permanent dwellings could be a maximum of 1.00 percentage point higher than the municipally imposed tax rate for permanent dwellings, instead of the current 0.6 percentage points.
- The maximum real estate tax rate for power plant buildings and structures would increase from 2.85% to 3.10%.
- The maximum tax rate for unbuilt plots would increase from 3.00% to 4.00%, and the definition of unbuilt plot would be revised with respect to building prohibitions applicable to the plot.
In addition, as of the 2017 tax year, the range for the general real estate tax rate would increase from 0.80–1.55% to 0.86–1.80%, and the tax rate range for permanent dwellings would increase from 0.37–0.80% to 0.39–0.90%.
Dividends Paid to Corporations, Particularly in Cross-Border Situations
The government is proposing changes to the taxation of dividends paid to corporations (government proposal 59/2015). The changes are based on amendments to the EU Parent-Subsidiary Directive, with the purpose of preventing abuses of the tax benefits of dividend income, particularly in cross-border situations.
The government is proposing that the taxation of dividends paid to corporations be changed so that the dividend income received by corporations would in future be taxable income only to the extent that the payment can be deducted by the party making the payment. According to the proposal, a corporation receiving dividends would have to determine whether the party paying the dividends is entitled to deduct the payment in its taxation. For example, the recipient of dividends would have to determine what kind of investment, agreement or arrangement the dividend payment is based on, and how the payment is treated in the taxation of the party making the payment.
The government is also proposing that a provision prohibiting the abuse of general dividend tax benefits be added the act. The provision would be applied in the taxation of corporations to arrangements that are not genuine and that seek to unjustifiably benefit from the provisions concerning the tax-exempt status of dividends. The provision could also be applied to individual stages or parts of an arrangement. When the criteria for the application of the provisions would be met, dividends would be subject to tax.
These amendments would be first applied to taxation for the year 2016.