Shares need no longer to be issued directly to subscribers in order for the subscribers to be exempted from Finnish transfer tax. This interpretation was established by the Finnish Supreme Administrative Court in its ruling (KHO 2017:39) on 9 March 2017, partially revoking the previous position of the Finnish Tax Administration.
Issuances of new shares directly to subscribers are exempt from transfer tax. Until now, however, the Finnish Tax Administration has regarded that only issuances of new shares have been exempted from transfer tax. Thus, issuance of shares to the company itself (i.e., creation of treasury shares) and the subsequent transfer of such treasury shares to subscribers has been regarded as transfer of ownership subject to transfer tax, although treasury shares do not entail any rights or obligations to the company itself.
The Finnish Supreme Administrative Court held that no transfer tax shall be paid when a company transfers (already registered) treasury shares to subscribers, if it has first issued the shares to itself without payment in accordance with Chapter 9, Section 20 of the Finnish Companies Act. However, this applies only to shares issued to the company itself without payment that have not previously been transferred to any other subscriber. Thus, transfer of any shares that have returned to the possession of the company as treasury shares, i.e. through repurchase, remain subject to transfer tax.
The ruling has significance in e.g. structuring and execution of transactions, incentive and remuneration share programs as well as IPOs and share issuances on capital markets. This position enables subscribers to receive shares against payment without having to pay for the shares first and then waiting for the shares to be registered in the Finnish Trade Register, thus bringing Finland closer to the delivery-versus-payment settlement model in share issuances.