The main trend in the tax amendments that entered into force in the beginning of 2013 is the tightening of taxation. The amendments also include deductions and changes that are beneficial for private enterprises, intended to remain in force in 2013–2015. By making use of the incentives available to growth companies, the tax burden of certain limited liability companies may even become lighter.
There have been extensive amendments and increases throughout the tax legislation. We will give a short summary below of the most significant changes for our clients.
Company Subsidies in 2013–2015
Double deductions for salaries of persons engaged in research and development projects
Limited liability companies and cooperatives can, if certain conditions are met, make double deductions from business income for research and development salaries in 2013–2015.
The maximum amount of additional deduction per tax year is EUR 400,000, and the minimum is EUR 15000. To qualify for the deduction, the company thus needs to pay salaries of at least EUR 15,000 to persons engaged in research and development projects. This deduction will be applied to projects that started in 1 January 2013 or later.
Double depreciations for production investments
A taxpayer engaged in business may make double depreciations for new production facilities that were acquired and taken into use in 2013–2015 for the first two tax years as well as for equipment and machinery used in them. Construction work for these buildings must have started no earlier than 1 January 2013.
New incentive for angel investors
A private individual investing in the share capital of an unlisted limited liability company may in 2013–2015, provided certain conditions are met, make a deduction of 50% of the investment from his or her capital income.
However, this deduction is not a final tax benefit, as this new incentive merely gives additional time to pay taxes. The deduction is deducted from the purchase cost of shares when the investor sells shares or otherwise gives up ownership.
There are strict conditions for qualifying for this tax incentive. An investor must, e.g. be making a minority investment into a small, new company engaged in business operations. This investment cannot be made through an investment company, and the maximum amount of the investment that can be deducted is EUR 150,000 for one company per year. The investor may, on the basis of investments into several companies, make deductions up to a EUR 150,000 per tax year.
This law will not enter into force until it has been confirmed by the European Comission.
One Per Cent Increase to VAT
The general VAT rate increased in 1 January 2013 from 23% to 24%. The categories with reduced VAT saw increases from 13% to 14% and 9% to 10%.
Restrictions on Right of Companies to Make Interest Expense Deductions
The right of companies to make deductions from net interest expenses has been significantly restricted through an amendment to the Income Tax Act (982/2012). The amendment entered into force on 1 January 2013, but will not be applied until taxes are handled for 2014.
For a more in-depth look at the amendment, please see our published article.
Changes to Taxation of Private Individuals
New category in income tax scale for incomes over EUR 100,000
The income tax scale for 2013 includes a new income category for private individuals with incomes of over EUR 100,000. The new income category is to be incorporated into the income tax scale also in 2014 and 2015.
New category in inheritance and gift tax scales
A new category has been added to the inheritance and gift tax scales for inheritances and gifts exceeding EUR 1 million. For the part of the inheritance or gift exceeding EUR 1 million, 19% tax must be paid for those in the first tax class, and 35% by those in the second.