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Investment climate

What is the general climate of real estate investment in your jurisdiction?

The Finnish real estate market has been subject to increasing activity in recent years. The volume of the Finnish real estate transactions in 2016 exceeded €7 billion, which is the highest annual volume so far and represents an increase of 30% compared to 2015. 


Who are the most common investors in real estate?

In recent years, institutional investors, mainly pension insurers, have been the largest investor group in real estate in Finland. 

Are there any restrictions on foreign investment in real estate?

Finnish law is generally rather liberal in terms of foreign investment and allows direct investment in both property and domestic companies holding Finnish real estate.

Many foreign real estate investors originate from other Nordic countries, particularly Sweden, such as Sagax and Hemso Samhallsfastigheter.

Investment structures

What structures are typically used to invest in real estate and what are the advantages and disadvantages of each (including tax implications)?

The most common structure for Finnish institutional investors in indirect property investment is the limited partnership, where the fund management company usually functions as the general partner.

There are significant tax advantages to these structures, since limited partnerships are tax transparent structures and their investment income is taxed according to the relevant investor's tax status, provided that certain conditions are met.

The investment income of limited liability companies investing in real estate is subject to corporate taxation and could therefore be regarded as less favourable from a tax perspective.

Finnish legislation also enables the establishment of special investment funds that invest in real estate (Act on Common Funds (48/1999, as amended)). These funds are structures managed by a separate fund management company. They are not taxable entities and are considered as fully transparent for Finnish tax purposes.

Forming a tax-exempt listed company with a structure resembling a real estate investment trust is possible only for companies investing in residential rental property.

Under Finnish law, to maintain this tax exemption, the relevant company must, among other things:

  • pay 90% of its relevant annual profit as dividends; and
  • be listed within three years of its foundation.

Real estate investments can also be made through a foreign or non-resident company.

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