Post by Juusela on Apr 29, 2009 2:15:17 GMT 4
Finland: Amendments to Business Income Tax Act
The Finnish Parliament have approved the government Bill (HE 176/2008) to amend the Business Income Tax Act (360/1968) in accordance with international financial reporting standards and the recent developments in bookkeeping legislation. The amendments entered into force on January 1 2009 with certain transitional provisions.
Unrealised changes in the values of financial instruments held for trading are now recognised also in taxation, if booked in the financial statements in accordance with the Finnish Bookkeeping Act or the applicable accounting standards.
However, changes in the value of derivatives held for hedging purposes are as a main rule not recognised in taxation (with the exception of exchange rate hedging). Special rules apply to credit institutions and pension and insurance companies. Receivables/debts in a foreign currency shall be valued in accordance with the exchange rate as per the date of the financial statements, thus changes in exchange rates are taxable income/deductible cost if booked in the financial statements.
Other bookkeeping related changes concern for example determination of acquisition costs of goods. Fixed costs and interest expenses are now included in the acquisition values also in taxation, provided IFRS is applied. Similarly, if inventories are valued at the net realisable value pursuant to IFRS, the same valuation is acceptable in taxation. Furthermore, when IFRS is applied the revenue recognition in taxation will follow the accounting concerning revenue recognition in proportion to the stage of completion of a construction contract.
Transferable connection fees related to electrical, telecommunications, water, sewage or district heating networks are treated as taxable income if the service provider does not have an obligation to refund the fees. Changes arising from purely domestic needs include e.g. renouncing the schematic credit loss reserve system concerning pension and insurance companies.
In addition, several amendments were enacted in relation to use of own shares. Consideration for sale of a company's own shares is now tax exempt income for the company. Correspondingly, the acquisition cost of own shares is a non-deductible cost for the company. However, acquisition cost for own shares that are transferred based on employment relationship is, under certain conditions, a deductible cost.
The use of own shares in the possession of the company as consideration in tax neutral corporate rearrangements such as mergers, divisions and transfers of business is now allowed also in taxation, making the implementation of such transactions more flexible than earlier. Moreover, the requirement for carrying out tax neutral transfers of business at the depreciable acquisition costs in accounting was abolished (due to IFRS' requirement to use the fair values under certain circumstances).
Janne Juusela (janne.juusela@borenius.com)
The Finnish Parliament have approved the government Bill (HE 176/2008) to amend the Business Income Tax Act (360/1968) in accordance with international financial reporting standards and the recent developments in bookkeeping legislation. The amendments entered into force on January 1 2009 with certain transitional provisions.
Unrealised changes in the values of financial instruments held for trading are now recognised also in taxation, if booked in the financial statements in accordance with the Finnish Bookkeeping Act or the applicable accounting standards.
However, changes in the value of derivatives held for hedging purposes are as a main rule not recognised in taxation (with the exception of exchange rate hedging). Special rules apply to credit institutions and pension and insurance companies. Receivables/debts in a foreign currency shall be valued in accordance with the exchange rate as per the date of the financial statements, thus changes in exchange rates are taxable income/deductible cost if booked in the financial statements.
Other bookkeeping related changes concern for example determination of acquisition costs of goods. Fixed costs and interest expenses are now included in the acquisition values also in taxation, provided IFRS is applied. Similarly, if inventories are valued at the net realisable value pursuant to IFRS, the same valuation is acceptable in taxation. Furthermore, when IFRS is applied the revenue recognition in taxation will follow the accounting concerning revenue recognition in proportion to the stage of completion of a construction contract.
Transferable connection fees related to electrical, telecommunications, water, sewage or district heating networks are treated as taxable income if the service provider does not have an obligation to refund the fees. Changes arising from purely domestic needs include e.g. renouncing the schematic credit loss reserve system concerning pension and insurance companies.
In addition, several amendments were enacted in relation to use of own shares. Consideration for sale of a company's own shares is now tax exempt income for the company. Correspondingly, the acquisition cost of own shares is a non-deductible cost for the company. However, acquisition cost for own shares that are transferred based on employment relationship is, under certain conditions, a deductible cost.
The use of own shares in the possession of the company as consideration in tax neutral corporate rearrangements such as mergers, divisions and transfers of business is now allowed also in taxation, making the implementation of such transactions more flexible than earlier. Moreover, the requirement for carrying out tax neutral transfers of business at the depreciable acquisition costs in accounting was abolished (due to IFRS' requirement to use the fair values under certain circumstances).
Janne Juusela (janne.juusela@borenius.com)