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Finland Launches Consultation On EU Exit Tax

by Ulrika Lomas, Tax-News.con, Brussels

21 June 2019


On June 14, 2019, the Finnish Ministry of Finance launched a consultation on draft exit tax legislation.

According to the ministry, the proposal is mainly based on the European Union Anti-Tax Avoidance Directive (ATAD), which includes five legally-binding anti-abuse measures.

The EU's exit tax is intended to prevent companies from avoiding tax on gains on assets such as intellectual property that is moved from a member state's territory, typically to a lower tax territory. The new exit tax is intended to enable that member state to tax the value of the product before the intellectual property is shifted elsewhere.

Under the ATAD, a taxpayer shall be subject to tax at an amount equal to the market value of the transferred assets, at the time of exit of the assets, less their value for tax purposes, in any of the following circumstances:

  • a taxpayer transfers assets from its head office to its permanent establishment in another member state or in a third country in so far as the member state of the head office no longer has the right to tax the transferred assets due to the transfer;
  • a taxpayer transfers assets from its permanent establishment in a member state to its head office or another permanent establishment in another member state or in a third country in so far as the member state of the permanent establishment no longer has the right to tax the transferred assets due to the transfer;
  • a taxpayer transfers its tax residence to another member state or to a third country, except for those assets which remain effectively connected with a permanent establishment in the first member state;
  • a taxpayer transfers the business carried on by its permanent establishment from a member state to another member state or to a third country in so far as the member state of the permanent establishment no longer has the right to tax the transferred assets due to the transfer.

EU member states must transpose the ATAD's exit tax rules into domestic law by December 31, 2019.

In addition, amendments to FInland's provisions on cross-border mergers have been proposed.

The deadline for submissions to the consultation is August 8, 2019.

TAGS: Finance | tax | business | tax avoidance | legislation | transfer pricing | Finland | exit tax | Europe | Tax | BEPS

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