Finland To Strengthen CFC Legislation
by Ulrika Lomas, Tax-News.com, Brussels
09 November 2018
The Finnish Government has proposed changes to controlled foreign company legislation that would widen the scope of the law and bring Finland in line with the European Union Anti-Tax Avoidance Directive (ATAD I).
Under the proposed measures, a foreign entity may be considered a CFC if 25 percent of its shares are owned, directly or indirectly, by Finnish residents. The current holding threshold is 50 percent.
A CFC will be considered low-taxed if its effective tax rate is less than three-fifths of the Finnish tax rate, or 12 percent. This is unchanged from the current law.
A CFC in a non-EEA jurisdiction will not fall under the scope of the amended law if the foreign jurisdiction is not listed on the EU's tax blacklist; the company carries out production activities and certain services in the jurisdiction of residence; and there is a tax information exchange agreement in place between Finland and the company's jurisdiction of residence.
The new CFC rules will also not apply to foreign companies located in the EEA if they are carrying out substantive business operations.
The Government said that the changes are based mainly on ATAD I and will enter into effect on January 1, 2019.
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