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Finland Corporate - Deductions

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As with taxable income, the concept of deductible costs is wide and covers, in general, all costs incurred in the pursuance of taxable income. Significant exceptions to this rule include (among others):

  • Income taxes (see below), tax late payment interests, and punitive tax increases.
  • Fines and other punitive payments.
  • 50% of entertainment costs.
  • Capital losses and liquidation losses if capital gains from the sale of shares of a target company would qualify for the participation exemption (see Capital gains in the Income determination section).
  • Losses from the disposal of a company’s own shares.
  • Merger losses.
  • Net interest expenses exceeding 25% of taxable income, including group contributions and adding back interest expenses and tax depreciation (taxable EBITD) (see Thin capitalisation in the Group taxation section).

As the accrual method is applied to the calculation of taxable income, expenses are usually deductible in the year they are realised (i.e. the year the obligation to pay has arisen).

Depreciation, amortisation, and depletion

The maximum annual rates of depreciation calculated on the remaining acquisition cost for tax purposes (declining-balance method) are 25% for machinery and equipment and from 4% to 20% for buildings and other constructions, depending on the type and estimated life of the asset. The remaining acquisition cost for tax purposes is defined as cost less accumulated tax depreciation and, in the case of machinery and equipment, proceeds on disposal of the assets. The straight-line method is applied to certain intangible assets and capitalised expenditures and to assets with long economic use, such as dams. Tax depreciation is limited to the cumulative charges made in the books.

Costs related to qualifying intangible property are usually amortisable over a period of ten years or a shorter period if the economic life is proven to be less than ten years.

The capital cost of mines, sandpits, quarries, and peat bogs is written off in proportion to the quantities extracted. Short-lived items (the economic life of which is three years or less) may be written off immediately.

Land is not a depreciable asset.


Acquired goodwill is amortisable for tax purposes over its economic life, up to a maximum of ten years.

Start-up expenses

Start-up expenses are generally deductible expenses when determining taxable income.

Interest expenses

Finnish interest deductibility limitation rules that implemented ATAD 1 entered into force as of 1 January 2019. The new rules are applied for the first time in the taxation for financial year 2019. Broadly, the deductibility of a company's net financing expenses in Finland are limited to 25% of the company's adjusted taxable income (EBITD) and is applied at the level of an individual company.

In case the total net financing expenses (including both internal and external financing) exceed EUR 500,000, the interest deduction limitations will apply. Should the total net financing expenses exceed the threshold of EUR 500,000, the deductible net financing expenses are limited to 25% of the company's adjusted taxable income (EBITD, i.e. taxable income including group contributions and adding back interest expenses and tax depreciation). Thus, in this case, the amount that exceeds 25% of the company's EBITD is non-tax deductible. However, external net financing expenses are always fully deductible up to EUR 3 million and will be deducted before internal financing expenses. This means that in case the net external financing expenses already exceed 25% of the company's EBITD, any of the internal financing expenses cannot be deducted.

See Thin capitalisation in the Group taxation section.

Bad debt

In general, bad debts incurred from sales receivables, etc. are tax deductible. The bad debts must also be deducted for accounting purposes.

Charitable contributions

Donations are deductible for CIT purposes in certain cases.

In order for a donation to be tax deductible, the amount of the donation should be at least:

  • EUR 850, but not more than EUR 250,000, if made to an EEA member state or to a publicly financed university or other higher educational institution in the EEA to benefit the sciences, the arts, or the Finnish cultural heritage, or
  • EUR 850, but not more than EUR 50,000, if made to an association, foundation, or other institution in the EEA nominated by the Tax Administration and to benefit the sciences, the arts, or the Finnish cultural heritage.

Donations of not more than EUR 850 (e.g. to charitable purposes) are, in general, tax deductible.


No income taxes are deductible when determining taxable income. However, the real estate tax and YLE tax are deductible.

Education costs of employees

Employers are allowed to make an additional tax deduction for certain education costs of their employees. It is required that the employer has made a qualifying education plan and the education relates to the current or future tasks of the employee. The deduction entails both internal and external courses. The amount of the deduction is the average daily salary of all employees working for the employer multiplied by the amount of all qualifying educational days of all employees. This amount is subsequently divided by two. The maximum amount of qualifying education days is three days per employee within the fiscal year in question. The deduction has no tax consequences for the employees.

Net operating losses

Losses may be carried forward for ten subsequent years. However, the right to carry forward losses may be forfeited in certain instances, such as in cases where there is a direct or indirect change in the ownership of the company operating at a loss. However, a special permit can be applied in certain situations from the Finnish tax authorities to retain the tax losses despite the change in ownership. Loss carrybacks are not allowed.

Payments to foreign affiliates

A Finnish corporation may claim a deduction for royalties, service fees, and interest charges paid to foreign affiliates, provided the underlying transaction is beneficial to it and the amounts paid are at arm’s length.

Last Reviewed - 29 December 2019

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