Corporate - Deductions

Last reviewed - 10 January 2024

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.
  • Non-deductible interest expenses (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

As a general rule, 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. However, the new law that came into force on 1 January 2020 adopted accelerated depreciations on machinery and equipment for tax years 2020-2023. The applicability of the law was later amended to tax years 2024-2025.

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.

Additionally, in 2021, a new law was adopted that provides accelerated depreciation on low-value assets and the remaining low book value of machinery and equipment from tax year 2021 onwards (see below).

Land is not a depreciable asset.

Accelerated depreciation for tax years 2020-2025

The law on accelerated depreciation on machinery and equipment entered into force on 1 January 2020. The law originally concerned tax years 2020-2023, but its applicability has been extended later to tax years 2024-2025.

Under the new legislation, a taxable person engaged in agriculture or a business may annually deduct up to 50% (instead of 25%) of the tax carrying value of newly acquired machinery or equipment in tax years 2020-2025.

The accelerated depreciation represents a temporary difference and must be recorded in the depreciation difference calculation in the statutory financial statements.

In order to have accelerated depreciation on investments in machinery and equipment, the following conditions must be met:

  • The machinery or equipment is new (i.e. it has not been purchased second-hand).
  • The machinery or equipment was taken into use on or after 1 January 2020.
  • The machinery or equipment is used by the taxable person for the purposes of that person's business or agricultural activity.
  • The machinery or equipment belongs to the movable fixed assets of the company or to the fixed assets of agriculture.
  • Accelerated depreciation in taxation requires that a corresponding depreciation has been recorded as an expense in the statutory financial statements.

Accelerated depreciation on low-value assets and the remaining low book value of machinery and equipment from tax year 2021 onwards

The law regarding the accelerated depreciation of low-value assets entered into force on 1 January 2021 and can be applied for the first time in the taxation for tax year 2021. According to the law, companies can use accelerated depreciation on low-value assets and on the remaining book value of machinery and equipment from tax year 2021 onwards.

The threshold of a low-value asset has also been raised to EUR 1,200:

  • If the purchase price of the asset is EUR 1,200 or less, it can be expensed directly during the fiscal year that it was acquired.
  • If the remaining book value of an asset (machinery and equipment) purchased in previous years is EUR 1,200 or less in the beginning of the fiscal year, the remaining book value can be expensed in full during the fiscal year in question.

Consequently, the limit for the total deduction for low-value assets per fiscal year was raised accordingly to EUR 3,600.


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 deduction 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 is 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.

There are certain exceptions to the above rules (both exemptions and additional limitations), and, in general, the provisions are very complex.

The limitations on interest deduction provisions were amended as of 1 January 2022. The changes concern provisions on the exception based on the balance sheet comparison and the exception related to public infrastructure projects. Deduction for interest expenses, which has been allowed when based on balance sheet comparison, will be limited in situations where a party owning a significant share of the group has funded the group. Amendments were also made to the exemption regarding public infrastructure projects.

As of 1 January 2023, the balance sheet test is not available when, in the consolidated financial statements, interest expenses payable to group entities (ownership of 10% or more) represent 20% or more of the interest expenses paid towards external parties. In addition, the exemption regarding infrastructure projects was amended. A privately owned entity implementing a long-term public infrastructure project ordered by a public entity is allowed to deduct the otherwise non-deductible net interest expenses paid to entities not part of the sphere of interest. The new provision concerning infrastructure projects is applicable retroactively as of tax year 2019 onwards. 

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.


Income taxes are non-deductible when determining taxable income. However, 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 work community development 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.