Finland: Legislation implementing Pillar Two global minimum tax

The bill implementing the EU Minimum Tax Directive (Council Directive (EU) 2022/2523 of 14 December 2022) into Finnish domestic legislation was approved on 28 December 2023.

The new legislation is effective 1 January 2024 and introduces a Finnish domestic minimum top-up tax (DMTT) applicable to financial years starting on or after 31 December 2023.

The legislation implements the global anti-base erosion (GloBE) rules, including related commentary and administrative guidance, and the EU Directive without significant variation or modification. The Finnish DMTT resembles closely the income inclusion rule (IIR) and the undertaxed profits rule (UTPR) with the aim of making it a qualified DMTT (QDMTT). Parts of the Administrative Guidance from February and July 2023 were implemented, but none of the December 2023 content.

In line with the GloBE rules, the Finnish legislation requires Global Information Returns (GIRs) to be filed within 15 months after the end of the reporting fiscal year (18 months for the transitional year, i.e., by June 2026). Local Constituent Entities (CEs) are required to file a notification with the Finnish tax authorities and a local return if there is any DMTT payable in Finland, both within the same deadlines as the GIR. However, the legislation authorizes the Finnish Tax Administration (FTA) to issue further guidance on the content and timing of the returns. As of to date, such guidance has not been issued.

The Finnish Ministry of Finance is preparing an amendment to the legislation to ensure conformity with the previously released Administrative Guidance. The bill is estimated to be submitted to the Parliament in April 2024 and enacted by June 2024.

FTA clarified their approach to Pillar Two related guidance and filings in their Pillar Two webinar held on 7 March 2024:

• FTA will publish a collection of Pillar Two related guidance in phases during spring 2024 following further guidance to be issued by the OECD. The guidance will include the following topics:
  • Group identification and allocation of profit to CEs
  • Calculations for qualifying income or loss, adjusted covered taxes, effective tax rate (ETR) and DMTT
  • Allocation of DMTT
  • Special circumstances relating to permanent establishments (PEs)
  • Safe harbor rules
  • Filing routines and tax assessment procedure to be applied in Finland.

FTA will follow OECD in their guidance and will not publish guidance on matters that cannot be justified based on OECD materials and the EU Directive.

• GIRs, notifications, and local returns are to be filed through FTA’s electronic platform MyTax (OmaVero). Data is to be filled in manually in the forms but XML and csv uploads will also be supported. No application programming interface (API) is being currently developed.