The Supreme Administrative Court of Finland held that a branch has no right to deduct the interest expenses in a debt-funded acquisition structure, when the shares in a Finnish group company were acquired in the name of a foreign company’s branch registered in Finland.
The cases were issued on 19 May 2016.
Taxpayers need to take these decisions into account when planning corporate restructurings and structuring acquisitions. For example, the effect of the rulings on using holding company structures in acquisitions remains to be evaluated, even when holding company structures have previously been accepted in established case law. In any event, prudent taxpayers would determine that the structure is commercially justified for tax purposes. The tax administration announced that it will issue further guidance on the effect of the decisions.
Read a June 2016 report prepared by the KPMG member firm in Finland: The Supreme Administrative Court: Interest expenses allocated to a Finnish branch were non-deductible
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