Finland: Interest incurred in debt push-down arrangements

Finland: Debt push-down arrangements

Finland’s Supreme Administrative Court in May 2016 issued decisions concerning the deductibility of interest costs in debt push-down arrangements, holding such interest expenses may not be deductible when the acquired shares to which the debt relates cannot be allocated to a branch’s assets or when the arrangement can be deemed to be tax avoidance transactions. In the subject cases, the debt had been allocated to a foreign entity’s Finnish branch that constituted a permanent establishment in Finland.

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Subsequently, the Finnish tax administration on 27 May 2016 published guidance relating to the decisions, and relating to debt push-down arrangements carried out through a branch or a "special purpose vehicle" (SPV)—that is, a Finnish company established for an acquisition. The guidance provides that the holdings in the cases apply to such SPV arrangements. Also, it was determined that debt push-down arrangements can be deemed to be "tax avoidance" structures if:

  • The intra-group funding is organized through a Finnish branch or an SPV;
  • The arrangement has been given a legal form that does not correspond the true nature and purpose of the matter (substance-over-form provision); and 
  • The objective of the arrangement is to avoid tax.

The tax administration recommended that companies confirm the tax treatment of significant mergers and acquisitions and other operations involving tax risk and possibly apply for an advance ruling from the tax administration.


Read a June 2016 report prepared by the KPMG member firm in Finland

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