In general, tax is collected during the tax year based on pre-assessment. For the first year, the competent tax office will determine the amount of advance tax to be paid in Finland based on the income estimation given in the start-up notification. At a later date, advance payments are calculated based on the actual income received in the previous year. If the actual profits differ considerably from the basis on which the advance payments were calculated, it is advisable to request an adjustment.

The final tax assessment is made following the end of the tax year. Corporate entities must file their annual income tax return within four months of the end of their accounting period. The Tax Administration usually issues a tax assessment decision within ten months of the end of the accounting period. This decision states the amounts of taxable income, confirmed losses and the amount of tax refund or outstanding tax to be paid, as the case may be.

As a rule, foreign tax is deductible in Finland only after it has actually been paid abroad. The taxpayer has to claim the tax credit before the end of fifth year calculated from the beginning of the year following the assessment year.

In situations where the information provided in the Finnish tax declaration by the taxpayer about his or her income later turns out to be incomplete, the tax authorities will adjust the income tax retrospectively. This is true not only if the actual income of the Finnish company/branch has been higher but also if, for example, the cost-sharing and transfer pricing practised with foreign affiliates is deemed to be inconsistent with the arm’s length principle.

There are several time limits for making tax adjustments which disadvantage the taxpayer. In cases where the taxpayer has not filed a tax return or has submitted incorrect or incomplete information, disadvantageous tax adjustments can be made up to five years after the relevant tax decision was made (or should have been made had a tax return been filed). The limitation period runs from the beginning of the year following the year in which the tax decision was made.

In addition to adjusting the tax retrospectively, the tax authority may impose a punitive tax increase of up to 30% of the income concerned. The amount levied in each individual case depends on the degree of fault attributed to the taxpayer.

Furthermore, if tax has to be adjusted retrospectively as a result of incomplete or incorrect information having been submitted by the taxpayer, default interest (currently 11.5%) is added to the additional tax.

If the taxpayer is dissatisfied with the tax assessment, he or she may first of all request a correction from the tax office which issued the assessment. If the tax office refuses to correct its decision, a formal appeal must be lodged.

First appeals are made to the Tax Assessment Adjustment Board. Appeals against this body’s decisions are filed with the regional Administrative Court. The limitation period for appeals made by the taxpayer is five years calculated from the beginning of the year following the assessment year, but in any case at least 60 days after the taxpayer received notification of the decision against which the appeal is being made. The Administrative Court’s decisions are final unless the Supreme Administrative Court grants special permission for retrial, which will only occur if there are important reasons to do so. The time limit for appeals to the Supreme Administrative court is 60 days from receipt of notification of the decision of the Administrative Court.

It should be noted that the tax authorities are entitled to collect the assessed tax even if the taxpayer is appealing against the relevant decision. In cases where the decision is altered on appeal, the taxpayer is later entitled to a refund. This may in some cases have quite devastating consequences for a company if both countries involved tax the same income.

Especially where international groups of companies are concerned, it will often be difficult to anticipate how the tax authorities of the countries involved will evaluate certain situations. Furthermore, uncertainties in this respect often involve massive financial risks for the taxpayer.

In borderline cases, the only way to gain certainty will often be to ask the tax authorities involved for an advance opinion. Upon application, the Central Tax Board issues binding advance rulings on matters that are considered significant for a number of cases or important for the taxpayer. The local tax offices also issue advance information on how they will treat certain matters, as long as the same matter is not pending or already decided by the Central Tax Board.

Advance rulings can be expensive. Depending on the tax concerned and the complexity of the matter, the Finnish tax authorities currently charge fees of up to €2,440 per advance ruling. In addition, it is advisable to have the application prepared by an expert in order to ensure that the ruling obtained does indeed cover all the relevant issues and discloses all relevant facts. The value of the advance ruling is very limited if relevant facts remain undisclosed, because in this situation it will not be binding. Bearing in mind the possible risks, obtaining clarity in respect of taxation matters will nevertheless often be well worth the investment.

Double taxation agreements aim at dividing the taxation rights between the respective national tax authorities and avoiding situations where both countries concerned tax the same income. In practice, however, the tax authorities of the countries concerned may have different opinions on whether certain criteria of the double taxation are fulfilled; for example, whether a company resident in one state is considered to have a permanent establishment in the other state, or whether the cost sharing practised between affiliated companies is in line with the arm’s length principle.

For this reason, double taxation agreements usually include special rules on mutual agreement procedures in conflict situations. If the taxation in the states concerned results or will result in a double taxation not in accordance with the applicable double taxation agreement, the taxpayer may request the competent authority in his or her state of residence to resolve the problem by means of a mutual agreement. If the relevant authority finds that unjust double taxation has indeed been levied, it may either (unilaterally) grant exemption in respect of the relevant national taxation or initiate mutual agreement negotiations with the competent authority of the other state involved with a view to achieving a workable solution for avoiding double taxation.

Ultimately, the decision on whether to grant an exemption or initiate mutual agreement procedures is at the discretion of the relevant authority. In Finland, the authority competent for processing requests to enter into mutual agreement procedures is the Ministry of Finance. The negotiations are conducted between the authorities involved, usually without involving the applicant. It is therefore important that the application is as comprehensive as possible and covers all the issues the taxpayer would like to have considered in the procedure.

One feature of the Finnish tax system that often surprises foreigners is the rather extensive public availability of tax information. While as a starting-point, taxation documents concerning a taxpayer’s economic situation are confidential, there are a number of quite significant exceptions to this basic rule.

With regard to companies, as well as individuals, details of the amount of income generated in a particular tax year, the tax paid in advance, as well as the residual tax to be collected or refunded is publicly available information. In addition, certain information concerning unpaid tax may be published.

The information mentioned above is public not only in theory but can be obtained very easily also in practice. For example, the amount of income tax assessed for a particular company or individual can be requested even via text message and each year the income tax assessed in certain municipalities is compiled in written directories.