The Finnish government issued a draft proposal on 7 January 2015 that would amend the transfer pricing rule in section 31 of the Tax Procedure Act. Comments are due by 20 February 2015. Information on the effective date for the amendment is not yet available. According to the current wording of the law, a transfer pricing adjustment is permissible in circumstances where the pricing has not been at arm’s length and can therefore be adjusted to the value where an arm’s length level is reached.
The contemplated change follows a decision issued by the Supreme Administrative Court in July 2014, in which the court held that section 31 only allows the Finnish tax authorities to make a transfer pricing adjustment (in accordance with the OECD guidelines); it does not permit the authorities to also re-characterize a transaction, unless the conditions for application of the general anti-avoidance rule (GAAR) in section 28 of the Tax Procedure Act are also met.
