Finland’s government has proposed amendments to merger and demerger rules to increase restructuring flexibility, expand tax-neutral treatment, raise the cash consideration limit to 50%, and clarify rules on business transfers, group losses, and share valuation. The changes are proposed to take effect on 1 January 2027.
Finland’s government has submitted a legislative proposal (HE 211/2026) to Parliament to amend the existing rules on mergers on 1 October 2026. The proposal aims to make corporate restructuring rules more flexible, streamline tax procedures, and reduce the administrative burden on taxpayers and the Tax Administration.
Key reforms include enabling tax-neutral sister company mergers, introducing demergers executed through incorporation, and adjusting the maximum limit for cash consideration up to 50%. Additionally, the text outlines updates regarding negative net contributions in business transfers, rules for loss deductions within corporate groups, and the calculation of mathematical values for shares during mergers, demergers, and share issuances.
The amendments are set to take effect on 1 January 2027.
Tax-neutral mergers without consideration and indirect ownership
The proposed amendment would expand tax-neutral merger treatment without consideration to certain indirect sister-company mergers. It would permit such mergers where shareholders indirectly own the receiving company through a 100%-owned intermediate company, but the relief would be limited to one intermediate ownership tier to ensure predictability and prevent changes in shareholder ownership proportions.
Proposed changes to demerger structures and share valuation
- Demerger via incorporation: A new demerger form would allow a company to transfer one or more business units to a newly incorporated entity in exchange for shares issued to the demerging company itself. Unlike a business transfer, this operates as universal succession, automatically transferring contracts, liabilities, and tax losses.
- Share consideration for real estate and housing companies: The amendment would relax the proportional distribution rule for housing and mutual real estate companies. Shareholders could receive shares only in the receiving entity that takes over the property or apartment rights linked to their original shares.
- Acquisition cost for listed companies: Where all companies involved in a demerger are publicly listed, the original shares’ acquisition cost would be allocated based on their relative fair market values, using initial stock exchange trading prices rather than net asset values.
Increase in maximum cash consideration
The proposed amendment would increase the maximum cash consideration allowed in tax-neutral mergers and demergers from 10% to 50%. Where consideration shares have no nominal value, the 50% limit would be calculated based on total paid-in equity, including SVOP funds, rather than only share capital.
Tax-neutral business transfers with negative net assets
The reform would allow tax-neutral business transfers even where the transferred assets have a negative net tax value, overturning earlier restrictions such as KHO 2001:3. The negative value would result in a negative acquisition cost for the consideration shares. On a later sale, this amount would increase the taxable gain. Even where the share sale is otherwise tax-exempt under EVL 6 b §, the amount corresponding to the negative acquisition cost would remain taxable to prevent untaxed value accrual.
Clarification of EEA scope
The reform would codify established Supreme Administrative Court case law and clarify that tax-neutral restructuring rules under EVL 52 § 2 and EVL 52 e § apply to corporate entities throughout the European Economic Area (EEA), in line with EU/EEA principles on freedom of establishment and free movement of capital.
Group loss deductibility in mergers and demergers
The reform would allow a receiving company to deduct confirmed tax losses of a merged or demerged company where both entities have belonged to the same corporate group since the beginning of the loss-making year, removing the need for a separate exception permit in certain group restructurings.
Mathematical value for non-listed dividend taxation
The rules would clarify that the mathematical value used to determine the 8% dividend threshold for non-listed companies is the latest value calculated at the end of the tax year, including where restructurings occur during the year.
Recalculation in restructurings and share issues
Mathematical values would be recalculated for the tax year of a merger or demerger regardless of financial year-end or dividend timing. For share issues, new shares would receive a mathematical value only after registration in the Trade Register, and invested funds would be included in net assets from the tax year of registration.
Negative net non-cash contributions in valuation
Shares received in a business transfer involving a negative net contribution would have a mathematical value and comparison value of EUR 0. Negative contribution amounts would reduce the parent company’s net assets, but individual share values could not fall below zero.
