Finland's government has asked Parliament to approve a separate tax regime for alternative investment funds set up as limited partnerships. Under the proposal, income and expenses would pass directly to investors.
Finland’s government submitted Government Proposal HE 341/2026 vp to Parliament on 12 November 2026, seeking to reform the taxation of alternative investment funds organised as limited partnerships.
The Ministry of Finance prepared the proposal. The laws are intended to enter into force in spring 2027. They would apply mainly to funds established after that date whose financial period does not end before 30 September 2028. That date corresponds to an extended 18-month financial period beginning on 1 April 2027.
Why the rules are changing
These funds are currently taxed under general corporate rules designed for ordinary business associations. The proposal says this treatment can give some investor groups a higher tax rate than a direct investment would, which may hinder fundraising. It also says taxing income from foreign funds under Section 16a of the current Income Tax Act is difficult in practice because income information is lacking.
How the new model would work
Funds covered by the rules would be called a “fund consortium”. No annual result of business or other activities would be confirmed for the consortium. Instead, all its income and expenses for the tax year would flow directly to the partners, keeping their original nature and source. The aim is for investors to be taxed as they would be on a comparable direct investment, with the fund adding no extra tax cost. The legal features of the funds would not change.
Foreign funds
The same flow-through treatment would generally apply to foreign fund groups. Partners holding less than 25% of a foreign fund could instead opt out of flow-through treatment. They would then be taxed when the foreign entity distributes assets or the unit is transferred, and the distribution would be fully taxable income for the partner. The government says small investors often cannot obtain the information needed for flow-through treatment.
Reporting duties
Domestic fund consortiums would have to give the Tax Administration an annual report of their income and expenses, with a breakdown of each partner’s share. They would also have to supply each partner with the corresponding information for their tax return.
Exceptions for existing funds
Funds established before the law takes effect would stay under current rules. A limited option would let some existing funds still at the fundraising stage switch to the new model. It requires that the financial period in which a fund starts operating does not end before 31 December 2028.
Impact and consultation
The proposal is not expected to directly affect Finnish tax revenue. Of the 26 statements received in consultation, most were positive. The proposal is intended to ease the way for investors such as public benefit organisations and investors with limited tax liability. The Tax Administration estimates implementation costs at about EUR 1 million. The draft was open for comment from 23 September to 21 October 2026.
The proposal now goes to Parliament, which will decide whether the new regime takes effect in 2027.
