Hannes Snellman Counsel in Supreme Administrative Court Case Confirming That Refinancing of Real Estate Company’s Bank Loans Is Not Subject to Transfer Tax
1 November 2019
The proceeding was initiated by the Finnish tax authorities’ interpretation whereby Finnish share transfer tax should also be levied on bank loans which are refinanced in connection with the acquisition of a real estate holding company. The latest reform on rules regarding share transfer tax, which entered into force on 1 March 2013, has widened the share transfer tax base to also cover so-called company loans of mutual real estate companies and housing companies. These rules include a provision according to which other kinds of bank loans of real estate companies may also be subject to share transfer tax if the shareholder has a right or obligation to pay these loans based on, for instance, the terms of the shareholders’ agreement or other agreement.
The Administrative Court held that the purpose of the extension of the tax base to other kinds of loans was clearly intended to only cover situations relating to tax evasion and found no legal base for levying transfer tax on bank loans of a real estate holding company when the obligation to refinance these loans is only based on the terms of the share purchase agreement. The Tax Recipients’ Legal Services Unit appealed this decision to Supreme Administrative Court, which, however, did not grant a leave of appeal to the Unit.