Transfer Tax Not to be Levied on Bank Loans Refinanced in Connection With an Acquisition of a Real Estate Holding Company, Says Court

Our Tax & Structuring team has assisted one of our clients in yet another successful court proceeding. 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 has been in force since 1 March 2013, widened the share transfer tax base to also cover sc. company loans of mutual real estate companies and housing companies. These rules included a provision according to which other kinds of bank loans of real estate companies can also be subject to share transfer tax if the shareholder has a right or obligation to pay these loans based on, for instance, terms of the shareholders’ agreement or other agreement. The administrative court held that the purpose of this extension of the tax base to other kinds of loans was clearly intended to only cover tax evasion type of situations and found no legal base for the levy of 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 team included Heikki Vesikansa, Matleena Pälve and Ossi Haapaniemi. The administrative court decision can still be appealed to the Supreme Administrative Court subject to there being basis for leave to appeal.