The Finnish Ministry of Finance has launched a public consultation on draft amendments regarding the taxation of real estate investment funds to protect Finland's tax base. As announced in 2021, the Finnish government plans to expand Finland's tax base through different measures, including amendments to the taxation of special investment funds that invest in real estate. The amendments would extend Finland's right to tax to the income generated by real estate investments made in Finland by special investment funds that invest in real estate.

The proposed amendments are in line with recommendations contained in a working group report issued in May 2021 on reforming the withholding tax of certain dividends and the taxation of profits from real estate investments so that a flow-through model would be applied to the funds' income. Under the flow-through model, the taxation of the income would be determined according to the original income types, as if the fund's unit owner had received the income directly from the investment object and not through a tax-free special investment fund. The tax treatment would be based on the investor's tax treatment, in which case, Finland's right to tax the income from the funds' real estate investments can be secured. The proposed flow-through model would be applied to the taxation of both domestic special investment funds investing in real estate and equivalent foreign special investment funds. Regarding foreign funds, the proposed flow-through model would only be applied to the income from Finland. However, given the challenges in applying the flow-through model, especially for special investment funds with a large number of investors, the flow-through model would only be applied in the taxation of special investment funds investing in real estate with less than 30 unit owners.

The proposed amendments are to come into force in 2023. The deadline for comments is 21 October 2022.