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Finland

2 November 2021

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Finnish Parliament Considering Draft Bill for Reverse Hybrid Mismatch Rules

The Finnish parliament is considering draft bill HE 204/2021 vp, which provides for the introduction of new hybrid mismatch rules. In particular, the draft includes measures to transpose the reverse hybrid mismatch rules as per Article 9(a) of the EU Anti-Tax Avoidance Directive as amended (ATAD2). The rules generally provide that where a tax transparent entity is at least 50% directly or indirectly owned by a legal entity partner together with related partners, the share of income from the transparent entity will be taxed in Finland if the state of residence of such partner does not tax the income because that state considers the entity to be a separate taxpayer (an opaque entity). For this purpose, a partner includes a legal person or a legal arrangement. However, the income is taxable only to the extent that it is not taxed in Finland under other provisions. Further, such income will not be taxed if the transparent entity is an alternative fund within the meaning of the Alternative Fund Managers Act, which is in accordance with the exemption in ATAD2 for collective investment vehicles.

The hybrid mismatch rules will apply from 1 January 2022.

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