background image
6.3. Depreciation and Amortization

When calculating Finnish taxable income, assets owned by an enterprise may be depreciated over their normal useful life using the declining-balance method or the straight-line method depending on the type of asset.

The depreciable base is the acquisition cost, which includes related levies, taxes, and installation costs. The depreciation expense for tax purposes is not permitted to exceed the cumulative depreciation expense reported in the annual financial statements.

Plant Machinery and Equipment

Plant machinery and equipment with a useful life of more than 3 years are combined into a pool for depreciation purposes and are depreciated using the declining-balance method. Companies may vary the annual depreciation rate in the pool from 0% to 25%.

The depreciable basis is decreased by proceeds from sales of assets in the pool. If the sales price exceeds the depreciable basis, the excess is added to taxable income. If the remaining balance of machinery and equipment is higher than the fair market value, additional depreciation may be claimed.

Equipment with a short useful life of up to 3 years may be written off in the year of acquisition. Effective 1 January 2021, machinery, equipment, and other moveable fixed assets with a value of less than EUR 1,200 may be depreciated in full (fully expensed) in the year they are put to use even if their useful economic life exceeds three years, with the maximum total value of assets so written-off limited to EUR 3,600 per year.

Effective 1 January 2020, taxpayers can claim increased depreciation on machinery, equipment, and similar movable fixed assets acquired and put to use during the tax years 2020 to 2023. The depreciation rate is doubled for such assets up to a maximum depreciation rate of 50% of the purchase price of the asset.      

The Finnish tax authority has published guidance, which provides that the increased depreciation is subject to the following:

  • Buildings are not eligible for increased depreciation;
  • Increased depreciation can be claimed on manufacturing assets, including machinery or equipment, purchased for the provision of services;
  • The relief can be claimed by the taxable persons engaged in any commercial or agricultural activity, including traders and self-employed persons, partnerships, limited partnerships, and companies;
  • The acquisition cost of second-hand machinery or equipment is not eligible for relief.
  • New machinery or equipment acquired for the replacement of existing assets put into service prior to the operation of the law may also qualify for increased depreciation, but not individual spare parts that are not new machines or equipment.

Immovable Property

Immovable property is depreciated using the declining-balance method. The annual depreciation rates depend on the building type/function and include:

Industrial buildings, power stations, workshops, and warehouses 7%
Residential housing and offices 4%
Buildings used exclusively for research purposes and those constructed of wood or other light materials 20%

Intangible Assets

Intangible assets, such as patents and goodwill, are depreciated using the straight-line method over 10 years. A shorter period may be used if the taxpayer can demonstrate that the asset’s useful life is less than 10 years.