The Finnish government sets out tax policy guidelines for 2026–2029
The Finnish Government has published its General Government Fiscal Plan for the years 2026–2029. The plan sets out numerous policy guidelines for the development of tax legislation through the end of the current decade. Several of the proposed changes, if implemented, would have a significant impact on both corporate and personal taxation of entrepreneurs. While the timing and practical implementation of some of the proposal, such as their potential retroactive application, remain uncertain, it is advisable to start preparing for many of them in advance.
In this article, we have highlighted the changes that, if enacted, are likely to have the most significant effects on the taxation of businesses and entrepreneurs in the coming years.
Corporate income tax rate to be reduced, deductibility of tax losses extended
The corporate income tax rate will be reduced from the current 20% to 18%, effective from the beginning of 2027. The period during which tax losses can be carried forward will be extended from 10 to 25 years. The extension will apply to losses confirmed for the 2026 tax year and onwards. Losses incurred before 2026 will remain subject to the current 10-year limit.
Taxation on earned income to be lowered; top marginal tax rate to be capped at 52%
Taxation on earned income is set to decrease, primarily benefiting higher income brackets. The top marginal tax rate will be reduced to 52% as of the beginning of 2026. For the 2025 tax year, the top marginal rate, when including the average municipal and church tax rate (59.3%), meaning that some taxpayers have faced marginal rates well above 60%.
Reduced VAT rate to be lowered
The reduced VAT rate will be lowered from 14% to 13.5% effective from 1 January 2026. This rate has applied since the beginning of 2025 to nearly all goods and services previously subject to the 10% reduced VAT rate. For example, the VAT on food and restaurant services will be lower in 2026 compared to 2024. Meanwhile, the VAT on items such as admission tickets and medicines will decrease slightly from the beginning of 2026, partially offsetting the increase that took effect in 2025.
Changes to the tax treatment of exchanges of shares
The government aims to amend tax legislation and administrative practice concerning exchanges of shares between limited liability companies. The goal is to address certain perceived shortcomings in the current regime. In an exchange of shares, it is typical for a company conducting business to transfer its shares to another company, with the receiving company recognizing the acquired shares at fair value in its balance sheet. This arrangement has in many cases enabled, for example, the payment of higher dividends subject to tax relief. It has also been frequently used as a corporate restructuring tool when one company acquires shares of another.
The practical implementation and detailed application of the government’s plan to prevent what it considers to be unjustified tax advantages arising from exchanges of shares remain unclear at this stage. It is also uncertain whether the changes will apply retroactively to exchanges already carried out.
We will provide further updates once the government’s plans become more specific. A government proposal is expected to be published in autumn 2025.
Lower withholding tax for key employees, review of taxation on incentive schemes
The withholding tax rate for key employees will be reduced from the current 32% to 25%. This tax regime may, subject to certain conditions, be applied in place of progressive taxation on earned income. Currently, eligibility requires, among other things, that the employee relocates to Finland from abroad and receives a monthly salary of at least EUR 5,800.
The government also intends to examine the need for changes to the taxation of employee stock options and share-based incentive schemes. The review is expected to be completed by summer 2026.
More details on real estate tax reform
The government has decided that the new valuation of property for real estate tax purposes will be introduced gradually, in such a way that property tax may increase by no more than 20 percent per year over an eight-year period. However, the amount of real estate tax payable may not increase to more than three times its pre-reform level.
