New regulations on share exchanges in limited-liability companies

Finland’s parliament adopted the Government proposal for changing a number of rules on dividend taxation, which affect contracts of exchange of corporate shares. Regulations on the valuation of shares and on their acquisition cost will be changed: valuation must now be based on the mathematical value prior to a share exchange. As the new regulations are entering into force, the income tax returns to be filed by limited companies already for the 2025 tax year will be affected by the new rules.

The objective of the new provisions on the tax treatment of share exchanges is to remove the possibility of increasing the value of the other company artificially, in a way that reduces dividend taxation. The impact of the new rules will extend to limited companies domiciled not only in the European Union but also in countries outside the EU.

The changes also concern the maximum limit of the cash consideration that can be paid in a share exchange contract.

Changes to the principles of valuation

With the new regulations, when a dividend-distributing company is party to a share exchange, effective on 1 January 2017 or later, so that the company receives shares of another entity and an associated relationship exists, the shares so acquired must be valuated by reference to their mathematical value valid before the share exchange, not by reference to an actual acquisition price. This change will affect the way the company’s net worth is calculated.

The “mathematical tax value of one corporate share” is based on net worth, and it is the key value that defines the proportions between capital-income dividends and earned-income dividends. These proportions, in turn, have an impact on the dividend recipients’ taxes whenever the company distributes its dividends to natural persons. 

Corporate income tax return filing for the 2025 tax year

The upcoming change will first affect the limited companies having an accounting year that ends on or after 8 December 2025. The Tax Administration will update the instructions for completing the income tax return during the first months of 2026. Similar updates will be made to in-depth guidance.

Effects on dividend recipients’ tax assessment during the 2026 tax year

If a company distributing dividends was party to a share exchange governed by the new regulations, but the company did not determine the stocks’ mathematical value in the new way, the Tax Administration will adjust the company’s net worth calculation and its mathematical value. As a result, the proportions between capital-income and earned-income dividends will be altered, and the tax to be imposed on the natural persons’ income (and that of estates of deceased persons) will be altered accordingly.

The Tax Administration will make the adjustments to the natural persons’ (or estates’) assessments for the 2026 tax year. The changed income taxes based on the new valuation rules of shares will concern all receipts of dividends that become ready to be drawn by shareholders on 1 January 2026 or later.

In the event that a taxpayer company chooses to cancel a planned distribution of dividends due to the upcoming changes, the cancellation must be finalised before the date of commencement of the dividend payments. Read more on cancellations (in Finnish and Swedish).

Changes to the rules on acquisition costs

Under the changed tax rules governing acquisition cost of limited-company shares, it is now required that after a share exchange, the acquisition value should be determined by reference to the mathematical value that was in force before the exchange. This impacts the taxation of sales, transfers, conveyances, etc. of corporate shares. The new regulations are applied on exchanges of shares taking place on 1 January 2026 or later. 

Read more

Government Proposal 125/2025 (available in Finnish and Swedish)