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Temporary profit tax for companies in the electricity and fossil fuel sectors

Companies operating in the electricity sector or the fossil fuel sector must pay a profit tax and file a tax return on their profits gained from operations in these sectors. The profit tax is a temporary measure  that entered into force on 24 March 2023. All companies in these sectors are required by law to pay an additional profit tax on the profits they have received due to the increased consumer prices of electricity and fossil fuels. The profit tax must be paid in addition to regular income taxes.

Companies in the electricity and fossil fuel sectors must also file a separate tax return on the profit tax to the Tax Administration. If the company’s accounting period has ended during the 2023 calendar year, the tax return must be filed by 30 April 2024. If the company’s accounting period ends in 2024, the tax return must be filed by the end of April 2025. 

What kinds of companies must pay profit tax?

For the purposes of the profit tax, a company can be a corporate entity, a business partnership, or a private individual operating a trade or business. The same definition applies in both the electricity sector and the fossil fuel sector.

A company must pay profit tax for operations in the electricity sector if they operate in the electricity market and either produce or distribute electricity.  The combined turnover of the company’s electricity business must be at least €500,000.Electricity production is the generation of electric power, while electricity distribution is the selling of electricity to consumers or retailers.

A company is not subject to the profit tax on electricity business if they only operate electricity networks or if their electricity business is electricity retail as defined in § 3, paragraph 12 of the act on electricity markets (Sähkömarkkinalaki 2013/588). Exemption from profit tax is discussed in more detail in chapter 2.2 of the detailed guidance on the profit tax in the electricity and fossil fuel sectors (available in Finnish and Swedish, link to Finnish).

A company must pay profit tax for operations in the fossil fuel sector if more than 75% of their turnover consists of one or more of the following operations:

  • production of crude oil or natural gas
  • manufacture of refined oil products from crude oil
  • manufacture of coal products.

If the company operates in both the electricity sector and the fossil fuel sector, they only need to pay the profit tax in the fossil fuel sector.

How to calculate the profit tax

The basis of profit tax in the electricity sector is the part of profit that exceeds a certain reference limit. The reference limit is 10% of the annual profit that has been calculated on the adjusted equity of the electricity business. Profit tax is not paid on the entire business result, but rather on the amount that exceeds the reference limit. The profit tax is 30% of the part of the result exceeding the limit.

Example: 

The result of the company’s electricity business is €3,000,000. The adjusted equity of the electricity business is €10,000,000. The 10% annual profit calculated on the adjusted equity is €1,000,000. The part of the profit that exceeds the reference limit, i.e. the basis of the profit tax, is €2,000,000 (€3,000,000 – €1,000,000). The amount of profit tax is €600,000 (€2,000,000 × 30%).

The basis of profit tax in the fossil fuel sector is the part of profit that exceeds a reference limit. The reference limit is based on the previous years’ results. The limit is 120% of the average business result for tax years 2018–2021. The profit tax is 33% of the part of the tax year’s business result that exceeds this limit.

Example:

In tax year 2018, a company operating in the fossil fuel sector had a negative business result (according to § 3 of the act on the taxation of business income (360/1968)) of –€500,000. In tax year 2019, the company’s result was €1,500,000. The previous year’s losses were subtracted from this amount, meaning that the company’s result for the tax year as defined in § 3 of the act on the taxation of business income was €1,000,000. In the following years, the business result (according to § 3 of the act) was €2,000,000 for 2020 and €2,500,000 for 2021.

The company must pay the profit tax in the fossil fuel sector for tax year 2023. The company’s business result for tax year 2023 is €5,000,000. For the purposes of the profit tax, a reference limit is calculated for the company. The profits for 2023 are then compared to this reference limit. The reference limit is based on the average business result for tax years 2018–2021. The company’s average result for these years is €1,375,000: (–€500,000 + €1,500,000 + €2,000,000 + €2,500,000) / 4. The reference limit is 120% of this average, i.e. €1,650,000.

The profit that exceeds the limit is calculated by subtracting the limit amount from the result for tax year 2023. The profit exceeding the reference limit amounts to €3,350,000 (€5,000,000 – €1,650,000). This is the basis of the profit tax, i.e. the profit amount from which the tax amount is calculated. The profit tax in the fossil fuel sector is 33% of the profit exceeding the reference limit, i.e. 33% × €3,350,000 = €1,105,500.

Instructions for filing and paying profit tax

The profit tax is calculated for the tax year. If the company’s accounting period is not the calendar year, a tax year consists of the accounting period or periods which have ended during the same calendar year. If the tax year consists of more than one accounting period, a separate tax return must be filed for each period.

If your company has an accounting period or periods that ended in 2023, you must file a tax return on the profit tax by 30 April 2024. If your company has no such accounting period, file the return for the accounting period or periods that end in 2024 by the spring of 2025. Please note: in some cases, the company’s income tax return must be filed before the profit tax return.

The tax return on profit tax must be filed electronically. The Tax Administration will not accept returns filed on paper, unless you have a special reason to do so.

File the profit tax return in MyTax

If necessary, you can request more time for filing the tax return in MyTax.

The Tax Administration will issue a decision on profit tax for the company. You cannot pay profit taxes as prepayments. In addition, unlike for income taxes, you cannot receive web invoices for profit tax. You can pay the profit tax in MyTax. The payment details can be found in MyTax or on the tax decision.

You can request an advance ruling on profit tax

You can request an advance ruling on temporary profit tax on electricity and fossil fuel sectors from the Tax Administration. Read more about requesting an advance ruling.

Additional information

Page last updated 1/11/2024