Capital gains and losses from the sale of assets in cross-border situations — natural persons

This is an unofficial translation. The official instruction is drafted in Finnish (Luonnollisen henkilön omaisuuden luovutusvoitot ja -tappiot kansainvälisissä tilanteissa, record number VH/1106/00.01.00/2024) and Swedish (Vinster och förluster av överlåtelse av en fysisk persons egendom i internationella situationer, record number VH/1106/00.01.00/2024) languages.

This guidance discusses the tax implications under the Act on income taxation (Tuloverolaki (1535/1992, TVL)) and tax treaties of capital gains and losses in the hands of a natural person.

The Tax Administration’s other guidances have previously contained sections and passages on cross-border situations, which have been incorporated into this guidance.

1 Introduction 

Taxes payable on capital gains are affected not only by Finland’s internal legislation but also by the provisions of the tax treaties that Finland has signed with other countries. In a cross-border context, the internal laws of the other state have an impact on the tax treatment of a capital gain in its entirety, as the other state may impose tax on a gain which is subject to Finnish tax as well. Furthermore, the taxes payable on capital gains are affected by practices emanating from European law.

This guidance’s scope is limited to the impact of Finnish internal legislation and the treaty provisions on the taxes levied on cross-border capital gains. This way, if falls outside of the present topic to make an attempt to include all possible situations in various international transfers and disposals of assets. Instead, the focus is on illustrating the special characteristics of capital-gains taxes in cross-border circumstances.

Provisions of tax treaties may restrict Finland’s taxing rights. The way taxes are levied in other countries is discussed here only in connection with the questions of whether the treaties would accord taxing rights to the other Contracting State, and of how any resulting double taxation on a gain can be relieved. The detailed rules included in treaty provisions may vary. For this reason, to verify the exact wording and effects of the provisions on capital gains in the relevant tax treaty is always recommended. 

Whether the assets to be transferred are classified as immovable or movable property is critical in connection with capital gains taxes in cross-border situations. Chapter 2 of the guidance addresses the definition of ‘immovable and immovable property’ in accordance with the provisions in Finnish legislation. In general, the definitions that concern immovable and movable property in the tax treaties contain identical elements. Nevertheless, a number of detailed rules associated with the definitions are often different, varying from treaty to treaty. Chapter 2 of the guidance discusses the definitions of immovable and movable property in light of the OECD Model Tax Convention. 

Appropriate differentiation between resident and non-resident taxpayer in Finland is made in all chapters of this guidance when addressing taxation on capital gains. When there is a tax treaty in force between Finland and another state, the issue of which one of them will be given the taxing rights is also affected by treaty residency, which points towards the Contracting State where the authorities have deemed the individual taxpayer to be resident for purposes of applying the tax treaty. Chapters 3 and 4 discuss the impact of the natural person’s status as a taxpayer and his or her treaty residency. For more information, see the Tax Administration’s guidance Tax residency and nonresidency, and residency for purposes of the relevant tax treaty – natural persons. 

Section 26, subsection 4 of the Act on assessment procedure (1558/1995, laki verotusmenettelystä, VML) contains detailed rules concerning the duty that falls on the parties involved in a fiscal matter to provide further information. Further information and facts are primarily expected from whichever party is in a better position to provide them. Read more on the Finnish tax authority’s rules of procedure in the Tax Administration’s guidance “General procedural provisions” — Verotuksen yleiset menettelysäännökset (in Finnish and Swedish). 

In cross-border circumstances, there is generally an emphasis of the taxpayer’s, not the other parties’, duty to help clearing up the fiscal matter. If the other counterparty involved in a transaction with the taxpayer does not reside in Finland or is not domiciled here, the responsibility for presenting further facts and information will lie with the taxpayer. This approach also concerns situations that involve a resident taxpayer in Finland who sells foreign-located immovable property because he or she is under a duty to provide full information to the extent necessary including facts about the legislation in force in the country of location, and including the basic fiscal rules under which foreign tax might be levied, if the Finnish tax authority would need the above information in order to assess the tax.

If the country of location is another country, not Finland, we recommend that the taxpayer contact the local tax authority to obtain relevant information on the tax treatment of capital gains. In addition, if the taxpayer plans to leave Finland, we recommend that he or she obtains information on how the tax treaty between the country of property and Finland or the individual taxpayer’s new country of residence will affect the treatment of capital gains. 

This guidance refrains from addressing the general fiscal principles and calculation rules, etc., relating to capital gains. For purposes of tax assessment in Finland, the calculations to arrive at the amounts of capital gains or losses in a cross-border context are identical to the calculations in conjunction with Finnish capital gains. Several characteristics requiring special attention concern the tax deductions caused by a capital loss in cross-border situations, and a discussion of those is included in chapter 5 below. 

It should be noted that a number of other particular circumstances have an impact on the taxation of capital gains, but this falls outside of the scope of this guidance. For more information on the above, see following instructions as appropriate: 

• “Profits and losses from the sale of assets in the income taxation of individuals” — Omaisuuden luovutusvoitot ja -tappiot luonnollisen henkilön tuloverotuksessa 
• “Tax treatment of capital gains arising from sales of securities” — Arvopaperien luovutusten verotus 
• “Capital gains from the sale of a permanent residence” — Oman asunnon luovutusvoitto – määräalan ja määräosan luovuttaminen 
• “Sale of a permanent residence exempt from tax” — Verovapaa oman asunnon luovutus 
• “Fully or partly exemptible capital gains” – Kokonaan tai osittain verovapaat luovutusvoitot henkilöverotuksessa 
• “Taxes levied on amounts of compensation received when an individual taxpayer has sold expropriated property, etc.” — Lunastustoimituksissa ja niihin rinnastettavissa tilanteissa saatujen korvausten verotus 
• Taxation of employee stock options and employee offerings in cross-border circumstances 
• Taxation of virtual currencies 
• “Tax treatment of derivative contracts” — Johdannaisten verotus 
• “Taxes on capital redemption policies” — Kapitalisaatiosopimuksen verotus
• “Corporate events and their tax treatment–stock swaps” – Yritysjärjestelyt ja verotus – osakevaihto 
• “Taxation on bonds pursuant to the Act on income tax” – Joukkovelkakirjan verotus tuloverolain mukaan
• “Distribution to stockholders of assets from the company’s unrestricted equity fund” — Vapaan oman pääoman rahaston varojenjako verotuksessa 
• “Corporate events and their tax treatment–mergers” – Yritysjärjestelyt ja verotus – sulautuminen 
• “Corporate events and their tax treatment–demergers” – Yritysjärjestelyt ja verotus – jakautuminen 

This guidance does not address the issue of how any foreign currency amounts should be included in capital gains calculations, nor foreign-exchange gains or losses related to the same. For more information on foreign currencies, see Tax Administration’s guidance “Profits and losses from the sale of assets in the income taxation of individuals” — Omaisuuden luovutusvoitot ja -tappiot luonnollisen henkilön tuloverotuksessa (in Finnish and Swedish, link to Finnish).  

In the same way, this guidance also leaves out the various issues related to taxable income attributable to a permanent establishment or fixed base, and to the income of self-employed operators of trade or business. For more information on these, see Tax Administration’s guidance Income taxation of foreign self-employed individuals.

2 Immovable and movable property

2.1 General information on disposals of immovable vs. movable property

The fiscal legislations of different countries have rules on capital-gains tax that vary from country to country.  As for immovable property, however, a near-standard rule is that the internal legislation of most countries requires that capital gains from the sale of immovable property should be taxed in the country of location. Different countries have varying internal legal rules concerning capital gains on the sale of movable property, as well. If no tax treaty exists, the two countries that are involved will only invoke their respective internal legislation when levying tax on capital gains.

When there is a tax treaty, the usual approach is that taxing rights belong to the country of location of immovable property. However, the taxing rights with respect to capital gains from the sale of movable property are generally given to the country of residence of the natural person receiving the gain. As a result, to differentiate between immovable and movable property is important. 

In some countries, income in the form of capital gains may be fully exempted from tax, or there may be classification rules requiring that the gains are seen as a different category of income, assessed at a special tax rate. However, the way taxes are levied in Finland on capital gains is generally not affected by whether or not the other Contracting State is actually levying tax. 

2.2 Finland’s internal legislation

The meaning of ‘real property’ in civil law and in the Act on income taxation is almost identical with the exception that under § 6 of the Act, certain situations are defined where the real property extends to a building located on land belonging to another owner. The tax rules that apply to real property are also applied on a building, structure or other constructed unit located on land belonging to another owner but encumbered by a right that allows the taxpayer to sell the building to an outside buyer without the landowner’s consent.

In light of international comparisons of laws in force in different countries, Finland’s definition of real property is a narrow definition. For example, property is classified here to be movable, if an apartment or a condominium is in the form of shares of a housing company or in the form of shares of a real estate company. Many other countries have legal provisions that define apartments as immovable property, and an owner of an apartment is also deemed to own a fraction of the land where the residential building is located. 

The concept of movable property covers all kinds of property that is not immovable. As a result, items falling into the movable property class include for example corporate securities, motor vehicles, and limited rights to hold an asset in one’s possession (for example, the rights emanating from a lease contract). Movable property also includes the fractional part belonging to the taxpayer of an undistributed estate of a deceased person.

2.3 Provisions of tax treaties

2.3.1 Immovable property and the income derived from sale of immovable property

Article 13 in the OECD Model Tax Convention contains a set of standard treaty provisions applicable to situations where the taxpayer sells (transfers, conveys, alienates) property and makes a profit. In general, when a taxpayer has owned immovable property and sells it at a profit i.e. receives a capital gain, the country of location is the country that has the taxing rights. A similar provision is in all the tax treaties Finland has made.

The majority of Finland’s treaties with other countries contain a provision that when a taxpayer sells the shares of a corporate entity of which the corporate assets (to a proportion higher than 50% in the majority of the treaties) consist of immovable property located in the source state, the capital gain, if any, may be taxed in the source state. In addition, the capital gain may correspondingly be taxed in the source state if the holding of the shares of a corporate entity entitles the taxpayer to enjoyment of the entity’s immovable property. This means that the above provision applies to any capital gains resulting from taxpayers’ sales of housing-company shares, and of shares in a real estate company.

The tax treaties have definitions on what is meant by “immovable property” for purposes of the treaty. Article 6 in the OECD Model Tax Convention contains a set of standard treaty provisions through which immovable property should be defined. In most tax treaties, article 6 contains a provision indicating that “immovable property” should be defined by reference to the laws of the Contracting State where the property is located.

Within the meaning of the treaties, property located in Finland is immovable property only when Finland’s internal legislation defines it as immovable property. Moreover, when a tax treaty is applied on a taxpayer’s tax assessment, a situation may arise when treaty provisions on immovable property must be applied on income derived from the taxpayer’s foreign-located immovable property even if represents a property type that Finland’s legislation would not be define as immovable property.

However, a standard feature of the treaties is a special list of immovable property items that will always, regardless of internal laws, be deemed to be immovable property for treaty purposes. Some examples of the list’s contents are “property accessory to immovable property”, livestock and equipment used in agriculture and forestry, usufruct of immovable property (Article 6, paragraph 2, the OECD Model Tax Convention). In addition, Finland’s treaties with other countries make mention of a ”building” as immovable property. This is related to the narrow definition of the real estate concept in Finland’s internal legislation.  

In most countries of the world – except the Nordic countries – it is normal that apartments, units, flats or suites inside a residential building are immovable property by definition of law (this is the case for example in Spain, France, and the U.S. and others). The buyer of the rights to an apartment will also become a co-owner of the land where the building is located.

However, Finland’s internal laws lay down that housing-company shares are movable property. They entitle to enjoyment of the residential apartment only, and the land where the apartment building is located belongs to the housing company as a corporate entity. For this reason, the majority of Finland’s tax treaties contain a reservation in the form of additional provisions (in Article 6, for the majority of the treaties) on the income of shareholders in housing companies from direct use, from renting out, or from use in any other form of the right to enjoyment of immovable property situated in Finland and held by the housing company, where such right is based on the ownership of shares. This income may be taxed by the Contracting State where the company-owned immovable property is located.

Although Article 6 of the treaty would indicate that the income derived from an apartment would be derived from immovable property, the capital gain from selling a housing-company apartment cannot be taxed in the source state unless it were expressly referred to in the treaty (this would normally be Article 13 on capital gains or the protocol document connected to the treaty) as a category of income to be taxed. When the treaty makes no mention of this kind of capital gains, the source state cannot levy tax on gains from a housing-company apartment although the property itself were defined as immovable property in accordance with Article 6.

Some of Finland’s tax treaties contain a list of certain property items not to be treated as immovable property although the contracting states’ internal legislation would provide otherwise. The list’s contents include for example ships, boats and aircraft (Article 6, paragraph 2, the OECD Model Tax Convention). Because crafts are defined this way, the income derived from them is not taxed as income derived from immovable property. Instead, it is considered business income or considered part of a specific category of income reserved expressly for operation of a craft.

In this regard, if the treaty states nothing or has no list, it is the contracting state’s internal law that determines the categories of income to be treated as income from immovable property. Besides that, there are other special circumstances where the source state treats a property as immovable although the legislation in Finland would treat is as movable property. If the source state’s interpretation is not contradictory to the tax treaty in force, the Finnish tax authority is under a duty to accept the interpretation.

2.3.2 Movable property and the income derived from sale of movable property 

When movable assets are sold (transferred, alienated, etc.) and the seller makes a profit, the capital gain is generally only taxed in the seller’s country of residence (Article 13, the OECD Model Tax Convention). From this, it follows that the source state cannot levy tax on the capital gains in the hands of an individual taxpayer resident in the other contracting state. 

Under treaty provisions, an item of property is movable when it represents all other property classes that in accordance with the definitions laid down by the treaties are not immovable property. The movable property concept concerns both tangible and intangible assets. Income derived from movable property (in the form of a capital gain when selling it) does not include, under provisions of tax treaties, the items of income that are subject to tax as other income (dividends, interests and royalties).  

Although the holding of shares in housing companies and real estate companies is movable property within the meaning of Finnish internal legislation, the majority of Finland’s tax treaties contain a provision that when a taxpayer sells the shares that entitle the holder to own a housing-company apartment, the capital gain, if any, may be taxed in the country of location of the immovable property of the housing company or housing co-operative. A provision to this effect is in Article 13, paragraph 2 of the Nordic tax treaty (412/1997, SopS 26). Taxes on capital gains are assessed as provided in the national rules on capital-gains tax of the country of location.  

Many of Finland’s tax treaties contain non-standard provisions, the content of which may vary, on how tax should be levied on capital gains resulting from disposals of movable property. Most of these provisions concern situations where a taxpayer is the owner of a certain interest i.e. part of corporate stocks or other corporate securities, or has been their owner for a certain period, or has been resident in the source state for a certain period, before selling the stocks or securities. For more information on these situations and the non-standard provisions, see section 3.4 below.

3 Taxes on a capital gain received by Finnish resident taxpayers

3.1 General remarks on how capital gains are subjected to Finnish tax

A Finnish resident individual must pay income tax to Finland regardless of the jurisdiction where the income is sourced to (§ 9, subsection 1, paragraph 1 of the Act on income taxation). The worldwide liability for paying tax extends to the capital gains that may result from immovable as well as movable property. From this, it follows that nor the country of location of the immovable property nor the country of fiscal residence of the company that issued corporate stocks has any impact on whether the capital gain becomes subject to Finnish tax as the provisions of Finnish internal legislation are invoked.   

However, treaty provisions may restrict Finland's taxing rights. Treaty provisions may also impose an obligation on Finland to relieve double taxation in situations where not only Finland but also the source state has the right, under treaty provisions, to levy tax on capital gains.

3.2 Residents who also are Finnish residents for purposes of the treaty

Provisions of tax treaties impose no obstacles for Finland to levy capital-gains taxes when the taxpayers who received the gains are resident individuals who simultaneously are treaty residents here. The source state may have the right, in accordance with its internal legislation, to levy tax on capital gains when the taxpayer is a Finnish resident, but such a tax is subject to the restrictions agreed in the tax treaty with Finland.

According to treaty provisions, capital gains may be taxed in the source state if the property that was transferred (sold, alienated, conveyed) was immovable property. In general, the source state’s taxing rights do not restrict Finland’s taxing rights. However, tax treaties require that because Finland is the taxpayer’s country of residence, Finland should relieve double taxation in situations where the source state, invoking treaty provisions, has levied tax on capital gains.

The Tax Administration will relieve the Finnish resident’s double taxation using the method set out by the Act on the elimination of international double taxation (Laki kansainvälisen kaksinkertaisen verotuksen poistamisesta (mentelmälaki), (1552/1995)). The Tax Administration will use either the credit method or the exemption method to relieve the double taxation of the capital gains from the immovable property, in accordance with the tax treaty article governing double taxation. For more information on how double taxation is relieved, see Tax Administration’s guidance Relief for international double taxation in natural persons’ tax assessment.  

Capital gains from a sale of immovable property located in a foreign country is income subject to tax for a Finnish resident in the same way as capital gains for Finnish-located immovable property would be, and the rules on how the gain’s amount should be computed are in both cases identical (§ 45 to § 47 and § 50 of the Act on income taxation).

It may be that a capital gain is exempted from tax in a foreign jurisdiction, in a similar way as various gains for Finnish-located immovable property is sometimes exempted (§ 48 of the Act on income taxation). If Finnish internal legislation provides for exemption but the taxpayer has paid tax on the gain to a foreign country, Finland cannot give credit for it because the income was exempted here and no Finnish tax was paid.

Normally, if a Finnish resident has received capital gains sourced to a foreign country from selling movable property, this income is taxed only in Finland. The provisions of certain tax treaties contain exceptions regarding the taxing rights of the Contracting States in the case of capital gains from the sale of movable property. These exceptions are discussed in further detail in section 3.4.

Example 1: Person A is a Finnish resident individual and also a resident of Finland for treaty purposes. She has owned a house in Estonia and decides to sell it. The house is a unit of real property that she had lived in for 5 years. She has also owned shares entitling their holder to a residential apartment and some Estonian listed-company stocks, and she decides to sell these as well. 

As for A’s tax assessment in Finland, the sale of the house that had served as her permanent home will be exempt from capital-gains tax under the provisions of § 48 of the Act on income taxation. However, in accordance with Article 13, paragraph 1 of the Finland–Estonia tax treaty, Estonia may levy tax on the transfer of both the house and the residential apartment’s shares. The capital gains from the sale of Estonian listed-company stocks cannot be taxed in Estonia because under Article 13, paragraph 4 of the treaty, the taxing rights regarding gains from movable property belong to the country of residence, Finland.

Because Finland is the country of residence, Finland will relieve any double taxation that arises from the taxes on capital gains from selling the shares entitling their holder to a residential apartment. Finland will not give credit for any tax paid to Estonia on the capital gains possibly received when A sold the real property because in accordance with Finland’s internal legislation, this type of capital gains is exempt from taxes.

3.3 Finnish residents who are “treaty” residents of the other Contracting State

If a Finnish resident individual is treated as being a resident of the other contracting state for purposes of the treaty, Finland is then only a source state as referred to in the treaty.

Finland would have the taxing rights, being the source state, to always levy tax on any capital gains from sales of Finnish-located immovable property received by an individual who is a Finnish resident and simultaneously a treaty resident of the other Contracting State. Furthermore, capital gains from selling shares in Finnish housing companies and real estate companies may be taxed by Finland on the condition that the treaty expressly set out a provision to that effect. Among Finland’s tax treaties with other countries, the only exception in this regard is the Finland–Japan treaty, which prevents Finland from levying tax on income derived from a housing-company apartment if the recipient of that income is a treaty resident of Japan (Non-standard provisions in some treaties).

In general, capital gains from the sale of movable property cannot be taxed in Finland because the tax treaties give the taxing rights on those gains to the individual taxpayer’s country of residence for tax treaty purposes(however, see section 3.4 of this guidance for information on exceptions).

Due to what is agreed in Finland’s tax treaties, capital gains from the sale of foreign-located immovable property cannot often be taxed in Finland, because the country of location is not Finland, and the “treaty” country of residence is not Finland.

Example 2: Person B, a Finnish citizen, has lived in the United States for one year. Under § 11 and the 3-year rule contained by this provision of the Act on income taxation, B continues to be a Finnish resident individual. However, B is a treaty resident of the United States. Person B has owned real estate located in Finland, shares for an apartment in a housing company located in Finland, and stocks in a Finnish listed company. B sells all these. 

In accordance with Article 13, paragraph 1 of the Finland–USA tax treaty, the taxing rights regarding the capital gains from the sale of the real estate property belong to Finland because the property is located here. In the same way, under Article 13, paragraph 2, Finland has the rights to tax B’s capital gains from the sale of the housing-company apartment, i.e. the shares that entitled B to have the residential apartment. However, B’s capital gains from the sale of Finnish listed-company stocks cannot be taxed by Finland, because under Article 13, paragraph 6 of the treaty, the taxing rights regarding sales of movable property belong to the country of residence, the United States. Because the United States is the country of residence, it will relieve any double taxation that arises from the taxes on capital gains from the sales of the real estate and housing-company apartment.

Read more about how “treaty” residence is determined in Tax Administration’s guidance Tax residency, nonresidency and residency in accordance with a tax treaty – natural persons.

3.4 Some exceptions concerning sale of movable assets

Whereas most provisions and articles of tax treaties conform to international standards, there are some among Finland’s treaties with other countries that contain special rules and exceptions. Several non-standard treaty provisions concern sales of movable assets in circumstances involving an individual taxpayer who moves away from the country of residence.

Examples of non-standard provisions include an agreement between the Contracting States to the effect that gains from the sale of corporate stocks may be taxed in the company’s country of residence, although the seller is no longer a treaty resident of that country. On the other hand, some treaties have a clause that gives the taxing rights for capital gains to one Contracting State invariably, regardless of the company’s country of residence.

This non-standard provision can only be applied if the individual who received the gain has been a resident of the Contracting State long enough (generally 5 years) before selling the corporate stocks. Finland’s tax treaties for example with Brazil, Canada, Germany, the Netherlands, India and the United Kingdom contain this non-standard provision and so does the Nordic tax treaty and a few other treaties. There is variation between the treaties as to whether the entire capital gains or just a part of them become taxable. In some treaties, only the stocks’ appreciation in value is seen as taxable income (e.g. the Nordic tax treaty, and Finland–Germany tax treaty).

In Finland’s tax treaty with the United Kingdom, the non-standard provision extends to the entire “gains from the alienation of any property” – the full amount of the capital gains (Article 14, paragraph 7): The provisions of paragraph (6) of this Article shall not affect the right of a Contracting State to levy, according to its own law, a tax on gains from the alienation of any property derived by an individual who is a resident of the other Contracting State and has been a resident of the first-mentioned Contracting State at any time during the five years immediately preceding the alienation of the property.

Concerning Finland’s treaty with Ireland, it is important to take account of the provisions of Article 6. In accordance with Article 6 in the treaty, “where under any provision of this Convention income or capital gains are relieved from Finnish tax and, under the law in force in the Ireland, an individual in respect of the said income or capital gains is subject to tax by reference to the amount thereof which is remitted to or received in Ireland and not by reference to the full amount thereof, then the relief to be allowed under this Convention in Finland shall apply only to so much of the income or capital gains as is remitted to or received in Ireland”. The above means that in the case of Ireland, the tax authority in Ireland will determine whether the income has been remitted to Ireland.

In accordance with Article 13, paragraph 7 of the Nordic tax treaty, after an individual has sold corporate stocks, other shares or rights, the capital gains can be taxed in the Contracting State where he or she was resident previously, however, only to the extent that an appreciation in the value of the stocks, shares or rights had arisen during the period of residency in that previous Contracting State, before moving to the other Contracting State and becoming a resident there. Under the non-standard provision in the Nordic tax treaty, the gains may continue to be taxed in the Contracting State where the person was resident previously for as long as 10 years after departure, although the person can have become a resident in the other Contracting State. 

The capital gains to which the Nordic tax treaty refers become subject to tax only at the stage when the transfer of ownership actually takes place, but nevertheless the taxing rights for the gains may be divided up, so the old and the new countries of residence can both levy tax. Although the Nordic treaty provision alone would give Finland the taxing rights for a 10-year period into the future, whenever the individual taxpayer would sell movable property and get capital gains, Finland cannot levy tax on a nonresident taxpayer’s income to a greater extent than what is permissible under Finland’s internal legislation. Because non-resident taxpayer is not liable to pay tax to Finland on income derived from disposals of movable property, Finland can use its taxing rights in Nordic cross-border circumstances only if the seller is a Finnish resident at the time when he or she sells the corporate stocks.

If another Nordic country has invoked the treaty’s non-standard provision and taxed the capital gains, Finland will give credit, being the country of residence of the Finnish resident individual, for any tax he or she had paid to a foreign jurisdiction when assessing the Finnish taxes on his or her income. 

Value appreciation that arises starting the date of acquisition of a stock and ending at the date of moving away from Finland is subject to Finnish tax, and equated with capital gains. However, the practice has been not to levy tax on any higher capital gain than that computed in accordance with the rules laid down by the Act on income taxation. This means that no tax is levied on unrealized gains, which would exceed the amount computed at the date of sale in accordance with the Act).

Example 3: Person C left Finland to start living in Sweden 2 years ago. Under the Nordic tax treaty, the authority deems C to be a treaty resident of Sweden, starting the day when C came to Sweden. As for Finland, person C continues to be a Finnish resident taxpayer. C had owned some Finnish listed-company stocks. When living in Sweden, C decides to sell them.

Scenario 3a: Person C sold the shares that C had bought at €1,000. When C leaves Finland, the value is quoted at €1,200 but when C actually sells them, the selling price is €1,500. As computed according to the rules of the Act on income taxation, C’s capital gain is €500.

Because under the tax treaty, Finland is only entitled to levy tax on the appreciation relevant to the period of residency here, the Finnish tax authority will assess €200 as taxable capital gains, which consists of the increase in value between acquisition date and the date when C left Finland. 

Scenario 3b: Person C sold the shares that C had bought at €1,000. When C leaves Finland, the value is quoted at €1,300 but when C actually sells them, the selling price is €1,200.  Although the capital gain would have been €300 upon leaving, at the actual selling date it was only €200. The Finnish tax authority will assess €200 as taxable capital gains, i.e. the increase in value.

Example 4: Person D moved to Finland from Norway 5 years ago. Person D is a Finnish resident and, for purposes of the Nordic tax treaty, also a treaty resident of Finland. Person D had owned some Norwegian listed-company stocks. When living in Finland, D decides to sell them. The acquisition cost of the stocks was €1,000, their quote was €1,200 at the date when D left Finland, and at the date of sale, the quote was €1,500. Computation of capital gains as required by the Act on income taxation gives the result of €500 (€1,500 minus €1,000).

The Nordic tax treaty provision would accord the taxing rights to Norway for a 10-year period into the future, whenever an individual taxpayer would sell movable property and get capital gains, but Norway can levy tax on the appreciation only. Because Finland is D’s country of residence, Finland will tax the entire capital gain. Norway has the taxing rights for the capital gain as well, but Norway’s rights can only concern the appreciation, i.e. the €200 (€1,200 minus €1,000). Because Finland is the country of residence, Finland will provide relief for any double taxation that arises from the tax levied by Norway.

Example 5: Person E left Finland to start living in Denmark 6 years ago. Although E is a Finnish citizen, after the year of leaving and after 3 years elapsed from that year, he became a nonresident from Finland’s perspective in accordance with the provisions of § 11, subsection 1 of the Act on income taxation. For purposes of the Nordic tax treaty, E is a treaty resident of Denmark. E had owned some Finnish listed-company stocks. When living in Denmark, E decides to sell them.

The Nordic treaty would give the previous Contracting State the taxing rights for a 10-year period into the future, whenever an individual taxpayer would sell movable property and get capital gains, but because E has become a nonresident from Finland’s perspective, the capital gains in D’s hands for selling stocks are not income sourced to Finland (§ 10 of the Act on income taxation). As a result, Finland will not tax the gains. They will be subject to tax in Denmark only.

For information concerning tax-deductions for capital losses in Nordic circumstances, see section 5 below.

3.5 The 3-year rule laid down in some tax treaties

Special clauses in some of Finland’s tax treaties set out the following rule: in situations where other treaty provisions do not give Finland the taxing rights, Finland still gets the taxing rights for 3 years in respect of individuals’ – Finnish tax residents and Finnish citizens – income, although the individual taxpayer is resident in the other Contracting State. Treaty provisions concerning the 3-year rule are normally found in the text of the treaty Article on relief of double taxation. However, as is the case in some of Finland’s treaties, they can also be found in the protocol text connected to the tax treaty.

To invoke the 3-year rule can make it possible for Finland to levy tax on capital gains, etc. although the treaty Article concerning capital gains would not allow this in many circumstances including the selling of movable property. 

When the Finnish tax authority taxes the income in accordance with the 3-year rule found in the tax treaty, Finland will be the country that relieves double taxation. In most cases, the 3-year rule is laid down in the treaty in the form of clauses that refer to the treaty’s provision on the credit method. Credit is given by Finland maximally to an amount equalling the Finnish tax on the income (the normal size of the credit).

However, when a 3-year rule is laid down in the treaty, it does not have an impact on Finland’s taxing rights with respect to the capital gains for which the treaty itself accords the rights to Finland. This way, capital gains for selling a Finnish located real estate property is normally taxed in Finland by virtue of the treaty Article on capital gains, which means that Finland will not give credit for any foreign-paid tax. The double taxation, if any, will be eliminated by the individual taxpayer’s treaty country of residence.

Example 6: Person G is a Finnish citizen who has lived in Estonia for 2 years. He is a Finnish resident individual under the 3-year rule laid down by § 11 of the Act on income taxation. He is a treaty resident of Estonia. He has owned real estate located in Finland and stocks in a Finnish listed company. He decides to sell all these.  

In accordance with Article 13, paragraph 1 of the Finland–Estonia tax treaty, the taxing rights regarding the capital gains from the sale of the real estate property belong to Finland because the property is located here. However, G’s capital gains from the sale of Finnish listed-company stocks cannot be subject to Finnish tax because under Article 13, paragraph 4 of the treaty, the taxing rights regarding sales of movable property belong to Estonia, the country of residence.

However, the tax treaty’s Article 23, paragraph 1, line ‘c’ contains the 3-year provision concerning Finnish citizens who still are considered resident taxpayers in Finland under Finnish internal law. This way, Finland can levy tax also on the capital gains resulting from the listed-company stocks. The 3-year rule also means that the responsibility for providing relief for double taxation on those capital gains will lie with Finland.

However, because Finland’s reason for levying the capital-gains tax for the real estate property is not the 3-year rule included in the treaty, Finland will not give credit for any tax paid to Estonia on that sale. Instead, Estonia has responsibility for relieving any double taxation because Estonia is the country of residence.

More information on the 3-year rule is available in Tax Administration’s guidance Relief for international double taxation in natural persons’ tax assessment.

The Tax Administration’s guidance article on Non-standard provisions in some tax treaties contains a list of foreign countries with which Finland has signed treaties with 3‑year rules. The details of the 3-year rule may vary. For this reason, to verify the exact wording and effects of the 3-year rule laid down in the relevant treaty is always recommended. 

3.6 Nonexistence of a tax treaty

It is possible for a Finnish resident individual taxpayer living here to receive capital gains sourced to a country that has no tax treaty with Finland. Conversely, it is possible, while living in a non-treaty country, for the Finnish resident individual to receive capital gains from a Finnish source.

If there is no tax treaty between Finland and the source country, the latter can apply its internal legislation to levy tax on any capital gains the Finnish resident has received. In this case, Finland will give credit for the tax paid to the foreign non-treaty country, in accordance with the provisions of § 2 of the Act on the elimination of international double taxation (1552/95).

If there is no tax treaty between Finland and the country of residence, Finland can apply its internal legislation to levy tax on any capital gains in the hands of the individual who lives elsewhere but is also a Finnish resident. However, the provisions of the Act only apply to the individual taxpayer’s foreign-sourced income, so double taxation will not be eliminated in Finland if the capital-gains income is sourced to Finland under § 10 of the Act on income taxation.

For more information, see Tax Administration’s guidance Relief for international double taxation in natural persons’ tax assessment.

3.7 Estates of deceased persons deemed to be Finnish residents

An estate is deemed to be a Finnish estate if at the date of death, the decedent was a Finnish resident in accordance with the Act on income taxation. However, estates in Finland that foreign diplomats and employees of certain international organisations leave behind are not Finnish estates (§ 12 and § 17, subsection 4 of the Act on income taxation).

Finnish estates of a deceased person are resident taxpayers in Finland (§ 9, subsection 1, paragraph 1). From this, it follows that a Finnish estate is under a duty to pay tax on capital gains when its property is sold, regardless of the country of location of that property. To eliminate double taxation, Finland will give credit for the tax paid to any foreign country on capital gains sourced to countries outside Finland. Shareholders of a Finnish estate may consist of resident and non-resident taxpayers alike.

In the case of an undistributed estate, if a capital gain has resulted from the selling of property that had belonged to the undistributed estate, the gain is considered income of the estate. If a shareholder of a fully distributed estate or of a partially distributed estate first receives property through a distribution, and then sells it and makes a capital gain, the tax authority will levy capital-gains tax from the shareholder. In this situation, if the shareholder is a non-resident taxpayer, the taxable part of the capital gain is only the part, which in accordance with § 10 of the Act on income taxation is considered income sourced to Finland. For more information on taxes assessed on non-resident taxpayers’ capital gains, see section 4 of this guidance. 

Sales and other transfers of a shareholder-held share of an estate are deemed to be disposals of movable property. This means that it is possible that a tax treaty will restrict Finland’s taxing rights in a situation where a Finnish resident taxpayer who is a treaty resident of another country sells his or her holding of a Finnish estate (for more information, see the discussion on sales of movable property in section 2.3.2 above).

However, the more recently signed treaties contain a provision to the effect that when capital gains are the result of a sale of company shares, and that company’s assets, to a certain percentage, consist of immovable property located in a contracting state, the country of location of the immovable property may levy the capital-gains tax. In general, the treaties use a definition of ‘company’ that also covers a shareholder-held share of an estate, if the estate’s immovable property located in Finland is worth more than the percentage set out by the tax treaty. In these circumstances, Finland will have the taxing rights with respect to any capital gains in the hands of a Finnish resident taxpayer – although the person may be a treaty resident of the other contracting state – who has sold his or her share in the decedent’s estate and made a profit.

4 Taxes on a capital gain received by nonresident taxpayers

4.1 Income received from sources in Finland

Non-resident taxpayers must pay taxes to Finland from their income received from Finland only (§ 9, subsection 1, paragraph 2 of the Act on income taxation). Based on the above, Finland will levy taxes on capital gains in the hands of a non-resident taxpayer only if the gains have come from Finnish sources. This means that the tax authority will have to determine whether the received gain is sourced to Finland within the meaning of § 10 of the Act. 

When a taxpayer has sold a real estate property and a building, structure or other constructed unit and made a profit, the income is sourced to Finland; the same concerns similar profits from the selling of a right of possession concerning these or concerning the land where they are located, including the land’s possession rights, rights of use, privileges to receive yields, which also constitute income sourced to Finland (§ 10, paragraph 10 of the Act on income taxation). The tax rules that apply to real estate property are also applied on a building, structure or other constructed unit located on land belonging to another landowner but encumbered by a right of possession, which allows the taxpayer to sell the building, etc. to an outside buyer without the landowner’s consent.

The provisions of the Act on income taxation determine how the gains from a Finnish source are subjected to taxation. For example, under the special tax rules on selling one’s home, it is often tax-exemptible to sell a house (real estate property) that the seller had lived in on a permanent basis. For more information, see Tax Administration’s guidance “The exemption offered to sellers of their own home” –  Verovapaa oman asunnon luovutus. (in Finnish and Swedish, link to Finnish)

Capital gains resulting from the transfer or sale of shares, holdings or rights relating to a totality of assets managed to the benefit of a corporate entity, partnership or another person are income subject to Finnish tax if, on the date of transfer or within 365 days prior to the transfer or sale, more than 50% of the assets, directly or indirectly, consist of immovable property located within Finnish territory (§ 10, paragraph 10 a of the Act on income taxation).

This provision of law is directed to all corporate entities, not only limited companies and co-operatives. From this, it follows that if a taxpayer were to sell some shares of an investment fund, the fund’s actual holdings of Finnish immovable property would have importance.

Example 7: Holding-company A is the owner of assets with a fair market value of €100,000. Directly or indirectly, a proportion worth €70,000 of those assets consists of Finnish-located immovable property. Company B, of a foreign country, owns 60 % of A’s corporate stocks. Company B has no other direct or indirect holdings of immovable property located in Finland. When a natural person, who is a non-resident taxpayer in Finland, has owned Company B’s stocks and decides to sell them, it will be deemed that 42 % of the proceeds from that sale (0.6 × 0.7 = 0.42) consists of Finnish-located immovable property. This means that the above provision of law is not applicable, and that the Finnish tax authority will not levy capital-gains tax. 

The provision of law sets a 50-percent limit. The following example illustrates exceedance of this limit.

Example 8: Holding-company X is the owner of assets with a fair market value of €1,000,000. Directly or indirectly, a proportion worth €800,000 of those assets consists of Finnish-located immovable property. Company Z, of a foreign country, is the owner of 70 % of X’s stocks. Company Z has no other direct or indirect holdings of immovable property located in Finland. When a natural person – a non-resident taxpayer in Finland – has owned Company Z’s stocks and decides to sell them, it will be deemed that 56 % of the proceeds from the sale (0.7 × 0.8 = 0.56) consists of Finnish-located immovable property, so the above provision will be applied, and the Finnish tax authority will impose capital-gains tax if the non-resident taxpayer made a profit.

When a nonresident taxpayer has given up the rights of possession of a Finnish-located real estate property or a building, structure or other constructed unit, including those within the meaning of § 6 of the Act, located on another landowner’s land, and made a profit, the income is sourced to Finland; including the land’s possession rights, rights of use, privileges to receive yields, as the profit is deemed to be a capital gain that constitutes income sourced to Finland in accordance with § 10, paragraph 10 of the Act on income taxation. The income is subject to tax at least for the part representing the rights that the owner had kept in connection with a transfer of property against consideration, or with a transfer of property that did not involve consideration. The event of giving up the rights of possession is governed by the tax rules on capital gains (ruling KHO 2009:13).  

Capital gains resulting from sales of real property other than what is described above, of securities or of movable property, are generally not considered Finnish-source income in the hands of a non-resident taxpayer. Capital gains resulting from sales of corporate stocks or other shareholdings in a stock-exchange-listed company are not considered Finnish-source income even if the assets of the company were to consist, for more than 50 %, of immovable property located in Finland. Furthermore, capital gains resulting from sales of rights, referring to the form of residence known as right-of-occupancy (called 'asumisoikeus' in Finnish; 'bostadsrätt' in Swedish, controlled by the Act called Laki asumisoikeusasunnoista (393/2021)) are not considered Finnish-source income.

Another additional requirement for Finland to levy tax on a capital gain in the hands of a non-resident taxpayer is that the relevant tax treaty does not prevent Finland’s taxing rights. For more information on the impact of tax treaties on capital-gains taxes levied on non-resident taxpayers, see section 4.3 of this guidance.

If Finland and the other country have no tax treaty, only the provisions of § 10 of the Act on income taxation will determine whether the capital gains should be deemed to be sourced to Finland, and consequently, if received by a non-resident taxpayer, subjected to Finnish tax.  

4.2 The impact of tax treaties  

4.2.1 Immovable property

In general, when a taxpayer has owned immovable property and sells it at a profit i.e. receives capital gains, the country of location is the country that has the taxing rights. In addition to the above, the majority of the tax treaties Finland has signed with other countries contain a provision that when a taxpayer sells the shares that entitle the shareholder to a housing-company apartment, the capital gains, if any, may be taxed in the country of residence of the housing company or co-operative. The corporate share units referred to here include the Finnish housing company (asunto-osakeyhtiö, bostadsaktiebolag) and the Finnish mutual real estate company (keskinäinen kiinteistöosakeyhtiö, ömsesidigt fastighetsaktiebolag). For more information, see section 2.3.

This means that most tax treaties impose no obstacle to Finnish capital-gains taxes in situations where a non-resident taxpayer has received the gains from a sale of immovable property located here. In the same way, most tax treaties impose no obstacle to Finland’s taxing rights concerning any profits relating to sales and transfers of shares in residential housing companies. One exception from this is Finland’s tax treaty with Japan, the provisions of which prevent Finland from collecting tax on sales and transfers of shares in residential housing companies if the individual taxpayer is a treaty resident of Japan.

On the other hand, like internal legislation in this regard, many tax treaties only concern the kind of companies that own more than a certain minimum level of immovable-property assets. It may be that the minimum levels defined in a tax treaty and in internal legislation are different. Provisions of internal legislation set out the minimum at 50 % assets, which consist of immovable property located in Finland (§ 10, paragraph 10 a of the Act on income taxation). 

For example, the Nordic tax treaty refers to at least 75 % for assets consisting of immovable property located here (Article 13, paragraph 2). This means that in a Nordic cross-border situation, the country can levy capital-gains tax only if more than 75 % of the sold corporate entity’s assets consist of immovable property located in the relevant Nordic country.

4.2.2 Movable property

In general, only the country of residence is entitled to capital-gains tax when movable property has been sold at a profit.

Any capital gains in the hands of a non-resident taxpayer that fall outside of the list in § 10 of the Act on income taxation are not considered income sourced to Finland. It is not possible for any provisions of a tax treaty to extend Finland’s taxing rights to these gains. For example, under § 10 of the Act on income taxation, capital gains derived from sales of Finnish listed-company stocks are not income from a Finnish source. This means that the Finnish tax authority will not levy tax on a non-resident taxpayers capital gains resulting from such selling although some tax treaties have accorded the taxing rights to Finland regarding capital gains from sales of corporate stocks (for more information, see section 3.4 and Example 5 in this guidance).

4.3 Income taxes of a nonresident assessed in accordance with the Finnish Act on assessment procedure

The Act on the taxation of nonresidents’ income (Laki rajoitetusti verovelvollisen tulon verottamisesta (lähdeverolaki) 627/1978) contains detailed rules on how Finnish-source income is taxed in normal circumstances. However, in the case of capital gains subject to Finnish tax, taxes are instead levied in the order laid down in the Act on assessment procedure (also referring to § 13, 13a, and 16 of the Act on the taxation of nonresidents’ income). This means that the tax authority assesses the taxpayer’s tax based on the taxpayer-submitted tax return, and that the exact amount of a capital gain is computed as required by the Act on income taxation (§ 13a, subsection 1 of the Act on the taxation of nonresidents’ income).

If a capital gain is to be taxed in Finland, the same formulas for tax computations will apply as in the case of a resident taxpayer, that is, by subtraction of either the actual acquisition cost or a presumed acquisition cost from the selling price (§ 46 of the Act on income taxation). The acquisition cost and the point of time when the sold property had been acquired are also determined in the same way as in the case of a Finnish resident. Non-resident taxpayers need to pay tax to the state of Finland on capital gains at the same tax rate (30% or 34%) as Finnish resident taxpayers (§ 15, subsection 1 of the Act on the taxation of nonresidents § 1 momentti).

The situations where a capital gain becomes exempt from taxes are the same as in the case of Finnish resident taxpayers (§ 13a of the Act on the taxation of nonresidents’ income). For example, if an individual taxpayer sells their home (either real estate property or shares entitling their holder to own a housing-company apartment), the exemption set out in § 48 of the Act on income taxation would concern resident and non-resident taxpayers alike. For more information, see Tax Administration’s guidance “The exemption offered to sellers of their own home” —  Verovapaa oman asunnon luovutus. (in Finnish and Swedish, link to Finnish)

The Act on income taxation additionally contains other rules concerning full and partial exemptions from capital-gains tax, which also concern resident and non-resident taxpayers alike. Examples of these include the tax treatment of expropriations, i.e. immovable property sales to the state, to the local municipality, and to other public bodies (§ 48 and § 49 of the Act). For more information, see Tax Administration’s guidance “Fully or partially exemptible capital gains” — Kokonaan tai osittain verovapaat luovutusvoitot henkilöverotuksessa (in Finnish and Swedish, link to Finnish).

4.4 Non-resident estate

An estate of a deceased person is a foreign estate if the decedent was a non-resident taxpayer at the date of death or if the estate is a foreign diplomat’s estate in reference to in § 12 of the Act on income taxation (and to § 17, subsection 4). Foreign estates are non-resident taxpayers, having a limited liability to tax (§ 9, subsection 1, paragraph 2). From the perspective of Finnish tax assessment, foreign estates are corporate entities (§ 3, paragraph 6).

Only the categories of income listed in § 10 of the Act are subject to Finnish tax. When a foreign estate receives any other income, also in the form of capital gains, it is not taxable in Finland. 

However, where capital gains received by the foreign estate are subject to tax, the calculation rules are identical to those concerning Finnish resident corporate taxpayer’s capital gains derived from a personal source of income. Accordingly, the remaining undepreciated part of the acquisition cost plus any expenses for obtaining the gain are subtracted from selling price. No subtraction of a presumed acquisition cost is possible because when the taxpayer is a corporate entity, presumed costs cannot be applied (§ 46, subsection 1 of the Act on income taxation).

When a shareholder of an estate receives a portion of the income earned by the estate, it is not treated as taxable income for the shareholder (§ 17, subsection 3). This applies to Finnish and foreign estates alike. As a result, even if a Finnish resident individual is the shareholder receiving income from a foreign estate, and the income is a portion of capital gains, Finland cannot levy tax on it. Whether or not the income received by the estate was subject to tax in Finland is not important.

For more information on the tax treatment of foreign estates, refer to the Tax Administration’s new guidance “Private international law’s impact on Finnish taxes” —  Kansainvälisen yksityisoikeuden vaikutus verotukseen (to be published later in 2025).

5 Deductibilty of a capital loss in cross-border circumstances

5.1 General remarks on the symmetry principle of the capital gains and losses

Capital losses sustained due to sale or transfer of an asset are deducted from the taxpayer’s capital gains, received from other sales and transfers, during the tax year and the following 5 years (§ 50, subsection 1 of the Act on income tax). If a taxpayer who is a natural person or an estate of a deceased person still has a remaining amount of capital losses after having applied them against the taxpayer’s all capital gains, such a remaining amount can be deducted from the taxpayer’s other capital income. This must be done before carrying out the taxpayer’s other deductions from the other capital income.

Legal norms concerning non-deductible capital losses are found in § 50, subsection 2 of the Act on income taxation. Accordingly, no deduction is granted if a taxpayer sustains a capital loss due to selling their home (on which an exemption from capital gains tax would apply), due to selling the movable property of the home, or due to selling other similar personal property. In addition, another legal provision lays down that any losses arising from sales amounting to less than €1,000 a year are non-deductible. 

The provision of § 50, subsection 3 additionally restricts the deductibility of capital losses by setting out a rule concerning derivative contracts: if such a contract is voided or if a loss is caused by a derivative contract, the loss is non-deductible if the contract was subject to trading outside of regulated securities markets within the meaning of the Act on Trading in Financial Instruments (1070/2017). For more information on how the Act defines a “regulated market” and markets comparable to those, see the Tax Administration’s guidance “The tax treatment of derivative contracts” — Johdannaisten verotus (in Finnish and Swedish, link to Finnish). 

The taxpayer has the right to deductions for a sustained capital loss when a capital gain in similar circumstances would be subject to Finnish tax, and when the relevant tax treaty would allow Finland to tax the gain.

No specific legal norm is included in the Act on income taxation that would address the deductibility of capital losses in a cross-border situation where Finland has no taxing rights on capital gains that could have arisen instead of the capital loss that actually arose. From the perspective of the symmetry principle which is present in the Act on income taxation, and because any losses directly comparable to a tax-exempt gain are non-deductible, the Finnish Tax Administration can allow a deductible capital loss for a resident of a foreign country only if they sell property located in Finland, the capital gains from which are subject to Finnish tax, and which also for treaty purposes are taxable in Finland. For the kind of capital losses for which a matching capital gain would not be subject to Finnish tax – or for the kind which for treaty purposes cannot be taxable here – no deduction is available.

Example 9: A U.S. resident individual sold some of his holdings of Finnish listed-company stocks, and the sale resulted in a capital loss of €10,000. The USA – Finland tax treaty prevents Finland from levying tax on capital gains if a U.S. resident sells Finnish listed-company stocks and makes a profit. From this, it follows that the U.S. resident who sustained the €10,000 capital loss cannot be given a deduction in Finnish tax assessment because Finland would not have the taxing rights on any capital gains that arise when someone sells Finnish listed-company stocks and makes a profit.

Example 10: An individual taxpayer who is a tax resident of France sold their holding of Finnish listed-company stocks. The sale resulted in a capital loss of €30,000. The taxpayer also sold immovable property located in Finland, and the result was €20,000 of capital gains. 

The treaty between Finland and France prevents Finland from imposing tax on capital gains arising from Finnish listed-company stocks. However, the treaty poses no restriction for Finland for imposing tax on capital gains from the sale of immovable property located here. 

As a result, the Tax Administration assesses that the individual received a capital gain amounting to €20,000. The taxpayer cannot claim a deduction based on the loss from the listed stocks to lower the gains of €20,000 related to the sale of immovable property. 

In the same way, no deduction is available if a taxpayer has made a capital loss due to selling an asset for which any capital gain, if arisen, would fall into the scope of the exemption method when providing relief for double taxation (ruling KHO 2013:195).

No provisions are included in the Nordic tax treaty that would address the deductibility of a capital loss in a situation where Finland would have the taxing rights on an increase in the asset’s value if such an increase occurred during a period that matches the period when the capital loss had developed. However, referring to the symmetry principle, and taking account of the fact that the Nordic tax treaty only gives Finland the taxing rights for an increase in asset value during the time of the owner’s residency in Finland (before leaving Finland), it would follow that a capital loss related to a longer period beyond the time when the owner was a Finnish resident, cannot be deductible.

The calculations for arriving to the deductible capital loss are conducted in accordance with the rules of the Act on income taxation. Finland’s fiscal legislation does not recognize the possibility of higher (fictive) deductions in conjunction with capital losses because deductions must reflect the size of the actual loss. From this, it follows that if the actual loss sustained at the time of selling an asset is lower than the loss would have been at the time of leaving Finland, the maximum deduction is still equal to the actual loss at the time of selling.

If at the time of leaving Finland, the quoted value of a corporate stock is below its acquisition value, the taxpayer can claim a deduction in their Finnish tax assessment for the loss calculated at that time (for the decrease in value). However, the deduction cannot be higher than the actual loss when selling the asset, even if the loss would have been greater because the quoted stock value was lower at the date when the individual taxpayer left Finland. As a result, if due to stock-exchange fluctuations, the selling of a listed corporate stock at the date of leaving would cause a loss but at the date when the taxpayer actually sold it, a profit was made, the tax authority would neither allow a loss nor assess tax on the capital gains received because of the increased stock value.

Example 11: Person F left Finland to start living in Sweden 2 years ago. Under the Nordic tax treaty, the authority deems C to be a treaty resident of Sweden, starting the day when C came to Sweden. As for Finland, person C continues to be a Finnish resident individual. C had owned some Finnish listed-company stocks. When living in Sweden, C decides to sell them.

Scenario 11a: When purchasing the stocks F paid €1,200 for them. When leaving Finland, the stock-exchange quote stood at €1,000 — and at the date when F actually sold them, the selling price was €800. As computed under the rules of the Act on income taxation, the result for person F is a capital loss of €400 at the date of sale (selling price €800 minus €1,200 the acquisition cost). At the date when F was leaving Finland, the capital loss would have been €200.

Due to what has been agreed by the Nordic tax treaty, Finland’s taxing rights only concern the part of the stocks’ increase in value that the individual taxpayer could benefit from during the residency period in Finland (starting at acquisition, ending at the date when leaving). Because the symmetry principle is invoked, any capital loss should be treated in the same way, i.e. the capital loss cannot be deductible in reference to a longer period than the residency period in Finland. The Finnish tax authority can only record a capital loss of €200 for F’s tax assessment (stock quote upon leaving €1,000 minus €1,200 the acquisition cost).

Scenario 11b: When purchasing the stocks F paid €1,200 for them. When leaving Finland, the stock-exchange quote stood at €800 – and at the date when F actually sold them, the selling price was €1,000. As computed under the rules of the Act on income taxation, the result for person F is a capital loss of €200 at the date of sale (selling price €1,000 minus €1,200 the cost of acquisition). At the date when F was leaving Finland, the capital loss would have been €400.

Because when F sold the stocks, F’s capital loss was lower (price €1,000 minus €1,200 the cost of acquisition) compared to the capital loss at the date of leaving (stock quote upon leaving €800 minus €1,200), the Finnish tax authority will record a capital loss of €200 for F’s tax assessment, referring to the value at the date of the sale.

Scenario 11c: When purchasing the stocks F paid €1,200 for them. When leaving Finland, the stock-exchange quote stood at €1,000 – and at the date when F actually sold them, the selling price was €1,300. As computed under the rules of the Act on income taxation, the result for person F is a capital gain of €100 at the date of sale (selling price €1,300 minus €1,200 the cost of acquisition). At the date when F was leaving Finland, the capital loss would have been €200.

Because no capital loss is caused at the actual selling transaction, the tax authority will not record any capital loss. Correspondingly, this scenario does not give rise to any taxable increase in value because at the date of leaving Finland, the value had not increased. 

Scenario 11d: When purchasing the stocks F paid €1,200 for them. When leaving Finland, the stock-exchange quote stood at €1,300 – and at the date when F actually sold them, the selling price was €1,000. As computed under the rules of the Act on income taxation, the result for person F is a capital loss of €200 at the date of sale (selling price €1,000 minus €1.200 the cost of acquisition). When leaving, no capital loss arose because the quoted value at that date was higher than acquisition cost.

The Finnish tax authority will not record any capital loss, because upon leaving there was no loss. Correspondingly, this scenario does not give rise to any taxable increase in value at the date of leaving, because no profit was made when F sold the stocks.

For more information on how taxes on increased values have been agreed by the Nordic tax treaty, see section 3.4 of this guidance.

5.2 Changed taxpayer status or changed “treaty” country of residence

In accordance with § 50, subsection 1 of the Act on income taxation, the taxpayer must first offset an allowable capital loss against gains that have arisen from other sales, etc., and then, offset the remainder against the taxpayer’s other capital income. If it is impossible to claim the capital loss during the tax year, it becomes an allowable loss, to be claimed later as capital gains arise for the taxpayer and as other capital income arises. Carry-forward is available for 5 years, counting from the tax year’s end. 

After leaving Finland to start living in a foreign country, a taxpayer will not lose their right to claim allowable losses that had arisen during the time when he or she was a Finnish resident taxpayer and also a treaty resident in Finland. This means that even after leaving, the taxpayer will continue to have the right to claim any deductible losses against any capital gains and other capital income, which are subject to taxes in accordance with the provisions of the Act on assessment procedure. 

The tax authority does not grant an allowable loss to the taxpayer if the loss arose when the taxpayer was a non-resident in Finland or treaty resident of a foreign country, and a matching capital gain would not have been subject to Finnish tax or a matching capital gain would not have been taxable in Finland due to the tax treaty. Losses that have arisen this way cannot become deductible in the individual’s Finnish tax assessment in situations where a foreign resident comes to Finland to start living here.

6 Notes on special circumstances

6.1 Paying an additional price for M&A in a cross-border situation

When an agreement to sell a company to a buyer has been made, it is typical that the buyer will pay a significant part of the acquisition price at a later stage. In general, the agreement’s terms and conditions often contain indicators and calculation rules for arriving at the exact sum of the additional price payable later. This section of the guidance discusses the tax treatment of that part of the price, assuming that the acquisition concerns corporate stocks or some other movable asset.

Under provisions of § 110, subsection 2 of the Act on income taxation, the date of the agreement between the seller and buyer determines the taxable capital gain’s tax year. From this, it follows that from the capital gains perspective, no importance needs to be attached to the time when the corporate acquisition is paid for, nor to the time when any additional price is paid.

The date of the acquisition agreement also determines whether a liability arises to pay tax to Finland. When the seller is a resident taxpayer in Finland at the date of the agreement, the seller must pay Finnish tax on the capital gains in full, including any additional price to be received later. If the seller is a non-resident taxpayer, or a treaty resident of the other contracting state in accordance with the relevant tax treaty, and the sales transaction had been made when the seller resided in another country before moving to Finland, and the seller receives an additional price after having moved here, no Finnish tax will be levied on the additional price on the condition that the sold asset was not among those listed in the provisions of § 10 or § 10a of the Act on income taxation. 

Example 12: Person H, a Finnish resident, moved to Singapore in 2018. Person H had owned all the shares of a limited liability company and during 2022, he decided to sell them. After the sales transaction, person H remained in Singapore to continue working for the company. At the date of the agreement, H was a Finnish resident taxpayer but the tax authority, for purposes of the relevant tax treaty, deemed H to be a treaty resident of Singapore. H became a non-resident taxpayer in 2023.

However, on 1 June 2024, H moved back to Finland. In conjunction with the sales agreement concerning the shares, H received additional amounts of money, that were part of the price, both in 2023 and 2024. The date when calculations were finalised to arrive at the exact sum of the price was 25 April 2023. The date when H received the 2024 amount was at the end of July 2024. This means that the individual taxpayer H had already become a Finnish resident taxpayer when receiving the final amount.

At the date of the agreement, H was a Finnish resident taxpayer and simultaneously a treaty resident of Singapore. For this reason, the taxing rights for the capital gain belonged only to Singapore. The treatment will be identical regarding the additional transaction price received later: Singapore has the taxing rights for the capital gain although H received the additional price at a date when he had become a Finnish resident taxpayer and also a treaty resident of Finland.  

Example 13: Person J is a foreign citizen who has lived in Finland for 5 years already, so J has become a Finnish resident taxpayer and also a treaty resident here. On 1 May 2024, J moved to France, and this made him a non-resident taxpayer from Finland’s perspective. When the tax authority applies the relevant tax treaty, J is regarded as a treaty resident of France. Person J had owned all the shares of a limited liability company and during 2023, he decided to sell them. 

In 2024, J received an additional part of the price, the exact size of which was determined by a calculation dated 22 April 2024. The date when J received the 2024 amount was at the end of July 2024, at a time when J had already become a non-resident taxpayer in Finland. 

Because at the date of the agreement, J was a Finnish resident taxpayer and simultaneously a treaty resident of Finland, the taxing rights for the capital gain, within the meaning of the Act on income taxation and within the meaning of the tax treaty, belonged only to Finland. The treatment is identical regarding the additional price received later: Finland has the taxing rights for the capital gain although J received the additional price at a date when he had become a non-resident taxpayer here and a treaty resident of France.

For more information on situations where one price is paid first and another additional price is agreed upon and paid later, see Tax Administration’s guidance “Profits and losses from the sale of assets in the income taxation of individuals” — Omaisuuden luovutusvoitot ja -tappiot luonnollisen henkilön tuloverotuksessa (in Finnish and Swedish, link to Finnish).

6.2 Swap contracts and the exit tax referred to in § 52 f of the Act on the taxation of business income

After a swap contract, there is no tax assessment of capital gains or losses. The exemptibility of swap contracts remains effective even if a stockholder, a natural person, leaves Finland to start living in another country of the European Economic Area (EEA) and ceases from being a Finnish resident. 

However, if the stockholder left Finland to start living in an EEA country and sells or otherwise transfers the stocks away before 5 years have passed from the end of the tax year when the swap occurred, the capital gain that was not taxed when the swap occurred becomes subject to taxation in Finland. In this case, an amount of money reflecting the sold/transferred stocks, which would have been taxable income if the tax rules on swap contracts had not been applied must be added to the stockholder’s income for the year of the sale or transfer.

Example 14: Person K purchased 10,000 shares in the Finnish company A in 2016. After a swap that took place in 2021, person K received 15,000 shares of the Swedish company B in replacement of all of the above 10,000 shares. The profit from the swap stood at €50,000 in accordance with accounting. The calculation rule for taxable capital gains is that the acquisition cost of the shares given away needs to be subtracted from the fair market value – at swap date – of the shares received. 

In 2022, person K left Finland for Sweden to start living there permanently. Immediately after leaving, K was no longer deemed as connected with Finland by substantial ties, so he became a non-resident taxpayer from Finland’s perspective.  

In 2025, K decides to sell 3750 shares of the Swedish company B. Because 5 years have not yet elapsed since the swap, Finland will levy tax on the capital gains that had not been assessed for taxation in conjunction with the swap. 

However, only the proportion to the original holding of shares, before the swap, has relevance in the capital-gains tax assessment (10000/15000 × 3750 = 2500). This way, Finland will levy €12,500 of capital-gains tax, computed as 2500/10000 × €50,000 = €12,500. This means that no exit tax concerns K’s earlier holding for which the swap accorded him 11250 shares in the Swedish company B, which remain with K. 

And further, if an individual first received corporate stocks in a swap, and then left Finland to start living in a non-EEA country before 5 years had passed from the end of the tax year when the swap occurred, the capital gain that was not taxed when the swap occurred becomes subject to taxation in Finland, even if the received corporate stocks continued to be in the individual’s ownership.  

In an alternative scenario, if the individual sells or otherwise transfers the corporate stocks he had received in a swap, and then leaves Finland later, after 5 years, to start living in a non-EEA country, no capital gains attributed to the swap become taxed in Finland.  

If instead, there is a capital loss sustained by the taxpayer when leaving Finland, it is a non-deductible loss.

For more information on the taxation of capital gains and capital losses, see the Tax Administration’s guidance  “Capital gains and capital losses from trading with securities” — Arvopaperien luovutusten verotus (in Finnish and Swedish, link to Finnish).

6.3 Sales/conveyances of assets inherited or gifted in a foreign country

If an inheritance or gift was received and the fiscal authority of another country assessed taxes, the taxpayer will need to obtain information on the asset’s taxable value that had been implemented in that assessment. After the exact value has become known, it can be equated with an acquisition cost, entered in the Finnish calculations regarding taxable capital gains.

The Supreme Administrative Court’s preliminary ruling KHO 2021:120 is a precedent for how the acquisition cost of inherited or gifted property should be determined in situations where neither the foreign country nor Finland has assessed taxes. The Court ruling indicates that although no inheritance tax had been assessed anywhere, the fair market value of the date when the property or asset was received should be the acquisition cost. 

Supreme Administrative Court ruling no. 2021:120

Person A inherited listed-company stocks left behind by a U.S. decedent who had written a last will and testament. In accordance with U.S. tax rules, no inheritance tax had to be paid to the United States of America, and person A had not submitted any inheritance tax return to U.S. authorities. Likewise, no inheritance tax had to be paid to Finland according to the Convention between the United States of America and the Republic of Finland for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on estates and inheritances. Person A submitted a tax return to the Tax Administration to declare the received corporate stocks at the value of €683,827.21. The Tax Administration officially valuated the inherited stocks at the value of €0 because no Finnish inheritance tax would be levied. Person A intended to sell the stocks.

The Supreme Administrative Court ruled that when A sold them, the acquisition cost, within the meaning of § 47, subsection 1 of the Act on income taxation, is the fair market value prevailing at the date when the stocks were received although no Finnish inheritance tax was payable. The Court also ordered that the Central Tax Board’s decision on the matter was to be cancelled. The Board had indicated that a presumed acquisition cost should be applied as provided in § 46, subsection 1 of the Act on income taxation.

If no inheritance or gift tax has been assessed in Finland or in another country, the fair market value of the date of receipt should be the cost of acquisition, for purposes of capital-gains calculations, if the following conditions are fulfilled:

• The inheritance or gift is subject to tax in at least one of the countries involved. This means that there must be a country relevant to the inheritance or gift that has legislation in force, governing taxes on inheritance and gifts, and the category of assets or property concerned, and the transfer resulting from inheritance or the giving of a gift falls into the legislation’s scope.
• The fact that no tax – due to a bracket system or due to other local relief from taxes in the particular case – actually is paid in the foreign country has no importance. In the same way, whether or not the foreign country’s tax rules require the inheritance or gift to be declared to the authorities has no importance. Instead, if the inherited or gifted assets fall outside of the foreign country’s legally defined tax base, the fair market value at receipt cannot become the acquisition cost for purposes of capital-gains calculations.
• The taxpayer is under a duty to present evidence of how the inheritance or gift is classified for fiscal purposes and subjected to tax, if any, by the foreign country. The taxpayer should follow a similar process to present proof as is done in situations where, some time before, a Finnish inheritance or gift tax has been levied here. The taxpayer is also under a duty to declare the fair market value of the property reliably. This must be done if the property was not taxed by the foreign country. After that, to decide whether the declared value is acceptable, the Tax Administration will perform an appraisal based on the taxpayer’s declaration and other facts and information. An alternative cost for the tax calculation is the presumed acquisition cost, which is applied when the taxpayer declares no fair market value or when the taxpayer-declared value is lower than the presumed acquisition cost.
• Normal rules are applicable to the question of when an inheritance is deemed to have been received. In general, the decedent’s date of death determines the date when an inheritance is received. From this, it follows that the date when the assets actually become available to the inheritor has no importance.