Selling overseas residential property
If you have a home in another country and you intend to sell it, you should note that tax rules vary from country to country. If you make a profit, you usually have a taxable capital gain, and if you make a loss, you may or may not have a tax-deductible loss. If you live in Finland and you are a Finnish tax resident, you are fully liable to pay tax on your worldwide income, including any capital gains derived from the sale of real property overseas. You normally also have to pay tax to the tax authorities of the country where it is located. The Finnish tax-assessment process will later give you credit in order to eliminate any international double taxation.
There are two alternative methods of eliminating double taxation: the credit method and the exemption method. The choice between these two methods depends on the provisions of the international tax treaty between the country of location and Finland. If the property is located in another Nordic country and you have sold it and have paid tax locally for the capital gain, the credit method will be used. The Finnish Tax Administration will collect Finnish tax on the capital (investment) income at the standard rate of 30 percent (or 34 percent if your capital income is €30,000 per year or higher), but will give full credit for any tax amounts paid in other Nordic countries.
The tax treaties Finland has made with Spain, Portugal, France and Egypt provide for elimination of double taxation through the exemption method. So, if you are selling a home located in one of the above countries, any capital gain will be exempt from Finnish tax. However, the fact that you have received the gain may affect your Finnish tax rate on capital income. For this reason, you must report it on your Finnish income tax return. The impact of the exemption method is that if have had interest expenses relating to the property that you sold, you cannot deduct them if they are higher than the gain you receive. Another consequence of the exemption method is that you cannot deduct any capital loss from taxable capital gains relating to other sales in your Finnish taxation.
Important note: As of the beginning of 2019, Finland will collect tax on both rental income from apartments in a housing company, and any capital gains received from the sale of such an apartment, when these are received by Spanish or Portuguese residents.
Report capital gains and capital losses
When you fill out the Finnish tax return form, include all your capital gains and losses. For tax purposes, the rules for calculating capital gains are the same regardless of whether the property had been sold overseas or in Finland. If you have owned a home in another country for at least two years – and used it as your permanent home for at least two years – no Finnish tax is collected on any profit you make when you sell it.
If you have foreign-sourced capital gains and capital losses,
- Log in to MyTax to file your tax return on the gain/loss (link), or
- Fill out Form 16B, Statement on foreign income (capital income).
Further guidance for those who file on paper.