When can a gift tax relief be granted for a generational transfer?
You may be granted partial gift tax relief for a generational transfer if all of the following factors apply to your situation:
- The gift subject to tax includes a farm, other company, or part thereof.
- You continue to operate the farm’s agricultural farming, or its combined agricultural and forestry activity, or – in the case of a business enterprise – you continue to conduct the business in the same company that you received as a gift. Please note that you are not entitled to the relief if you receive a farm and continue the farm’s forestry activity only.
- The farm or company accounts for more than €850 of gift tax.
Gift tax relief can also be granted in full if the aforementioned conditions are met and you pay a consideration of more than 50% of the fair value of the farm or business assets.
You must apply for relief before we levy taxes. You can request relief on a gift tax return. However, ensure first whether the conditions set for granting relief are fulfilled in your situation. You can also apply for a preliminary gift tax ruling beforehand.
More information about the conditions set for granting relief is available in the following instructions:
Generational transfer of a farm (in Finnish and Swedish only, link to Finnish)
Generational transfer of a farm in taxation (detailed guidance, in Finnish and Swedish only, link to Finnish)
Generational transfer of a limited liability company in taxation (detailed guidance, in Finnish and Swedish only, link to Finnish)
Generational transfer of a one-person company or private business in taxation (detailed guidance, in Finnish and Swedish only, link to Finnish)
Submit a gift tax return
Submit a gift tax return if the generational transfer was carried out
- wholly as a gift (no consideration paid)
- as a gift-like sale (consideration at most 75% of the fair value)
Also submit a gift tax return in the following situations:
- The question is of an under-priced sale (consideration less than 100% but more than 75% of the fair value), but you are not certain whether the purchase price is sufficient.
- You are granted relief based on a preliminary ruling, and you do not need to pay any gift tax (the purchase price is more than 50% of the fair value of the received business assets or farm).
If you are applying for gift tax relief for a generational transfer without any appropriate grounds, a punitive tax increase may be imposed.
When you continue farming or business activities, you can apply for a payment extension on a gift tax return. The requirement is that at least €1,700 of tax comes from the farm or other business whose activities you are continuing.
The extension to the payment period must be applied for before we levy taxes. If we grant a payment extension, the gift tax payable on the farm or business will be divided into at most 10 annual instalments. The minimum amount of a single instalment is €850. No interest will be collected on the extended payment period.
If you only receive a forest estate or holiday home as a gift, you cannot receive a tax relief for generational transfer.
Please note that if you are applying for gift-tax relief for a generational transfer without any appropriate grounds, a punitive tax increase may be imposed.
When you transfer shares or a farm you have received as a gift or through a gift-like sale, note the elapsed time:
- More than five years have elapsed from the levying of gift tax. You will not lose the tax relief you have received for a generational transfer. If you sell assets, declare the sale for taxation on capital gain.
- Less than five years have elapsed from the levying of gift tax. You may lose the tax relief you have received for a generational transfer if you transfer the majority of the company’s shares or the farm. As a result, the amount of discounted gift tax must be repaid to the Tax Administration, increased by 20%.
If you transfer assets before the five-year deadline, declare it within three months after the transfer using any of the following methods:
- In MyTax: Go to the Activities tab and then click the All adjustment matters link under Claims for adjustment. Select Claim for Adjustment of gift tax.
- Using the “Claim for adjustment of inheritance or gift tax” form (in Finnish)
- In writing in your own words.
In your claim for adjustment or the cover letter for your free-form document, indicate clearly that the document is intended for declaring a transfer as referred to in section 55 of the act on inheritance and gift tax (Perintö- ja lahjaverolaki 378/1940).
Send your free-form document to:
Finnish Tax Administration
PO Box 650
If you sell assets
If the transfer takes place as a sale, also remember to declare the transfer for taxation on capital gains:
- Request for a prepayment in MyTax. Select “Tax cards and prepayments” and then “Request tax prepayment”. Declare the transfer under “Other income”: First, select “Yes” under “Capital gains and losses”. Then, select “Add new transfer”.
- Declare the transfer using the “Capital gains and losses” form.
If you are selling assets for which you have received relief, the value of the generational transfer will be used as the acquisition cost in the taxation of capital gains.
The gift tax relief granted will affect the determination of the acquisition cost even if
- you are selling assets after the five-year deadline
- you are selling less than the majority of assets before the five-year deadline, which is why you will not lose the gift tax relief.
Read more in detailed guidance: Fulfilling specific obligations to report information on inheritance and gift tax (in Finnish)