Credit can be given on tax paid to foreign country

If you have paid inheritance tax to a foreign country, you can receive credit for it when your Finnish inheritance tax is assessed.

You may be given credit if all the conditions listed below are met:

  • You are an inheritor and on the date when the decedent died, Finland was your country of tax residence.
  • You have paid tax on the inheritance to a country other than Finland.
  • You have received the Finnish Tax Administration’s inheritance tax decision, and it indicated that the same assets are subject to inheritance tax in Finland.

Credit can only be given for tax paid to a sovereign state

Only the types of foreign taxes that were paid to a sovereign state (i.e. to a central government) can be credited by Finland. This means that if the foreign tax was paid to a local province, a federal state, etc., you cannot receive credit for it.

When you claim credit of foreign tax, you must enclose a photocopy of a tax demand received from a foreign authority with your Finnish inheritance tax return.

Example: Antti, the decedent, lived in Finland on his date of death. His assets were located in Finland with the exception of an apartment located in Spain. His daughter Sini living in Finland and his son Tomi living in Spain are Antti's only heirs. Both Sini and Tomi must pay Finnish inheritance tax on their respective parts of the estate going to them. A Spanish tax is also imposed by Spanish tax authorities on the apartment.

Sini is entitled to a tax credit for the Spanish tax because she lived in Finland at the date of Antti’s death. Tomi is not entitled to this credit.

No credit on tax paid to a foreign tax authority is given if:

  • tax has been paid on inherited immovable property located in Finland (such as lots, real estate property used for leisure, agricultural farms, forestry farms, and other land including parcels of land that have not undergone a cadastral procedure);
  • tax has been paid on inherited corporate stock if the corporation’s assets, to more than 50 percent, consist of immovable property located in Finland (for example, a housing company or a real-estate company).