The Finnish Parliament has approved legislative amendments under which Finland’s corporate income tax rate will decrease from the current 20% to 18%. The new tax rate will apply for the first time to taxation for the 2027 tax year. At the same time, the carry-forward period for business losses will be extended from 10 years to 25 years for losses incurred in the 2026 tax year and thereafter.

In addition to reducing the corporate income tax payable by companies, the changes will have implications for tax planning, the utilisation of tax losses and deferred taxes recognised in the 2026 financial statements.

The corporate income tax rate is stipulated in Section 124 of the Finnish Income Tax Act. The provision will be amended so that the corporate income tax rate decreases from 20% to 18%. The new tax rate will apply for the first time to taxation for the 2027 tax year. A company’s tax year consists of the accounting period or periods ending during the calendar year.

The change highlights the importance of how taxable income is determined for 2026 and 2027. Companies should pay particular attention to material timing issues relating to income and expenses, depreciation, potentially deductible losses, group contributions and the impact of interest deduction limitations. Any decisions regarding the timing of income and expenses must, of course, be based on applicable tax legislation and the relevant requirements for its application.

As a rule, the domestic withholding tax rate applicable to dividends, interest and royalties paid to non-resident corporate entities will also decrease to 18%. In addition, the 18% tax rate will apply to income of non-resident corporate entities that is taxed in Finland in accordance with the procedure laid down in the Finnish Tax Assessment Procedure Act. These changes concern Sections 7 and 15 of the Finnish Act on the Taxation of Non-Residents’ Income. However, an applicable tax treaty, EU law or a domestic tax exemption provision may continue to result in a lower tax rate or an exemption from tax.

Section 119 of the Finnish Income Tax Act, which governs the utilisation of tax losses, will also be amended. The carry-forward period for business losses will be extended from the current 10 years to 25 years for losses incurred in the 2026 tax year and thereafter. Losses incurred in earlier tax years will continue to be subject to the 10-year carry-forward period.

The change is particularly significant for companies in growth and investment phases, as well as businesses where achieving profitability requires a lengthy investment or development period.

The longer carry-forward period does not affect the other requirements governing the utilisation of tax losses. For example, the restrictions on the utilisation of losses in connection with changes in ownership under Section 122 of the Finnish Income Tax Act will remain unchanged.

The reduction in the tax rate may affect the measurement of deferred tax assets and liabilities already in the 2026 IFRS financial statements. Under IAS 12, deferred taxes are measured using the tax rate expected to apply when the temporary difference reverses, provided that the tax rate has been enacted or substantively enacted by the reporting date.

If a temporary difference is expected to reverse while the new tax rate is in effect, the deferred tax is generally measured using the 18% tax rate. This will reduce both deferred tax assets and deferred tax liabilities and may result in a one-off impact on the 2026 financial results.

The extension of the loss carry-forward period may, in turn, improve the actual possibilities for utilising tax losses. However, the longer carry-forward period does not in itself justify recognising a deferred tax asset. The recognition criteria and the probability of future taxable profits must be assessed separately.

Finland’s 18% corporate income tax rate will remain above the 15% minimum tax rate under the global minimum taxation rules. However, the nominal corporate income tax rate alone does not determine a group’s effective tax rate for Pillar 2 purposes.

The reduction in the corporate income tax rate may affect, for example, deferred taxes, the jurisdictional effective tax rate and safe harbour assessments. International groups should therefore take the change into account as part of their 2026 financial statement process and Pillar 2 calculations.

As part of the 2026 financial statement and tax processes, companies should review in particular:

• tax forecasts for 2026 and 2027 and the determination of taxable income
• the timing of income and deductions for tax purposes
• the years in which confirmed tax losses were incurred and their remaining carry-forward periods
• the potential impact of changes in ownership on the utilisation of tax losses
• the measurement of deferred taxes in the 2026 financial statements
• for international groups, the impact on Pillar 2 calculations.

The reduction in the corporate income tax rate provides a good opportunity to review the company’s overall tax position.

At Svalner Atlas, we are here to help you and your company with tax questions related to the change in the corporate income tax rate and its implications. You can also contact us if you would like to assess the impact of the change on, for example, taxable income, the utilisation of tax losses, deferred taxes or Pillar 2 calculations.

We have comprehensive expertise in corporate tax planning and implementation, as well as across various areas of taxation and law. We assist companies and individuals in finding solutions tailored to their specific circumstances, taking into account evolving legislation and current case law.

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