Finland: Company and Capital Income Taxation Reform

• The company tax rate will sink to 26%.

• The capital income tax rate will sink to 28%.

The effect of the reform on the taxation of dividends

• the taxation of dividends paid by listed companies will become higher (at least 70% will always be subject to double taxation)

• the dividends paid by non-listed companies will be non-taxable up to EUR 90,000, pro-vided that the net assets of the company are at least less than EUR 1,000,000

The effect of the reform on the timing of selling shares

• it may be advisable to postpone sales partly resembling a gift in connection with changes of generation to 2004

• if you intend in the next few years to dispose of shares, which you have owned for at least 10 years it may be advisable to do so before 2005 (the acquisition cost presumption will de-crease)

• the taxation on sales of shares owned for a period not longer than 10 years will be relieved in 2005 (the tax rate will decrease to 28%)

From the standpoint of taxation, what should a private person invest in the future?

• it will generally be advisable to own real estate directly or through a mutual real estate corporation

• a holding company will probably not be worthwhile for a private person through owning shares in listed companies (the regulations remain unspecified at this stage)

• interests may be subject to a lower tax rate than dividends