Minister of Finance Riikka Purra: “The Government is supporting Finnish jobs and industry”
Bill on tax credit for large investments aimed at building a climate-neutral economy sent out for comments

The Ministry of Finance is requesting comments on a bill on a tax credit for large investments aimed at building a climate-neutral economy. The Government decided on the preparation of the tax credit as part of the Government’s growth package in its spending limits session last spring.

Minister of Finance Riikka Purra is pleased to move the package forward.

“The tax credit for large industrial investments is an important tool for supporting Finnish jobs and industry in the current weak economic situation. We need smart new taxation solutions to support economic growth. My hope is that this new tax credit will attract long-awaited large investments to Finland,” said Purra. 

In its spring 2024 session on spending limits, the Government decided to adopt a tax credit for large investments aimed at building a climate-neutral economy. On 24 June, the Ministerial Committee on Economic Policy decided to continue preparation of the tax credit. The objective of the tax credit is to increase the number of large-scale industrial investments that use electricity while also supporting the construction of a clean transition industry in Finland. It is based on the temporary state aid framework adopted by the European Commission in spring 2023, which is intended to support the Member States’ economies and the green transition. The act can only enter into force if the Commission finds it compatible with the state aid framework. 

Eligible projects

In the draft for the government proposal, the tax credit could be allocated to investments that accelerate the clean transition and reduce dependency on fossil fuels. However, the Ministerial Committee on Economic Policy decided that production of renewable electricity would not be eligible. 

Projects would be eligible if they relate to:

• production of renewable energy (including hydrogen and hydrogen fuels); storage of electricity and heat; storage of renewable hydrogen, biofuels, bioliquids, biogases and biomass fuels;
• decarbonisation of industrial production processes and energy efficiency measures;
• investments in the production of equipment (e.g. batteries), key components and related critical raw materials essential to the transition to a climate-neutral economy. 

Amount of tax credit

The tax credit is intended for large investments. According to the decision of the Ministerial Committee on Economic Policy, the minimum size of eligible investments would be EUR 50 million and eligibility would be considered separately for each investment. 

The tax credit would be no more than 20 per cent of the investment costs and would be capped at EUR 150 million per company. The EUR 150 million cap would be calculated on a consolidated basis for groups of companies. 

The company making the investment would receive the credit as a deduction from corporate income tax. 

Requirements

The tax credit would only be granted for new projects, i.e. those that would begin work after submission of the application. The temporary state aid framework requires that tax credits be granted by the end of 2025. Business Finland will begin receiving applications as soon as possible after the government proposal has been submitted. 

The earliest that the tax credit could be used is in 2028. The tax credit would be staggered so that a maximum of 10 per cent of the total tax credit would be available per year. The credit would have to be fully used within 20 years. For investments due to be completed after 2028, it would not be possible to begin using the credit until after the investment is complete.

Direct aid for similar investments also being planned

In addition to the tax credit, the Ministry of Employment and the Economy is currently also working on a state aid programme. The budget appropriations for the programme would fall under the industrial policy provision of the Government Programme and would be partially allocated to similar investment projects as the tax credit. A government decree concerning this programme has also been sent out for comments today.

Next steps

Prior notification of the introduction of the tax credit was submitted to the European Commission over the summer. The Commission must find the credit compatible with the single market before it can enter into force. Discussions are ongoing with the Commission. The details of the tax credit may change and be refined as these discussions proceed. 

The Ministry of Finance requests that comments on the tax credit be submitted on 11 October 2024 at the latest.

The request for comments is available on the Lausunto.fi website.

Inquiries:

Jari Salokoski, Senior Ministerial Adviser, tel. +358 295 530 437, jari.salokoski(at)gov.fi