Annex 5. Measures to combat international tax evasion and aggressive tax planning

Finland will continue national efforts to combat international tax evasion and aggressive tax planning with a special action plan to broaden the Finnish tax base and improve transparency. The Government will assess the effectiveness of international and national measures already in place to combat tax evasion, and will evaluate the need for new measures. 

1. Opportunities will be examined for introducing a taxation model that would prevent tax avoidance relating to sales, gifts and inheritance of people who are living abroad but liable to pay taxes in Finland.   
2. The possibility will be explored of excluding companies that operate under the so-called Mankala principle and publicly-owned companies involved in infrastructure projects from the limitation regarding deductions for interest expenses. An assessment will be conducted to determine whether the existing interest limitation and tax evasion regulations are effective enough to prevent the transfer of taxable income beyond the taxation powers of Finland, for instance in private equity structures. 
3. The need to amend Controlled Foreign Companies legislation will be assessed from the perspective of aggressive tax planning. 
4. A provision will be introduced stating that an entity or a benefit under joint administration is considered Finnish if it was established under the laws of Finland, if its domicile is in Finland, or if its place of effective management is Finland. 
5. Regulations concerning profit equalisation in corporate groups will be revised and the deductibility of so-called final losses of foreign subsidiaries will be allowed. 
6. Hidden dividends should be considered entirely taxable income. 
7. The possibility of introducing a legal provision that defines beneficial owners will be investigated. 
8. The legal provision on the adjustment of transfer pricing will be revised to permit its application within the scope of the OECD transfer pricing guidelines. In the same context, an examination will made of whether the legislation needs to be clarified so that in profit allocation permanent establishments would be governed by the OECD guidelines. 
9. The concept of ‘economic employer’ will be introduced to ensure that in Finland employees cannot evade taxes by working for a seemingly foreign employer.