On 23 April 2025, the Finnish government announced a reduction of the corporate income tax rate from the current 20% rate to 18%.

Based on currently available information, the 18% tax rate will apply to all accounting periods ending in the calendar year 2027 and thereafter.

The tax rate reduction is subject to legislative process, which is expected to be completed at the end of 2025 or 2026. We will provide further updates on the legislative process as it proceeds.

We recommend that companies pay particular attention to the following:

• Tax accounting implications: The announced tax rate change from 20% to 18% is not yet substantively enacted for the purposes of IAS 12, Income taxes. Deferred tax should be recorded at the new rate only when the Finnish Parliament has approved the change, expected in Q4 2025 or 2026 (see further details below).

• Pillar Two implications: Companies should consider the effect on safe harbour calculations, which may increase the need for more detailed Pillar Two calculations.

• Modelling of Finnish corporate income taxes: Including the interaction with, for example, investment tax credits and interest deductibility restrictions.

• Tax loss expiration: Additionally, the Finnish government announced its intention to extend the expiration period for corporate income tax losses carried forward. Tax losses arising in the tax year 2026 (i.e. accounting periods ending in the calendar year 2026) and thereafter would be carried forward for 25 years. Based on the government announcement, tax losses incurred up to and including the tax year 2025 would continue to be carried forward for ten years.

Legislative process in Finland and tax accounting implications of the tax rate change

Legislative process in Finland 

In Finland, the Government issues its legislative proposals as a Government Bill (hallituksen esitys), which initiates the process in Parliament. After the legislation is approved by the Parliament, it is signed by the President, after which the law enters into force.

Substantively enacted vs. enacted

Deferred tax assets and liabilities are measured under IFRS® Accounting Standards* at the tax rates that are expected to apply to the period when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted by the balance sheet date. The International Accounting Standards Board (IASB) has noted that substantive enactment occurs when any future steps in the enactment process will not change the outcome.

Given the Finnish legislative process and practice, our view is that the point of substantive enactment in Finland for IFRS financial reporting purposes occurs when the Parliament approves the legislation.

Expected IFRS accounting impact

Deferred tax should be recorded at the new rate only when the Finnish Parliament has approved the change. If, for example, the rate is approved by the Parliament in December 2026, Finnish deferred tax assets and liabilities on the balance sheet as at 31 December 2026 would be fully measured at the new tax rate of 18%.

*Comprises IFRS Accounting Standards, IAS® Standards, IFRIC® Interpretations and SIC® Interpretations