Finland: Government proposal for a law on tax credits for clean technology investments
Written By
Partner
Finland
I am a partner in our Real Estate & Infrastructure group in Helsinki, heading our Nordic Energy and Infrastructure practice. In addition, I work with our Corporate and M&A Group with equity and debt related transactions.
Associate
Finland
I am an associate in our Real Estate group in Helsinki, specialising in Energy law. I also work with our Corporate and M&A teams in Finland.
Related
Practices
Sectors
Trending Topics
Regions
Countries
In April 2024, the Finnish Government held its discussions on the General Government Fiscal Plan for 2025-2028, releasing a plan to accelerate industrial investments through a temporary tax credit. The tax credit is aimed for large industrial investments supporting the transition to a net-zero economy, such as battery and hydrogen projects and fossil-free steel industry.
Key information on the legislative proposal
The newly proposed law aims to increase Finland’s competitive position for industrial investments, to stimulate large-scale industrial investments that utilize energy and to support the development of a clean transition industrial ecosystem in Finland.
The tax credit is based on the temporary state aid framework adopted by the European Commission in spring 2023, which intends to support the economies and green transition of EU Member States. The national entry into force of the proposed bill is conditional on the Commission finding it compatible with the state aid framework.
Eligible projects and amount of tax credit
New projects that begin work after the submission of the application are eligible. Eligible projects need to relate to:
- production of renewable energy; storage of electricity and heat; storage of renewable hydrogen, biofuels, bioliquids, biogases and biomass fuels;
- decarbonisation of industrial production processes and energy efficiency measures; and
- investments in the production of equipment, key components and related critical raw materials essential to the transition to a climate-neutral economy.
The tax credit is intended for eligible investments with a minimum size of EUR 50 million. The tax credit is proposed to be no more than 20 per cent of the investment costs and would be capped at EUR 150 million per company. In the tax credit model, the company would be able to deduct part of its investment costs from the corporate income tax. The tax credits need to be granted by the end of 2025 and used in 2028 at the earliest. The proposed credit is staggered, so a maximum of 10 per cent is available per year. The credit needs to be fully used within 20 years. If investments are due to be completed after 2028, the designated tax credit can only be used after the investment is complete.
Next steps
The proposal has been open to comments until 11 October 2024 and should be presented to the Parliament shortly. According to currently available information, the proposal will be presented to the Parliament as urgent, and a response will be given prior to the next parliamentary session brake.
If you would like to read about the tax credit in more detail, please see this article written by our Finnish partners Laura Huomo and Ville Alahuhta (in Finnish only): Valmistelussa merkittävä verotuki vihreisiin investointeihin - Lexology
