Splitting a capitalisation contract triggers no tax; premiums follow savings

The Finnish Central Tax Board (Centralskattenämnden, KVL) has ruled that splitting a capitalisation agreement (kapitaliseringsavtal) into several agreements by amending its terms triggers no taxable income for the holderVero, and that the premiums paid are allocated among the new agreements in proportion to the savings transferred to eachVero. The Swedish- and Finnish-language rulings, CSN:024/2025Vero and KVL:024/2025VeroVero, concern the same application. The ruling covers the tax years 2026 and 2027Vero and was decided by 7 votes to 1; it is not final (Ej lagakraftvunnet / Ei lainvoimainen)Vero.

The applicant was the policyholder, that is the owner, of the capitalisation agreementVero and was considering splitting it either into identical capitalisation agreements or into agreements of similar size but with different content. The split was technically possible by changing the existing terms without surrendering the policyVero.

The Board noted that a capitalisation agreement is a form of indirect investment in which the holder does not own the underlying assets but owns the agreement itself, whose performance tracks the underlying assets. Taxation is realised under the principles of sections 34 and 35 of the Income Tax Act (Inkomstskattelagen / Tuloverolaki)Vero when payments under the agreement are made as insurance payments, surrender value or under any other nameVero.

The agreement the applicant owned was divided by contractual amendment into several capitalisation agreements that the applicant continued to ownVero. Since no funds were paid out in connection with the divisionVero, the applicant's financial position did not change. The amendment gave the applicant no payment from the agreement and no possession of the assets covered by itVero.

The Board held that the described amendment was neither a surrender (återköp / takaisinosto) of the agreement the applicant owned nor an exchange (byte / vaihto) for other propertyVero, that is, no disposal (överlåtelse / luovutus). The division therefore realised no taxable income in the applicant's taxationVero, regardless of how the assets were distributed among the agreementsVero.

On the acquisition cost, the Board held that splitting the agreement should not affect what share of a payment later made from it is taxableVero. The premiums of the applicant's agreement are thus allocated among the new agreements in proportion to the savings transferred to each.

The applicant could also give a written direction — for example in a will or a written direction taking effect on death — that the agreement be divided on the applicant's deathVero. The Board held that giving such a direction, to be executed only later, realised no income in the applicant's taxation at the time it was givenVero.

For advisers, the operative points are that a pure contractual split with no payout is not a realisation eventVero, that premiums travel with the savings into each successor agreementVero, and that a testamentary direction to split later is likewise not taxed when givenVero.

Legal basis: Inkomstskattelagen (Tuloverolaki, 1535/1992) 29 §(1), 34 §(1) and (5), 35 §(1) and 110 §.