Finland proposes wider interest deductions for critical infrastructure

The government proposes letting certain companies deduct net interest expenses that cannot be deducted under the current interest-limitation rulesVero, where the interest relates to critical infrastructure projectsVero. The change would cover entities that are critical operators under the act on the protection of critical infrastructure and the improvement of resilience (laki yhteiskunnan kriittisen infrastruktuurin suojaamisesta ja häiriönsietokyvyn parantamisesta), or that are subject to at least equivalent obligations.Vero

The relief would be project-specificVero: only long-term projects that produce, develop, use or maintain large-scale critical infrastructure qualifyVero, and the infrastructure must be necessary for providing essential services — services essential for maintaining vital societal functions, economic activity, public health, public safety or the environment.

Under the current rules in section 18 a of the Business Income Tax Act (laki elinkeinotulon verottamisesta, 360/1968)Finlex, interest expenses are deductible up to the amount of interest income, while net interest expenses above EUR 500,000 a year are deductible only up to 25% of the adjusted business result, with the non-deductible remainder carried forward to later years. The proposal would open an additional deduction for the project-related shareVero.

An entity using the new rule would have to split its operations into infrastructure projects and other activitiesVero and apply the interest-deductibility rules to each separately, keeping the project's income, expenses, interest, assets and liabilities segregated from the rest of the business. In addition, of the project's non-deductible net interest, the portion matching the ratio of net interest paid to parties other than private owners to all of the project's net interest would also be deductibleVero.

Using the new deduction would be voluntaryVero. An entity claiming it would have to demonstrate that the conditions are metVero, and would then have to apply the regime for the whole duration of the infrastructure projectVero.

The act would apply for the first time in 2027 taxationVero. An entity that already meets the conditions in tax year 2026 could deduct net interest accrued in 2026 and previously left undeducted in its 2027 taxationVero.

Legal basis: government proposal HE 227/2026 vpVero amending the interest-deduction limitation provisions of the Business Income Tax Act (360/1968)Vero.