No Finnish credit or step-up for US green-card exit tax

A Finnish resident who gives up a United States green card and later sells securities taxed on the gain in Finland gets no step-up in Finnish acquisition cost to the value the United States taxed on exitFinlex, and Finland is not required to credit the United States exit tax against the later Finnish taxFinlex. The Supreme Administrative Court rejected the taxpayer's appealFinlex and left the Central Tax Board's advance ruling unchangedFinlex.

The case concerned a Finnish citizen who had lived in the United States for years and held listed shares and interests in unlisted companies and partnerships in the United States, Finland and third states. He was generally liable to tax in the United States as a green-card holder, held no United States citizenship, and had been treated in Finnish taxation as generally liable and treaty-resident in Finland from 2021. He was considering surrendering the green card, which would trigger United States expatriation tax on the appreciation as a deemed disposal at fair market value, and afterwards disposing of the same assets in a transaction taxable in Finland.

On acquisition cost, the Court held the treaty does not decide the questionFinlex; it is decided solely under domestic lawFinlex. Tuloverolaki contains no provision under which an exit value taxed abroad enters hankintamenoFinlex. Where the request assumes exit tax falls on a time when the person is already generally liable in Finland and treaty-resident there, the taxing right over the gain on other property under Article 13(6) has already passed to FinlandFinlex. In at least such a case, the fair market value used in the fictitious disposal is not included in acquisition cost under Tuloverolaki 46 §Finlex.

On the credit, Article 23(1)(a) read literally would have favoured the taxpayerFinlex because he is not a United States citizen and Finland must relieve tax the United States may levy other than solely on citizenship groundsFinlex. The Court held that provision does not form a coherent whole with the saving clause in Article 1(4) where the United States taxes solely on prior long-term residenceFinlex, so the duty was unclear and supplementary interpretation was available under Article 32 of the Vienna ConventionFinlex, guided by the treaty's object and purpose under Article 31.

On that systematic reading, Finland credits United States tax under Article 23(1)(a) only where the United States has a treaty-contemplated taxing right other than by virtue of Article 1(4) — other than because the person is a citizen, former citizen or long-term residentFinlex. The 2006 protocol extended Article 1(4) and Article 23(3) from citizens to former citizens and long-term residents with no stated intent to expand Finland's credit duty, and the ratification proposal described the change as minor. The Ministry of Finance confirmed the parties did not intend the costs of United States saving-clause taxation to fall on the other state. Because the United States right here could rest only on prior long-term residenceFinlex, Finland has no duty to credit the exit taxFinlex.

For practice, the taxes stack: the later Finnish gain uses historical acquisition cost with no upliftFinlex, and the exit tax is not creditedFinlex. Relief in saving-clause cases runs the other way, with the United States deducting the Finnish tax under Article 23(3).

Legal basis is KHO:2026:84Finlex, affirming Keskusverolautakunta 23.10.2025 no 47/2025Finlex for tax years 2025 and 2026, applying Tuloverolaki 45 § and 46 §, Laki kansainvälisen kaksinkertaisen verotuksen poistamisesta 1 § and 2 §, Articles 1(4), 13(6), 23(1)(a) and 23(3) of the Finland-United States tax treaty, and Articles 31(1) and 32 of the Vienna Convention on the Law of Treaties.