The Tax Expert and What he Suggests

The Tax Expert and What he Suggests


An expert working group set up by the Ministry of Finance identified a second loophole in dividend taxation in its 2020 report on dividends distributed by unlisted companies. Wealthy investors and entrepreneurs in particular have the opportunity to raise significant returns on a limited company at a light tax rate.

Substantial dividend tax relief encourages the channeling of labor income to the corporation. It also directs inefficient use of capital when it is worth leaving funds to a limited company even if the company does not need them for its business. Dividend taxation should be reformed on the basis of the model presented by the working group. Alternatively, dividend taxation could be simplified based on the models.

Insurance covers on the same line as other investment products

Investment insurance and capitalization agreements, so-called insurance envelopes, make it possible to defer taxation of investment income even indefinitely. Funds can be withdrawn from the insurance envelope tax-free in the amount of invested capital, and the income accumulated in the investor’s envelope is not taxed at all in USA if the assets are donated further or the funds are raised abroad after the move. In this case, however, the increase in value may be subject to inheritance or gift tax or foreign tax.

The right Tax Advanatages                              

The tax advantage for unit-linked insurance not only directly narrows the tax base, but also threatens the Finnish tax base more broadly. The wealthiest can use insurance envelopes sold by Finnish and foreign insurance companies as tools for their investment activities, while direct investments by small investors do not have a similar tax advantage.

  • Despite its name, insurance covers are specifically an investment product that has nothing to do with actual insurance. The total capital of insurance shell investments has risen to tens of billions of euros.

In the first place, the tax advantage should be eliminated by taxing the income accumulated in the insurance envelopes as the income of the investor where the direct investment. In that case, the income would be taxed directly by the beneficial owner of the insurance cover. The short-term option would be to apply a Swedish-style wealth tax to insurance covers in addition to income tax, in which case they would be subject to an annual tax based on the fair value of the insurance cover. However, this model would require the valuation of assets on an annual basis, which would be difficult for some asset classes. If insurance envelopes were to be subject to an ad valorem tax, it would be necessary to assess at the same time whether the income tax on them should be reduced at the same time in order to avoid double taxation. Make a visit to for the perfect solutions.

Tax treatment of fund investments similar to other similar investment products

In addition to insurance envelopes, fund investments also enjoy a similar tax advantage. Some mutual funds manage investments by a small number of owners, so they can be used for tax planning. Therefore, such funds should be treated in the same way for tax purposes as the insurance envelopes described above.

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