Legal Alerts/17 Jun 2026

Clean Investment Opportunities: An Extension for Finland’s Tax Credit for Large Clean Transition Investments is Proposed

The Finnish Government has published a new draft proposal aimed at fostering large-scale industrial investments that support the transition to a climate-neutral economy. The proposed tax credit closely resembles the previous tax credit for large industrial projects, which was available in 2025. While some minor adjustments have been made compared to the previous tax credit, the core idea remains the same.

As relevant background, 54 projects applied for the previous tax credit in 2025, requesting a combined total of approximately EUR 3 billion in tax credits. Of these, 40 projects were approved, with a total of EUR 2.3 billion in tax credits granted. As the previous tax credit will only become deductible starting in 2028, no data on its actual utilisation is yet available.

Key features

Overall, the tax credit is designed to reduce the financial burden on companies undertaking large-scale, climate-friendly projects. The tax credit will target large industrial investments with a general minimum threshold set at EUR 50 million, which is mostly calculated separately for each investment (for some investment categories, calculation is done at the company or group-level). The proposed credit would cover up to 20% of the investment costs (15% for clean technology manufacturing projects unless the applicant is an SME or the project is located in a regional aid area, in which case 20% applies), capped at EUR 150 million (calculated on a consolidated basis for groups of companies). If a company carries out an investment project in partnership with another company, the maximum amount of the tax credit is EUR 150 million per investment project.

Eligible projects for the tax credit include:

production of biofuels, biogas, and renewable and low-carbon synthetic fuels; storage of electricity and heat;
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 new investments decided upon by the end of 2027. Business Finland will manage the approval and monitoring process, and applications are intended to be submitted through Business Finland's online service, whereas the role of the Finnish Tax Administration should mainly be focused on the technical implementation.

The companies entitled to the tax credit could start deducting the credit from their corporate income tax from 2029 onwards. However, the tax credit can be deducted no earlier than in the tax year in which the investment is completed. Furthermore, in each tax year, the deduction for the tax credit can be a maximum of 10% of the total amount of tax credit granted to the company.

Aspects to consider

Eligible expenses: Eligible costs comprise capitalised fixed-asset investment costs recorded in the applicant’s accounts. Wages, overhead costs, financing costs, travel expenses, and VAT are excluded from the eligible cost base. Notably, this exclusion may place companies that rely on in-house expertise to manage their investment projects at a disadvantage compared to those that outsource such work. This is because costs incurred from outsourced services do qualify for the credit, whereas internal staff costs do not. In practice, the proposal therefore incentivises the use of external service providers. Expenses generally qualify only where the written order or contract was concluded after the filing of the application.
Only for new projects: The tax credit should be applied before the commencement of work related to the investment, meaning that only new investment projects would be eligible for the credit. This is justified by the fact that the support should have an incentivising effect, so funding should not be granted for projects that have already begun. Certain limited exceptions exist for pre-application procurement orders that are explicitly made conditional on credit approval. Purchase of land and preparatory tasks, such as obtaining permits and conducting preliminary feasibility studies, would not be considered as the commencement of work. However, it should be noted that earthworks (e.g. land levelling and piling) may be considered the commencement of construction activities.
Investment threshold: The minimum eligible cost threshold is generally EUR 50 million per investment project. For energy production and storage investments, no euro-denominated threshold applies; instead, the minimum facility size is 1 MW of nominal capacity. For industrial decarbonisation and energy efficiency projects, the EUR 50 million threshold may be calculated at the level of an investment programme consisting of technically similar and economically related projects within the same group, provided each individual project has eligible costs of at least EUR 10 million. For clean technology manufacturing investments, the threshold is assessed on a per-facility basis.
Completion deadline: All investment projects must be completed and operational within a specified timeframe from the date the credit is granted. For energy production and storage investments, the deadline is 48 months, except for pumped hydro storage and renewable fuels of non-biological origin (RFNBO) or low-carbon fuel production projects, which are subject to a 60-month deadline. Industrial decarbonisation and energy efficiency projects, as well as clean technology manufacturing projects, must be completed within 60 months. If the deadline is exceeded, the credit amount is reduced by 1% for each full calendar month of delay. However, no reduction is applied if the company demonstrates that the delay was caused by unforeseeable circumstances beyond its control that could not have been avoided despite the exercise of due diligence.
Taking advantage of the tax credit: The tax credit is not limited to offsetting tax on income generated by the specific investment project. Therefore, it can also be applied against the company’s other taxable income. In addition, the credit can be utilised within a corporate group through the Finnish group contribution system, as tax arising from received group contributions is also eligible for the deduction. This means that the tax credit can effectively be shared across group companies, significantly broadening its practical value.
Global minimum tax: The tax credit is deducted from the corporate income tax payable by the company after foreign tax credits have been applied, and the deduction requires a euro-denominated claim by the company. The company should evaluate whether it is required to pay supplementary tax under Pillar II due to the deduction of the credit and the consequential decrease in its effective corporate income tax rate. It is therefore not an automatic ex officio tax deduction, but the deduction is always based on a discretionary claim by the company. Minimum tax rules should accordingly be taken into account when determining the deductible amount.

Next Steps

The draft proposal is open for consultation until 19 June. As with the previous tax credit, the proposed credit constitutes State aid under EU law and will only enter into force after European Commission approval. Finland has already made a pre-notification to the Commission earlier this spring and discussions are ongoing; changes to the final proposal may however be required.

At this stage, it is advisable for companies to begin identifying projects that may qualify for the tax credit. It is important to note that no work related to the project can begin yet, but it would be crucial to start preparing calculations and estimates for the application well in advance to ensure that the application can be processed and granted smoothly by the end of 2027. Business Finland will publish more detailed guidelines for the application process and its timeline after the law has been passed.

If you have any questions concerning the proposed tax credit, please contact the undersigned or other members of our Tax team, Environment & Natural Resources team, Projects & Construction team, or Energy & Infrastructure team.