Selling or Buying Finnish Real Estate? VAT Could Change the Economics of Your Deal

On 5 November 2026, the Finnish Government submitted a legislative proposal to Parliament to reform the VAT rules on real estate investments and sales of real estate. The reform is expected to be adopted, although amendments are possible during parliamentary consideration.

For VAT purposes, real estate investments include new construction and qualifying renovation work. Currently, VAT deducted on these investments is monitored over a ten-year adjustment period.

Under the proposed rules, sellers could no longer pass their remaining VAT adjustment rights and obligations to the buyer in a property sale. To avoid repaying VAT deducted on earlier investments, the seller would need to choose a VAT-taxable sale, where available. For the buyer, any VAT incurred on the purchase that cannot initially be recovered would increase the acquisition cost.

Property investors and developers, businesses owning their premises, public bodies and tenants that have carried out qualifying renovation work should assess the proposal’s implications for their properties and investments.

If a property is sold during the adjustment period, the buyer can currently, subject to conditions, take over the seller’s remaining adjustment rights and obligations.

Under the proposed rules, a VAT-exempt sale would require the seller to repay previously deducted VAT attributable to the remaining adjustment period. Choosing to make the sale subject to VAT would avoid that repayment. Where VAT on the original investment was not fully deductible, a taxable sale could also allow the seller to recover previously non-deducted VAT for the remaining adjustment period.

For a taxable sale, the buyer would need to be a VAT-registered business, a municipality, a wellbeing services county, the State or another public-law entity.

The option would not be available for new buildings before first use. It would also be unavailable before a building is taken back into use following significant alterations intended to change its purpose or substantially change the conditions of its use, where those alterations make the building comparable to a new building. In the latter case, VAT on earlier investments could have to be repaid even though the seller cannot choose a taxable sale.

Any potential VAT repayment should therefore be factored into negotiations on the sale price and timing and considered when assessing the seller’s net proceeds from the sale.

Where the conditions described above are met, the VAT treatment of the sale and its effect on the price should be agreed as part of the transaction negotiations.

If the sale is taxable, VAT would be calculated on the full VAT-exclusive sale price, not merely on the cost of earlier construction or renovation work.

The buyer would generally report and, where entitled, deduct the VAT on its own VAT return rather than pay VAT to the seller. The amount deductible would depend on the extent to which the property is used for activities entitling the buyer to deduct input VAT.

A taxable purchase would also start a new ten-year adjustment period. Changes in the proportion of the property used for activities giving a right to deduct VAT could lead to further deductions or repayment of VAT already deducted.

The changes are proposed to apply from 1 January 2028, including to investments whose adjustment periods began before that date. If ownership and possession pass at different times, the transfer of possession would determine which rules apply. Even if ownership passes in 2027, the new rules would apply if possession passes in 2028.

Tenants could not use the new taxable-sale option when a lease ends. If a tenant receives compensation for qualifying renovation work, it would have to repay previously deducted VAT for the remaining adjustment period, rather than pass the adjustment right and obligation to the property owner. Without compensation, the end of the lease would not itself trigger an adjustment for that work.

Property owners, sellers, buyers and tenants should review how the proposed rules would affect existing investments and planned transactions.

Our Tax Team is happy to discuss the implications for your business, properties or planned transactions.