Finland Issues Guidance on Allocation of Income & Taxes for Pillar 2

On November 25, 2025, the Finnish Tax Administration published guidance on the allocation of profits/losses and taxes between group entities to take account of the June 2024 OECD Administrative Guidance (AG4).

It should be noted that on November 3, 2025, Finland issued also a draft law to amend its Minimum Tax Act for the June 2024 and January 2025 OECD Administrative Guidance. Whilst there is some overlap with the latest guidance, the latest guidance includes substantial detail on the specific operation of the rules for the allocation of income and taxes between constituent entities, including PEs, CFCs and flow-through entities. The  guidance confirms that the operation of the rules in Finland isbased on the OECD Commentary (as updated). This also includes the amendments in the June 2024 OECD Administrative Guidance.

Aspects of the June 2024 OECD Administrative Guidance included in the latest guidance includes:

-Specific rules for foreign PEs/CFCs, Hybrids/reverse hybrids with domestic source income (Article 3.1.3 of AG4)

-Cross-crediting between Permanent Establishments and distributions from foreign subsidiaries (Article 3.1.3 of AG4)

-Extension of the Substitute Loss Carry-forward DTA to PEs, hybrids and reverse hybrids (Article 4.1 of AG4)

-Allocation of deferred tax expenses and benefits from a Parent Entity to a CFC, PE Hybrid or Reverse Hybrid: 5 step process (Article 4.2 of AG4)

-Five-Year Election to exclude the allocation of all deferred tax expenses and benefits to CFCs, PEs, Hybrids and Reverse Hybrids (Article 4.2.2 of AG4)

-Determining GloBE status when a Flow-through Entity is held directly by another Flow-through Entity (Article 5.2.2 of AG4)

-Non-group owners: Partially owned Flow-through Entities (Article 5.3.2 of AG4)

-Non-group owners: Indirect minority ownership (Article 5.3.5 of AG4)

-Taxes allocated to a flow-through entity (Article 5.4.2 of AG4)

-Hybrid entities – Taxes pushed down include indirect owners (Article 5.5.2 of AG4)

-Hybrid entities – Entities located in jurisdictions without a Corporate Income Tax system (Article 5.5.4 of AG4)