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Temporary profit tax for companies in the electricity and fossil fuel sectors

Companies operating in the electricity sector or the fossil fuel sector file a tax return on their profits gained from operations in these sectors. The profit tax is a temporary measure  that entered into force on 24 March 2023. All companies in these sectors are required by law to pay an additional profit tax on the profits they have received due to the increased consumer prices of electricity and fossil fuels. The profit tax must be paid in addition to regular income taxes.

Companies in the electricity and fossil fuel sectors must also file a separate tax return on the profit tax to the Tax Administration. If the company’s accounting period has ended during the 2023 calendar year, the tax return must be filed by 30 April 2024. If the company’s accounting period ends in 2024, the tax return must be filed by the end of April 2025. 

The Provincial Government of Åland has not implemented the profit tax legislation in the Åland Islands.

What kinds of companies must pay profit tax?

For the purposes of the profit tax, a company can be a corporate entity, a business partnership, or a private individual operating a trade or business. The same definition applies in both the electricity sector and the fossil fuel sector.

A company must pay profit tax for operations in the electricity sector if they operate in the electricity market and either produce or distribute electricity.  The combined turnover of the company’s electricity business must be at least €500,000.Electricity production is the generation of electric power, while electricity distribution is the selling of electricity to consumers or retailers.

A company is not subject to the profit tax on electricity business if they only operate electricity networks or if their electricity business is electricity retail as defined in § 3, paragraph 12 of the act on electricity markets (Sähkömarkkinalaki 2013/588). Exemption from profit tax is discussed in more detail in chapter 2.2 of the detailed guidance on the profit tax in the electricity and fossil fuel sectors (available in Finnish and Swedish, link to Finnish).

A company must pay profit tax for operations in the fossil fuel sector if more than 75% of their turnover consists of one or more of the following operations:

  • production of crude oil or natural gas
  • manufacture of refined oil products from crude oil
  • manufacture of coal products.

If the company operates in both the electricity sector and the fossil fuel sector, they only need to pay the profit tax in the fossil fuel sector.

How to calculate the profit tax

The basis of profit tax in the electricity sector is the part of profit that exceeds a certain reference limit. The reference limit is 10% of the annual profit that has been calculated on the adjusted equity of the electricity business. Profit tax is not paid on the entire business result, but rather on the amount that exceeds the reference limit. The profit tax is 30% of the part of the result exceeding the limit.

Example: 

The result of the company’s electricity business is €3,000,000. The adjusted equity of the electricity business is €10,000,000. The 10% annual profit calculated on the adjusted equity is €1,000,000. The part of the profit that exceeds the reference limit, i.e. the basis of the profit tax, is €2,000,000 (€3,000,000 – €1,000,000). The amount of profit tax is €600,000 (€2,000,000 × 30%).

The basis of profit tax in the fossil fuel sector is the part of profit that exceeds a reference limit. The reference limit is based on the previous years’ results. The limit is 120% of the average business result for tax years 2018–2021. The profit tax is 33% of the part of the tax year’s business result that exceeds this limit.

Example:

In tax year 2018, a company operating in the fossil fuel sector had a negative business result (according to § 3 of the act on the taxation of business income (360/1968)) of –€500,000. In tax year 2019, the company’s result was €1,500,000. The previous year’s losses were subtracted from this amount, meaning that the company’s result for the tax year as defined in § 3 of the act on the taxation of business income was €1,000,000. In the following years, the business result (according to § 3 of the act) was €2,000,000 for 2020 and €2,500,000 for 2021.

The company must pay the profit tax in the fossil fuel sector for tax year 2023. The company’s business result for tax year 2023 is €5,000,000. For the purposes of the profit tax, a reference limit is calculated for the company. The profits for 2023 are then compared to this reference limit. The reference limit is based on the average business result for tax years 2018–2021. The company’s average result for these years is €1,375,000: (–€500,000 + €1,500,000 + €2,000,000 + €2,500,000) / 4. The reference limit is 120% of this average, i.e. €1,650,000.

The profit that exceeds the limit is calculated by subtracting the limit amount from the result for tax year 2023. The profit exceeding the reference limit amounts to €3,350,000 (€5,000,000 – €1,650,000). This is the basis of the profit tax, i.e. the profit amount from which the tax amount is calculated. The profit tax in the fossil fuel sector is 33% of the profit exceeding the reference limit, i.e. 33% × €3,350,000 = €1,105,500.

Instructions for filing profit tax

The profit tax is calculated for the tax year. If the company’s accounting period is not the calendar year, a tax year consists of the accounting period or periods which have ended during the same calendar year. If the tax year consists of more than one accounting period, a separate tax return must be filed for each period.

If your company has an accounting period or periods that ended in 2023, you must file a tax return on the profit tax by 30 April 2024. If your company has no such accounting period, file the return for the accounting period or periods that end in 2024 by 30 April 2025. Please note: in some cases, the company’s income tax return must be filed before the profit tax return.

The tax return on profit tax must be filed electronically. The Tax Administration will not accept returns filed on paper, unless you have a special reason to do so.

File the profit tax return in MyTax

See instructions for completing the tax return on profit tax

If necessary, you can request more time for filing the tax return in MyTax.

If you file the tax return or related information late, the Tax Administration may impose a late-filing penalty or punitive tax increase.

Tax assessment and the tax decision

The Tax Administration uses information provided by third parties as well as the information submitted on your profit tax return in the assessment of your profit tax. After the assessment process is complete, you will receive a tax decision. The decision will show the assessment result and the amount of tax to pay, if any.

When is profit tax assessment completed?

The assessment end date is shown on your tax decision. However, the assessment process is always completed by the end of October in the next calendar year after the tax year. The profit tax assessment for 2023 therefore ends by 31 October 2024. The profit tax assessment for 2024 ends by 31 October 2025.

You can add information and correct details on the tax return up until the end of the tax assessment process. If you make additions or corrections, the assessment end date may change from what is stated in the original tax decision.

In addition, if the Tax Administration continues the tax assessment for tax control purposes, for example, the end date may be changed. In this case, the Tax Administration will send you a notice before the end date, stating that the assessment process is still ongoing.

If you have made additions or corrections to the return or if the Tax Administration has notified you that the assessment process is still ongoing, you will also receive a new tax decision at a later date even if the assessment result does not change. The new tax decision will show the new assessment end date.

You can request an advance ruling on profit tax

You can request an advance ruling on profit tax in the electricity and fossil fuel sectors from the Tax Administration if needed. As the request concerns income taxation, submit the application for advance ruling before the due date of the tax return. Even if the Tax Administration has granted you an extension for filing your tax return, you must submit your application for advance ruling by the original due date.

Read more about requesting an advance ruling.

Paying the profit tax

After the tax assessment process is completed, the company will receive a tax decision on profit tax. Please note that you cannot pay profit taxes as prepayments. In addition, unlike for income taxes, you cannot receive web invoices for profit tax. You can pay the profit tax in MyTax. The payment details can be found in MyTax or on the tax decision.

Claim for adjustment of profit tax

You can claim adjustment within 3 years of the start of the next calendar year after the tax year. Instructions for appeal are enclosed with the tax decision. Check the instructions for the deadlines for filing claims.

You can file a claim for adjustment as soon as the tax assessment process has ended. The end date is stated in the tax decision. Depending on your accounting period, the assessment process for profit tax ends either in October 2024 or in October 2025. While the assessment process is ongoing, you can make changes to the tax return by filing a new tax return.

You can file a claim for adjustment in MyTax.

Additional information

Temporary profit tax for companies in the electricity and fossil fuel sectors — other pages

Page last updated 6/10/2024