US Flip share exchange Finland taxation

Taxation of a US Flip in Finland

What is a US Flip?

Especially Finnish startup companies have been increasingly interested in introducing a US based parent company in their holding structure. In a US Flip the exiting shares of a Finnish limited liability company (Oy) are exchanged to new shares issued by a usually newly incorporate US company (such as Delaware C-Corp). After the Flip the US company will be the new groups parent company.

The main reason for a US Flip is generally better access to US funding sources. More directly the requirements/preferences of a new US investor to invest in a US company. On the other hand, the US Flip can also enable better access to talent, customers as well as visibility in the US investment and market scene.

How is a US Flip taxed in Finland?

In Finland a US Flip is a taxable event. The Finnish tax neutral share exchange rules are as a starting point applicable only within the EU and EEA countries. As United States is not an EU/EEA country the Flip is a taxable event for Finnish income tax purposes. Same applies likely also to the United Kingdom, as UK ceased to be a Contracting Party to the EEA Agreement after its withdrawal from the EU.

In some cases, it may be possible to structure a Flip through another EU/EEA country. For early-stage companies it may also be possible to execute a taxable Flip without significant tax cost. This may be the case e.g., when the business operations are still in an early stage, turnover is low and the company is loss making. Thus, as a rule, the earlier the easier it is to carry out a US Flip with a Finnish entity involved.

The possibilities and feasibility of a US Flip as well as the exact transaction structure and tax consequences depend on your individual circumstances and should be analyzed carefully.

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