Taxation of interest on members’ capital and equity bonus

Metsäliitto Cooperative withholds tax on interest on members’ capital paid to natural persons, estates and partnerships. The withholding tax rate is 7.5 per cent if the interest on members’ capital is less than EUR 5,000. The withholding tax rate on interest in excess of this is 25.5 per cent. Interest on members’ capital less than EUR 20 is exempt from withholding tax.

Taxation of equity bonus

When the fund increase share paid by Metsäliitto Cooperative for additional shares subscribed at a discounted rate is transferred to the member’s additional shares at the end of the restriction period, this transfer is not yet taxable income for the member. The taxation of the fund increase share is only actualised when terminating or disposing of additional shares.

If a member terminates the additional shares subscribed at a discounted rate at the end of the restriction period, the fund increase share of 15 per cent that Metsäliitto Cooperative invests on the member’s behalf will be taxed as capital gain for the year in which it is paid to the member’s account.

If additional shares subscribed with Equity Bonus are transferred to a new owner for consideration (such as in a sale or trade), the share of 15 per cent that Metsäliitto Cooperative invests on the member’s behalf is counted in the transferor’s taxation as capital gain for the year in which the additional shares are transferred. When determining taxable capital gain, the acquisition cost of the additional shares is considered to be the subscription price paid by the transferor for the additional shares (85 per cent).

If additional shares subscribed with Equity Bonus are transferred to a new owner as inheritance or gift, the recipient of the inheritance or gift must pay inheritance or gift taxes for it, if applicable. An inheritance or gift is a transfer without consideration, and as such, they do not cause capital gain taxation for the inheritance or gift tax.

Members must independently monitor the acquisition costs of their additional shares and report any additional share terminations and sales in their taxation. Please note that a forest partnership is not considered a taxpayer, but instead each party to the partnership is treated as a taxpayer. On the other hand, an estate is treated as a taxpayer. Metsäliitto Cooperative will send the member a report on the transfer of additional shares. The form for reporting capital gains can be found on the Tax Administration’s website. Capital gains and losses can also be reported online through MyTax.

Overview of the taxation of the equity bonus for different types of transfer

BEFORE THE RESTRICTION PERIOD ENDS

• Personal withdrawal: If the Equity Bonus share is terminated before the restriction period ends, the fund increase share is lost and no taxable capital gain is accumulated.
• Sale, trade or other transfer for consideration: Capital gains tax on the capital gain must be paid if the transfer price exceeds the 85 per cent share paid by the member.
• Inheritance or gift: The calculated fund increase share is transferred to the recipient of the inheritance or gift, even if the restriction period has not ended. The transferred additional shares must be valued at their fair value in the recipient’s inheritance or gift taxation. If it can be assumed that the recipient of the inheritance or gift will be keeping the additional shares until the end of the restriction period, the Tax Administration should accept a fair value that also includes the fund increase share of 15 per cent. If the inheritance or gift tax value also includes the fund increase share of 15 per cent, and the additional shares are terminated after the end of the restriction period, the value reported for inheritance or gift tax will be considered the acquisition cost for taxation, and no taxable capital gain is accumulated.

AFTER THE END OF THE RESTRICTION PERIOD

• Personal withdrawal: Capital gains tax is paid on the capital gain. The share of 85 per cent paid by the member for the additional shares is an acquisition cost for the additional shares in taxation, and as such, the share of capital gain is the 15 per cent fund increase share paid by Metsäliitto Cooperative.
• Sale or other transfer for consideration: Capital gains tax on the capital gain must be paid if the transfer price exceeds the 85 per cent share paid by the member for the additional shares.
  • In addition, the buyer pays transfer tax.
• Inheritance or gift: The transferred additional shares must be valued at their fair value for inheritance or gift taxation, so the fair value must also include the fund increase share of 15 per cent.

Example calculations, transfer for consideration

Example 1: The member transfers additional shares subscribed at the discounted rate at full price; 1,000 shares at EUR 1 per share

Example 2: Member transfers additional shares subscribed at the discounted rate, without taking into account the share paid by Metsäliitto Cooperative on the member’s behalf (during the restriction period)

*In the examples, annual capital income is less than EUR 30,000.

Limitation of liability: Metsäliitto Cooperative is not responsible for the taxation of its members or third parties, and the advice on this page is provided as a guideline.