The forest gift tax deduction allows forest owners who have received a forest estate as a gift in connection with a generational handover to deduct part of the gift tax for the estate from their wood trade income. The amount of the forest gift tax deduction is based on the gift tax paid for the generational transition.
In practice, the donee must first pay the normal gift tax. After this, they can annually make a forest gift deduction of no more than 50 per cent from the taxable capital income from forestry. The deduction can also be made from wood trade income concerning another forest estate you own. The forest gift tax deduction can only be made from the capital income from forestry. In other words, it cannot be used as a deduction from other income, based on loss-making transactions.
A minimum surface area, determined on the basis of the municipality in which the forest is located, has been defined for the forest gift tax deduction. The surface area is determined per donee, and all the forest land included in the same gift can be taken into account in the surface area. Since the forest gift tax deduction is only granted for inter vivos gifts, and not in connection with inheritance, it encourages planned generational handover.