A change of ownership of a forest property can also be implemented as a pure gift. The gift as a method of transfer is well suited to situations where the transferors do not need to get a purchase price from the forest. Likewise, the gift is suitable for situations where there is only one heir or if other heirs are donated property other than forest. The gift is also suitable for situations where the forest is sparsely wooded and a significant amount of wood cannot be felled in the next few years. In this case, the forest deduction through trade is of little significance.
A gift-like transaction is also suitable for some situations, in which case the seller receives some of the purchase price. The buyer, on the other hand, receives the forest deduction from the forest property he or she purchased. The forest deduction is calculated from the acquisition cost.
The received gift is taxed in accordance with the gift tax regulations. The received gift is subject to the gift tax if the value of the gift is 5,000 euros or more. Gifts received from the same gift giver over a period of three years are combined and taxed as a single gift.
Gift tax (I tax bracket) as of 1.1.2017:
|
Gift value, euros |
Tax at the lower limit, euros |
Tax in excess, % |
|
5 000 – 25 000 |
100 |
8 |
|
25 000 – 55 000 |
1 700 |
10 |
|
55 000 – 200 000 |
4 700 |
12 |
|
200 000 – 1 000 000 |
22 100 |
15 |
|
1 000 000 – |
142 100 |
17 |
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Gift tax category I includes the spouse, child, adopted child, grandchild, parents, grandparents or adoptive parents of the gift donor or the child or grandchild of the spouse of the gift donor.
Gift tax (II tax bracket) as of 1.1.2017:
|
Gift value, euros |
Tax at the lower limit, euros |
Tax in excess, % |
|
5 000 – 25 000 |
100 |
19 |
|
25 000 – 55 000 |
3 900 |
25 |
|
55 000 – 200 000 |
11 400 |
29 |
|
200 000 – 1 000 000 |
53 450 |
31 |
|
1 000 000 – |
301 450 |
33 |
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Gift tax category II includes other people than close relatives.
The recipient of the gift can use the gift tax calculator to calculate the gift tax in advance in various situations. A gift given is combined with inheritance taxation if the gift donor dies within three years of the gift being given and if the recipient of the gift inherits from the same person.
The gift (and will) may exclude the marital rights of the current or future spouses of the recipients. The marital rights of the spouses cannot be ruled out in the transaction.
The recipient of the gift must file a gift tax return to the tax authorities on their own initiative within 3 months of receiving the gift. The gift tax return can be made in the MyTax service or with a paper return. The tax administration sends a separate decision on gift taxation to the taxpayer. Gift tax payment forms are also provided to the taxpayer.
The unused forest deduction right of the previous owner will be transferred to the new owner in connection with the gift. Unfinished ditch cleaning and supplementary ditching as well as forest road construction depreciation will also be used by the new owner in connection with the donation. The transferring forest owner may not make the forest deduction or depreciation for the year of the change of ownership, but the forest deduction and depreciation shall be made by the owner who owns the forest parcel at the end of the year (31 December).
Forest gift deduction
The forest gift deduction may have arisen from the gift tax paid on the forest donated on 1 January 2017 and thereafter or sold in a gift-like transaction. The forest gift deduction cannot arise from inherited forest.
The lower limit of the forest gift deduction is the so-called value of the forest which is EUR 30,000 in accordance with the Valuation Act. The value according to the Valuation Act = 10 x forest land area (hectares) x average yield of forested land per municipality (euros per hectare). The calculation uses the forest property hectares indicated in the pre-filled tax return. However, in areas with low forest yields (Northern Finland and Åland), the lower limit is 100 hectares of forest land. The lower limits for the forest gift deduction (30,000 euros and 100 hectares of forest land) are gift-specific, in which case each different gift has its own lower limit.
The forest gift deduction base is the gift tax paid for the part exceeding the threshold of EUR 30,000 (or 100 hectares) x 2.4. In practice, the compensation is between 72% and 81% of the gift tax exceeding the threshold.
The forest gift deduction must be used during the 15 years following the year of the forest donation. The deduction can be made from the net capital income of all forests of the forest owner, from which the entrepreneur deduction has still been deducted. Net capital income refers to the net income from forestry if all forestry deductions (forest deduction, provisions, annual expenses, depreciation) have been deducted from the taxable income from forestry (income from timber sales, forestry subsidies, insurance and compensation for damage, taxable own use of timber).
The forest gift deduction to be made in the tax year is a maximum of 50% of the net capital income of forestry (from which the entrepreneur deduction has also been deducted). The annual deduction must be at least EUR 1,500 and may not exceed EUR 195,000.
Voluntary transfer of a forest property or a part of a forest property (more than 10%) over a period of 15 years results in the loss of the forest gift deduction benefit, that is, the forest gift deductions made are recognized as income increased by 20%.
The forest gift deduction claim is made in personal taxation in May in connection with the submission of a pre-filled tax return using Form 2L.
Example calculation of the forest gift deduction in 2021
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A 90-hectare forest property in Salo will be donated to one gift recipient by one donor. Gift tax category I.
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According to the estimation, the fair value of the forest property is EUR 350,000. The gift tax will be EUR 44,600 for the recipient of the gift.
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According to the Valuation Act, the value of a hectare of forest land in Salo is EUR 1,222.90 per hectare (10 x EUR 122.29 per hectare), so the limit value of EUR 30,000 means an area of about 25 hectares of forest land in Salo.
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According to the Valuation Act, the value of the forest in Salo is 90 hectares x EUR 1,222.90 per hectare = EUR 110,061.
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The forest gift deduction is calculated using the following formula: (EUR 110,061 - EUR 30,000) / EUR 110,061 x EUR 44,600 x 2.4 = EUR 77,863. A maximum of EUR 23,359 (EUR 77,863 x 0.3), or approximately 52% (calculated at a capital gains tax rate of 30%), can be returned over the next 15 years.
Detailed instructions for using the forest gift deduction can be found in the in-depth forest gift deduction guide on the Tax Administration's website in Finnish.
Forest gift deduction calculator
In cooperation with Tapio Oy, the Finnish Forest Centre, the Ministry of Agriculture and Forestry and the Tax Administration, the forest gift deduction calculator was completed in 2017, and it can be used by all actors and forest owners working with changes of ownership of forest properties. The calculator can be used to assess the possibility of using the forest gift deduction before the donation and to calculate the amount of the final forest gift deduction after the donation. In addition to the forest gift deduction, the calculator also takes into account the possible forest deduction.