Different forms of forest property ownership

The ownership base of the forest property is most likely to be ascertained from the legal confirmation of possession of the property, that is from the registration of the right of ownership. The Land Register is maintained by the National Land Survey of Finland. Ownership is always reported as fractions. If the name of the owner is followed by the number 1/1 on the certificate of registered ownership, it means that the person owns the property alone.  

In addition to the right of ownership, the property is always subject to the right of possession. It can be granted to a person other than the one holding the right of ownership, for example, in connection with the transfer, by withholding or by will. The reserved right of possession may not have been recorded in the property information system. In that case, it may need to be clarified with the help of previous documents. It is essential to know who has the right of possession, as this person is the forestry operator. Usually, however, the right of possession belongs to the owner. 

Most commonly, a forest property is owned by one person or spouses together. If a person owns a forest property alone, he or she is the forestry operator. Spouses may have their own forest property or properties. In addition, they may have jointly owned properties. However, even if the spouses have their own properties, the spouses can be considered as one forestry operator for tax purposes. In this case, the spouses submit only one forest tax return and a VAT return. The allocation of the spouses’ forestry net capital income or loss-making capital income is made in relation to the number of hectares of the forest land. Forest hectares are made clear on the spouses' pre-filled tax returns by properties.  

Sometimes spouses want to file their own tax returns and engage in forestry independently. This is also possible by requesting it on the forestry tax return form (Form 2C). Forest property jointly owned by spouses is usually treated as a consortium. If the unmarried spouses have or have had a common child, then the tax treatment is the same as that of the spouses. 

A tax consortium is a form of ownership in which two or more persons own one or more properties together. Consortium shares are expressed as fractions. Based on the same fractions, the forestry profit or loss is distributed to the shareholders of the consortium. Typical examples of tax consortia are consortia consisting of parents and children or the ones consisting of siblings. Decisions in the consortium require unanimity. Consortia currently own 9% of Finland's private forests area.  

Upon the death of a person, forest ownership is transferred to the estate administration, that is to those persons who have the right to participate in the joint administration of the deceased person's property. Typically, the shareholders in the estate are the widow and heirs (children). An undivided estate may remain a forestry operator until a distribution of the estate or a division of property and a distribution of the estate are made. Decisions in the estate require unanimity. Currently, 9% of Finland's private forests area is owned by such estates. 

A jointly owned forest is a common forest area belonging to shareholder properties. The number of shareholder properties and the number of joint forest shares included in them may vary. The owners of the shareholder properties form a joint forest partnership, whose task is to manage the operations of the jointly owned forest. The first jointly owned forests were once established mainly through general reparcelling and settlement activities.  

In recent years, the establishment of and joining the new jointly owned forests have increased significantly due to the development of the legislation concerning jointly owned forests and surveying. Larger-than-average family forest properties have set up the so-called ancestral jointly owned forests. New jointly owned forests have been established by forest investors. They have also been established in connection with land reallocation arrangements and at the initiative of forest companies, forest management associations and municipalities. Currently, 6% of Finland's private forests area is owned in the form of jointly owned forests. 

The jointly owned forest is a separate taxpayer and the joint forest tax rate is 26.5 percent. When the jointly owned forest pays its shareholders a surplus, its shareholders do not pay any additional tax on the surplus. 

In Finland, the corporate forest ownership of private individuals has been low. Private forest ownership in the form of limited companies has increased in recent years, mainly due to the incorporation of larger estates. With the incorporation, the forests of these estates have been transferred to joint-stock forest ownership. In these cases, it has often been the case that at least the clear forest properties of the estates have been left outside the limited companies in the personal ownership of the farmers. 

In forest ownership in the form of a limited company, the tax rate is 20% when the forestry earnings are left with the limited company. However, the total tax rate rises to at least 27.5% (the limited company’s tax is 20% and the shareholder’s tax is 7.5%) when the owner of the limited company takes the forestry earnings from the limited company for his own personal use as a dividend. In forest ownership in the form of a limited company, it is not possible to use a forest deduction, forest gift deduction, provision for future liabilities and charges or deduction of the value of procurement work.   

When the transfer of the forest is made, the right of ownership and the right of possession can be separated from each other so that the ownership of the forest is transferred to a new owner or new owners, but the right of possession of the forest remains with the transferor or is transferred to, for example, the middle generation. Retention of the right of possession may be for life or for a fixed period. The value of the right of possession is deducted from the fair value of the property, and thus the gift tax, inheritance tax, or purchase price is reduced.