In some cases, a forest estate abundant with trees is best handed over to the next generation against payment. If the transferor has not yet made a forest deduction, a transaction against payment will make the estate eligible for such a deduction.
The forest deduction is a tax benefit targeting forest owners, which allows forest owners to deduct up to 60 per cent of the forest’s acquisition cost. In practice, this enables forest owners to sell a certain amount of wood tax-free.
The amount of the tax base for the tax deduction is calculated on the basis of the estate’s acquisition cost. In addition to the purchase price, the acquisition cost includes all other costs from the purchase, such as the transfer tax, land register costs and any costs incurred from the splitting of the estate. The tax base for the forest deduction is equal to 60 per cent of this acquisition cost.
When a forest owner sells wood, they can make a forest deduction on the capital income from forestry in the same fiscal year. The smallest deduction accepted by the tax authorities is 1,500 euros. At the most, forest owners can deduct 60 per cent of the capital income obtained from forestry in the fiscal year.
The tax benefit to the forest owner is significant, often amounting to thousands or even tens of thousands of euros. If no tax base can be calculated for the estate, a gift or inheritance will not make the estate eligible for a forest deduction. However, any unused forest deduction that the estate is eligible for will transfer to the successor even if no payment has been made for the transaction.
For many forest owners, the forest deduction is not only a new concept, but also difficult to grasp. Despite its apparent simplicity, the forest deduction is one of the most difficult elements in forest taxation.
Metsä Group’s experts in generational handover are familiar with forest deduction, and these topics are discussed in connection with generational handover. The forest deduction can play a decisive role in the solution that our specialist recommends. Each generational handover will be considered individually, taking into account all the different variables.