host and influencer Enni Koistinen, podcast host Rosanna Kulju, and fitness entrepreneur Jooel Vatanen. Additionally, influencer and blogger Sara Kukkonen is reportedly in the process of setting up a holding company, though it is unclear if the share exchange has been finalized based on available financial statements.
“Over the past few years, there has been a real boom in tax planning within the influencer industry,” says Finnwatch tax expert Saara Hietanen.
Significant Tax Benefits from Holding Company Structures
Finnwatch estimates that the tax benefits from these arrangements can vary widely, but typically exceed €10,000 in the first year alone, with some aiming for annual tax savings of over €20,000. However, due to incomplete data, it was not possible to assess the tax benefits in every case.
These tax planning strategies, known as share exchanges, capitalize on the Finnish tax system's approach to dividends from unlisted companies, where the tax rate on dividends depends on the company's net assets. By artificially inflating the net assets of their holding companies, influencers can qualify for more lightly taxed dividends.
“The system rewards those who can boost their net assets, creating incentives for various tricks to increase net worth. When successful, this lowers the tax burden on dividends for years to come,” Hietanen explains.
Ethical Concerns and Calls for Legislative Action
While the report does not accuse the influencers of illegal activities, it suggests that these arrangements exploit loopholes in the tax law. Some influencers, such as Lauri Vuohensilta, have cited other reasons for the arrangements, like protecting against risks in the U.S. market. Vuohensilta was the only influencer to respond to Finnwatch’s inquiries about the arrangement.
Despite the possible legitimate reasons behind these arrangements, Finnwatch argues that the significant tax advantages they confer were likely not intended by lawmakers. The organization is calling for immediate action to close these loopholes.
“These holding company arrangements seek to achieve legal but morally questionable tax benefits. The practice will continue unless the government moves to close this loophole and amend the legislation,” Hietanen warns.
Finnwatch's report also provides new data on the prevalence of share exchanges in Finland, with over 2,000 such arrangements executed between 2020 and 2023. However, not all of these exchanges are related to dividend tax minimization.
The potential tax revenue losses for Finland are difficult to quantify precisely, but Finnwatch estimates they could amount to tens of millions of euros annually. The organization attributes the root of the problem to Finland’s failed policy on dividend tax relief for unlisted companies, which it says costs the country hundreds of millions of euros each year.
Last year, Finnwatch brought the issue of influencers’ share exchange arrangements to public attention, prompting Prime Minister Petteri Orpo to pledge a review of the matter and to address any loopholes.
“The decisions to close this loophole must be made in the budget negotiations next week. It is unsustainable that while others face austerity and cuts, some are granted unwarranted tax benefits,” Hietanen concludes.
HT
