Choosing a deal structure in a Finnish M&A: share deal vs asset deal, tax and warranty implications

Question

I'm considering selling my Finnish tech company and I'm unsure whether to do a share deal or an asset deal. What are the main tax and liability implications in Finland for each structure, and how should warranties and disclosures be drafted to protect me? Do I need an attorney to run due diligence and draft the sale agreement?

Markelin &amp; Somppi · Accepted Answer

Hi, Taxation depends, among other factors, on wether the seller is a Finnish entity. f seller is Finnish, the tax is typically 20 precent of the profit. We can provide all necessary assitstance.

Br Filip Markelin

Yritysjuristi · Answer

Share deal vs. asset deal — tax implications

Share deal (osakekauppa)

When you sell shares in a Finnish limited company (Oy), the gain is taxed at the shareholder level. For a natural person, the capital gains tax rate is 30% on gains up to €30,000 and 34% above that threshold. The acquisition cost is either your actual verified cost basis or the presumptive acquisition cost (hankintameno-olettama) — 20% of the sale price, or 40% if you've held the shares for at least 10 years. You use whichever produces the lower taxable gain.

The major planning opportunity here is the EVL 6b § participation exemption: if the seller is a Finnish corporate entity (Oy) rather than a natural person, and the shareholding meets certain conditions (at least 10% ownership held for at least one year, shares held as fixed assets), the capital gain can be entirely tax-exempt. This is a critical structural consideration — if you personally hold the shares, you'll want to evaluate whether a pre-sale restructuring (such as a share-for-share exchange into a holding company under TVL 45 § or the EU Merger Directive implementation) could bring you within the exemption. The timing is sensitive because the Tax Administration (Verohallinto) scrutinizes arrangements made shortly before a sale.

From the buyer's perspective, a share deal means no step-up in the tax basis of the company's assets, which can make it less attractive and affect the price. The buyer also inherits the company as-is, including all historical tax positions.

Transfer tax (varainsiirtovero) applies at 1.6% on the share transfer price for Finnish limited company shares, though a first-time buyer exemption exists in limited circumstances and a separate exemption can apply for certain qualifying securities transactions.

Asset deal (liiketoimintakauppa)

In an asset deal, the company itself sells its business assets — IP, contracts, equipment, goodwill — and the company recognizes the gain. Corporate income tax is 20% on the profit (sale price minus book value of the transferred assets). After paying CIT, you still need to extract the proceeds from the company, typically as dividends (which are taxed again at the shareholder level under the dividend taxation rules) or through liquidation. This double-layer taxation often makes asset deals significantly more expensive from the seller's perspective.

However, asset deals can be attractive for the buyer because they get a stepped-up tax basis in the acquired assets, including amortizable goodwill (typically over 10 years under EVL 24 §). This buyer benefit can sometimes translate into a higher headline price, partially offsetting your tax disadvantage.

Transfer tax implications differ too: asset deals trigger 1.6% on securities and 4% on real property included in the transfer, applied asset by asset.

Bottom line on tax: For a tech company where much of the value is in IP, goodwill, and contracts, a share deal is almost always more tax-efficient for the seller. The asset deal primarily benefits the buyer. Your negotiating position and the competitive dynamics of the sale process will determine which structure prevails.

Liability implications

Share deal — seller's exposure

In a share deal, the company continues as a legal entity with all its liabilities intact. The buyer acquires those liabilities indirectly by acquiring the company. Your exposure as seller comes primarily through the warranties and representations (vakuutukset) you give in the SPA. Post-closing claims will typically be framed as warranty breaches. Key risk areas for a tech company include IP ownership and freedom-to-operate, employee-related liabilities (including accrued holiday pay, pension contributions, and any ongoing disputes), tax compliance history, data protection and GDPR compliance, and revenue recognition and contract enforceability.

You benefit from a clean break — once the shares transfer and any earnout or escrow period concludes, your ongoing exposure is limited to the warranty framework.

Asset deal — seller's exposure

Paradoxically, an asset deal can leave you with more residual liability. The company remains yours after the sale (unless liquidated), and any liabilities not expressly transferred stay with you. There are also mandatory transfer-of-undertaking rules under the Employment Contracts Act (työsopimuslaki, TSL 1:10) implementing the EU Acquired Rights Directive: if the transaction qualifies as a transfer of a business or part of a business, employees transfer automatically with their existing terms, and the seller has secondary liability for employment obligations arising before the transfer for a period after closing.

Contractual liabilities can be messy in asset deals because many agreements require counterparty consent for assignment, and any contract that fails to transfer creates gaps.

Warranties, disclosures, and the SPA

Warranty and indemnity framework

Finnish M&A practice largely follows the Nordic SPA tradition, which is influenced by but distinct from Anglo-American practice. There is no statutory warranty regime for share sales — the framework is entirely contractual (and supplemented by general contract law principles under kauppalaki and oikeustoimilaki).

As a seller, your key drafting objectives should include the following.

Ensure warranties are qualified by disclosure. The disclosure letter (disclosure letter or tiedonantokirje) is your primary protection mechanism. Anything fairly disclosed against a warranty should not give rise to a claim. Define "fairly disclosed" carefully — you want a standard that includes all materials in the data room, not just items specifically cross-referenced to individual warranties. Negotiate hard on limitations of liability: a general warranty cap (typically 10–30% of the enterprise value for non-fundamental warranties), a de minimis threshold for individual claims, a basket or tipping mechanism before aggregate claims become payable, and a time limitation (typically 12–24 months for general warranties, longer for tax and title warranties). Distinguish between fundamental warranties (title to shares, authority, capacity) where caps may be higher or unlimited, and business warranties (financials, IP, employment, tax, compliance) where standard caps apply. Resist broad indemnity obligations, which provide euro-for-euro recovery without the limitations that apply to warranty claims. If the buyer insists on specific indemnities (for identified risks), ring-fence them carefully with their own sub-caps and sunset dates. Consider W&I insurance — warranty and indemnity insurance has become increasingly common in Nordic M&A. A buy-side W&I policy can allow you to give a cleaner exit with lower warranty caps while the buyer still has recourse through the insurer.

Disclosure process

Run a rigorous vendor due diligence (VDD) or at minimum a thorough internal pre-sale review. For a tech company, pay particular attention to IP chain of title (ensuring all employee and contractor IP assignments are documented — this is a frequent gap), open-source software compliance, GDPR compliance and data processing agreements, key customer and supplier contract change-of-control provisions, and any outstanding or threatened disputes. A well-organized virtual data room and comprehensive disclosure letter will reduce your post-closing exposure more than any amount of warranty negotiation.

Yritysjuristi · Answer

Share deal vs. asset deal — tax implications

Share deal (osakekauppa)

When you sell shares in a Finnish limited company (Oy), the gain is taxed at the shareholder level. For a natural person, the capital gains tax rate is 30% on gains up to €30,000 and 34% above that threshold. The acquisition cost is either your actual verified cost basis or the presumptive acquisition cost (hankintameno-olettama) — 20% of the sale price, or 40% if you've held the shares for at least 10 years. You use whichever produces the lower taxable gain.

The major planning opportunity here is the EVL 6b § participation exemption: if the seller is a Finnish corporate entity (Oy) rather than a natural person, and the shareholding meets certain conditions (at least 10% ownership held for at least one year, shares held as fixed assets), the capital gain can be entirely tax-exempt. This is a critical structural consideration — if you personally hold the shares, you'll want to evaluate whether a pre-sale restructuring (such as a share-for-share exchange into a holding company under TVL 45 § or the EU Merger Directive implementation) could bring you within the exemption. The timing is sensitive because the Tax Administration (Verohallinto) scrutinizes arrangements made shortly before a sale.

From the buyer's perspective, a share deal means no step-up in the tax basis of the company's assets, which can make it less attractive and affect the price. The buyer also inherits the company as-is, including all historical tax positions.

Transfer tax (varainsiirtovero) applies at 1.6% on the share transfer price for Finnish limited company shares, though a first-time buyer exemption exists in limited circumstances and a separate exemption can apply for certain qualifying securities transactions.

Asset deal (liiketoimintakauppa)

In an asset deal, the company itself sells its business assets — IP, contracts, equipment, goodwill — and the company recognizes the gain. Corporate income tax is 20% on the profit (sale price minus book value of the transferred assets). After paying CIT, you still need to extract the proceeds from the company, typically as dividends (which are taxed again at the shareholder level under the dividend taxation rules) or through liquidation. This double-layer taxation often makes asset deals significantly more expensive from the seller's perspective.

However, asset deals can be attractive for the buyer because they get a stepped-up tax basis in the acquired assets, including amortizable goodwill (typically over 10 years under EVL 24 §). This buyer benefit can sometimes translate into a higher headline price, partially offsetting your tax disadvantage.

Transfer tax implications differ too: asset deals trigger 1.6% on securities and 4% on real property included in the transfer, applied asset by asset.

Bottom line on tax: For a tech company where much of the value is in IP, goodwill, and contracts, a share deal is almost always more tax-efficient for the seller. The asset deal primarily benefits the buyer. Your negotiating position and the competitive dynamics of the sale process will determine which structure prevails.

Liability implications

Share deal — seller's exposure

In a share deal, the company continues as a legal entity with all its liabilities intact. The buyer acquires those liabilities indirectly by acquiring the company. Your exposure as seller comes primarily through the warranties and representations (vakuutukset) you give in the SPA. Post-closing claims will typically be framed as warranty breaches. Key risk areas for a tech company include IP ownership and freedom-to-operate, employee-related liabilities (including accrued holiday pay, pension contributions, and any ongoing disputes), tax compliance history, data protection and GDPR compliance, and revenue recognition and contract enforceability.

You benefit from a clean break — once the shares transfer and any earnout or escrow period concludes, your ongoing exposure is limited to the warranty framework.

Asset deal — seller's exposure

Paradoxically, an asset deal can leave you with more residual liability. The company remains yours after the sale (unless liquidated), and any liabilities not expressly transferred stay with you. There are also mandatory transfer-of-undertaking rules under the Employment Contracts Act (työsopimuslaki, TSL 1:10) implementing the EU Acquired Rights Directive: if the transaction qualifies as a transfer of a business or part of a business, employees transfer automatically with their existing terms, and the seller has secondary liability for employment obligations arising before the transfer for a period after closing.

Contractual liabilities can be messy in asset deals because many agreements require counterparty consent for assignment, and any contract that fails to transfer creates gaps.

Warranties, disclosures, and the SPA

Warranty and indemnity framework

Finnish M&A practice largely follows the Nordic SPA tradition, which is influenced by but distinct from Anglo-American practice. There is no statutory warranty regime for share sales — the framework is entirely contractual (and supplemented by general contract law principles under kauppalaki and oikeustoimilaki).

As a seller, your key drafting objectives should include the following.

Ensure warranties are qualified by disclosure. The disclosure letter (disclosure letter or tiedonantokirje) is your primary protection mechanism. Anything fairly disclosed against a warranty should not give rise to a claim. Define "fairly disclosed" carefully — you want a standard that includes all materials in the data room, not just items specifically cross-referenced to individual warranties. Negotiate hard on limitations of liability: a general warranty cap (typically 10–30% of the enterprise value for non-fundamental warranties), a de minimis threshold for individual claims, a basket or tipping mechanism before aggregate claims become payable, and a time limitation (typically 12–24 months for general warranties, longer for tax and title warranties). Distinguish between fundamental warranties (title to shares, authority, capacity) where caps may be higher or unlimited, and business warranties (financials, IP, employment, tax, compliance) where standard caps apply. Resist broad indemnity obligations, which provide euro-for-euro recovery without the limitations that apply to warranty claims. If the buyer insists on specific indemnities (for identified risks), ring-fence them carefully with their own sub-caps and sunset dates. Consider W&I insurance — warranty and indemnity insurance has become increasingly common in Nordic M&A. A buy-side W&I policy can allow you to give a cleaner exit with lower warranty caps while the buyer still has recourse through the insurer.

Disclosure process

Run a rigorous vendor due diligence (VDD) or at minimum a thorough internal pre-sale review. For a tech company, pay particular attention to IP chain of title (ensuring all employee and contractor IP assignments are documented — this is a frequent gap), open-source software compliance, GDPR compliance and data processing agreements, key customer and supplier contract change-of-control provisions, and any outstanding or threatened disputes. A well-organized virtual data room and comprehensive disclosure letter will reduce your post-closing exposure more than any amount of warranty negotiation.

Choosing a deal structure in a Finnish M&A: share deal vs asset deal, tax and warranty implications

Lawyer Answers

Markelin & Somppi

Yritysjuristi

Share deal vs. asset deal — tax implications

Liability implications

Warranties, disclosures, and the SPA

Yritysjuristi

Share deal vs. asset deal — tax implications

Liability implications

Warranties, disclosures, and the SPA

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