Inheritance Tax in Finland

Who pays inheritance tax

In Finland, inheritance tax (perintövero) is levied on each individual heir or beneficiary based on the value of their share of the estate. The tax is personal -- each heir files and pays independently, not the estate as a whole.

Inheritance tax liability arises when:

• The deceased was resident in Finland at the time of death (tax applies to worldwide assets).
• The heir is resident in Finland (tax applies to their worldwide inheritance, even from a foreign estate).
• The inheritance includes real property located in Finland, regardless of where the deceased or heir is resident.

The taxable value is determined based on the estate inventory deed (perukirja), which must be completed within three months of death. The deed records all assets and liabilities of the estate at fair market value on the date of death. For guidance on the estate inventory process, see our article on estate administration.

The Finnish Tax Administration (Verohallinto) calculates the tax based on the estate inventory deed and issues a tax assessment to each heir. Heirs have the right to appeal the assessment if they disagree with the valuation.

Tax classes and rates

Finnish inheritance tax uses a progressive scale with two tax classes based on the relationship between the heir and the deceased.

Tax Class I -- spouse, direct descendants (children, grandchildren), direct ascendants (parents, grandparents), and the spouse's direct descendants and ascendants.

Tax Class II -- all other heirs, including siblings, nieces, nephews, friends, and unrelated persons.

For example, a child inheriting 150,000 euros would pay: 3,500 + 13% of (150,000 - 60,000) = 3,500 + 11,700 = 15,200 euros in inheritance tax.

A friend inheriting the same 150,000 euros would pay: 8,900 + 29% of (150,000 - 60,000) = 8,900 + 26,100 = 35,000 euros.

Exemptions and deductions

Several exemptions and deductions can significantly reduce the inheritance tax burden:

General threshold -- inheritances valued at 20,000 euros or less are completely tax-free. This applies per beneficiary.

Spouse exemption (puolisovähennys) -- the surviving spouse can deduct 90,000 euros from their taxable inheritance. Combined with the 20,000-euro threshold, the spouse effectively pays no tax on the first 110,000 euros inherited.

Minor child exemption (alaikäisyysvähennys) -- a child under 18 years old who is the deceased's nearest heir can deduct 60,000 euros from their taxable inheritance.

Life insurance exemption -- life insurance payouts to close relatives include a 35,000-euro tax exemption per beneficiary. The surviving spouse receives an additional exemption of 50% of the payout.

Household goods -- ordinary household goods up to a value of 4,000 euros are exempt from inheritance tax.

Funeral and estate administration costs -- reasonable funeral expenses, estate administration costs, and the estate inventory fee are deductible from the estate's assets before calculating tax.

Right-of-use deduction -- if a beneficiary receives only the right to use property (e.g., through a right-of-use will), the value of the right-of-use is deducted from the owner's taxable value. This is a significant planning tool.

Filing and payment

The inheritance tax process follows a defined timeline:

1. Estate inventory -- must be completed within 3 months of death. An extension can be requested from the Tax Administration.
2. Filing the estate inventory deed -- the deed must be submitted to the Tax Administration within 1 month of the inventory.
3. Tax assessment -- the Tax Administration reviews the deed and issues tax decisions to each heir. This typically takes 6-12 months.
4. Payment -- inheritance tax is due within 3 months of the tax decision, payable in two installments (the first within 3 months, the second within 5 months).
5. Appeals -- heirs can request a rectification within 3 years of the beginning of the year following the tax decision.

If the inheritance includes illiquid assets such as real estate or a business, paying the tax can be challenging. In such cases, the heir may apply for an extension or installment plan. It is also possible to sell inherited assets to cover the tax liability.

Each heir is responsible for their own tax, and the Tax Administration sends individual decisions based on the information in the estate inventory deed and any supplementary declarations.

Strategies to minimize inheritance tax

While tax avoidance is illegal, legitimate tax planning can substantially reduce the inheritance tax burden. Common strategies include:

Lifetime gifts -- gifts are taxed under the gift tax (also in the Inheritance and Gift Tax Act), but strategic gifting over time can be more tax-efficient than a single inheritance. Gifts under 5,000 euros within a 3-year period are tax-free.

Right-of-use wills -- a will that grants the surviving spouse right-of-use to assets rather than ownership reduces the taxable value for the next generation, because the right-of-use value is deducted.

Life insurance planning -- structuring life insurance with proper beneficiary designations takes advantage of the 35,000-euro exemption per beneficiary and the spouse's 50% exemption.

Distributing the estate broadly -- because each beneficiary has a 20,000-euro threshold and progressive rates, distributing assets among more beneficiaries can result in lower total tax.

Business succession relief -- if the inheritance includes a family business or farm, partial tax relief may be available under specific conditions defined in the tax law.

Timing -- the valuation date is the date of death. Understanding how asset values fluctuate and planning accordingly can affect the tax outcome.

Professional tax advice is recommended for estates exceeding 100,000 euros or involving complex assets.

Frequently asked questions

What is the inheritance tax threshold?

Inheritances of 20,000 euros or less are tax-free per beneficiary.

When must inheritance tax be paid?

Typically 6-12 months after the estate inventory, with payment due within 3 months of the tax decision.

Do I pay tax if I live abroad?

If the deceased was resident in Finland, Finnish inheritance tax applies to worldwide assets regardless of where heirs live. Double taxation treaties may provide relief.

Is the surviving spouse's inheritance taxed?

Yes, but the spouse benefits from a 90,000-euro personal exemption plus additional life insurance exemptions.