The taxman defies the law, accuses the lawyer – Millions of disputes over the profit tax of electricity companies

A dispute of principle has developed over the temporary profit tax law enacted for electricity companies due to the Russian war of aggression, the financial interest of which rises to millions of euros.

The tax assessed by the Helsinki Administrative Court to be in violation of the EU regulation is still applied by the taxpayer.

Administrative law did made a decision on the matter a year ago in the summer. Supreme Administrative Court (KHO) did not admit in February of the current year, the state, i.e. the tax payer’s law enforcement unit, applied for an appeal permit.

The law firm that originally prosecuted the case on behalf of Fortum Castrén & Snellman shareholder Janne Juusela wondering about the actions of the taxman.

“This is a legally binding decision of the administrative court, which the Court of Appeals has practically accepted with a non-appeal decision. According to the decision, the Profit Tax Act was fundamentally contrary to EU law and therefore cannot be applied to any taxpayer,” says Juusela.

Administrative right: Not applicable

Hello Marine (sd) the government prepared a temporary profit tax law at the end of 2022. Technically speaking, it is different from the EU regulation, where the so-called excess profits of electricity companies were cut with a price ceiling.

In Finland, instead of a price ceiling, the government decided on a model where the amount of profit tax was defined as 30 percent to the extent that the return exceeds the 10 percent return on equity committed to the electricity business.

From this Finnish model, the Administrative Court of Helsinki stated in June 2025 as follows:

“When the profit tax in the electricity sector is based on a completely different regulation than the upper limit of market income, and thus it is not possible to interpret the regulations regarding the profit tax in the electricity sector in line with the EU regulation, the administrative court considered that the tax calculated in accordance with the Profit Tax Act cannot be collected from the company, at least for the period of the EU regulation’s validity.”

The decision in question only concerned Fortum, but according to Juusela, referring to the violation of the EU regulation makes it principled and thus it should guide the taxman for all companies.

Fortum, which at the time pursued the matter, has no financial interests in the case, but it was a matter of principle. According to Fortum, the law was unclear, and it did not take into account electricity price protection, which cuts off the income from peak prices.

The tax was valid until 2023, but according to Juusela, it has been levied as back taxes even after the Supreme Administrative Court’s negative appeal decision last February.

Kauppalehti has seen the post-tax decision made by the taxman, in which almost five million euros have been added to the taxable income of a company based on the 2023 Profit Tax Act.

Taxman: We follow the law

According to the tax administration, it has operated in accordance with Finnish legislation, and thus it cannot be exempt from taxation.

“Parliament has enacted the tax law. The court has more freedom to overstep it based on the law and the constitution. We don’t have anything similar as an authority. How could we leave the statutory 50 million untaxed, i.e. waste state funds with that amount?” says the leading tax expert of the Norwegian Tax Administration Sami Varonen.

According to him, the decision of the Supreme Administrative Court (KHO) not to grant leave to appeal does not mean that the administrative court’s decision will become a preliminary decision like the KHO.

“Of course, a published administrative court decision for which the Supreme Administrative Court has not granted leave to appeal has greater significance than an ordinary administrative court decision. On the other hand, there can be many reasons why the Supreme Court does not grant leave to appeal,” Varonen estimates.

He also points out that the EU regulation in question has been applied in many different ways in the member states, and other member states have not necessarily followed the formulation of the regulation.

The Tax Administration has also monitored the decisions made by the EU Court in the case. According to Varonen, they do not “unambiguously support the conclusion that the Finnish profit tax law could not be applied”.

“Of course, based on the KHO’s decision, we assess whether this is a situation where we should, on the authority’s initiative, return the taxes by correcting the taxation in favor of the taxpayers. It stated that the limit will not be exceeded and that we will proceed through the customer’s correction claims,” ​​says Varonen.

Thus, the matter proceeds case by case to the Board of Adjustment for Taxation and possibly even to the court, if the taxpayer or the tax recipient appeals the decision of the Board of Adjustment.

According to Varonen, the vast majority of those subject to profit taxation are appealing the taxman’s decision. The financial interest varies from thousands of euros to around ten million euros.

“Serious problems of principle”

Janne Juusela, a partner at the law firm Castrén & Snellman, strongly criticized the taxman’s approach.

“There are serious problems of principle associated with the tax administration’s approach. The legal system is based on the principle of legality, according to which the authorities must comply with the law in force. The content of the law in force in the Profit Tax Act is that the law is inapplicable as it is contrary to EU law. Ignoring the law in force can be considered a blatant violation of the core principles of the legal system and the basic rights of taxpayers,” Juusela reports.

When the Profit Tax Act is enacted as its revenue was assessed as much as 0.5–1.3 billion euros. In the end, the truth was different: the Ministry of Finance told To Kauppalehti a year ago, that the tax revenue received from the Profit Tax Act has been 44 million euros.