- European Long-Term Investment Funds (ELTIFs) would be an efficient way to finance the green and digital transition.
- ELTIFs would make it possible to offer regulated alternative investment options for retail investors.
- Current Finnish tax legislation does not allow the offering of ELTIFs to non-professional investors.
- The tax rules would be fast and effortless to amend and doing so would not cut into central government tax revenue. If anything, permitting non-professional ELTIFs would bring more tax revenue to Finland. The rest of the legislative framework is already ready.
ELTIFs are the only long-term investment fund category that has cross-border distribution to both professional and retail investors. The EU ELTIF regulation has already been amended with provisions that facilitate the setting up of such funds. The ELTIF regulation is part of the Capital Markets Union action plan.
Finnish Minister of Finance Riikka Purra (Finns Party) has called for tax measures that help revitalise the Finnish economy. Economic growth requires investments, and they should be incentivised. Finance Finland proposes that the Finnish tax legislation is amended to permit the establishment of European Long-Term Investment Funds (ELTIFs) in Finland.
The European regulation of ELTIFs was harmonised and simplified with the revised EU ELTIF regulation, which entered into force at the start of 2024. The EU promotes the diversity of fund investment ‒ and so should Finland.
“Amending the tax rules would be quick and easy to do, and the change would not even cut into central government tax revenue. ELTIFs would enable the provision of regulated alternative investments for retail investors. This would make it possible to channel funding to unlisted companies, for example”, notes Finance Finland’s CEO Arno Ahosniemi.
Bringing variety to saving and investing
ELTIFs are considered an important means to finance the green and digital transition. The new type of funds would offer more alternatives for investors and also increase central government tax revenue.
“There is real demand for ELTIFs. If such funds cannot be set up in Finland, they will be set up somewhere else. The Government now has an excellent chance to prove it stands behind its programme and really supports households’ saving, investing and wealth creation. These are needed to revitalise economic growth.”
Largely due to the obstacles in regulation, ELTIFs have not become very well known or received much attention from investors or the fund industry in general. However, the recent review of the EU ELTIF regulation brought ELTIFs in the scope of the same provisions as other investments.
“Now is the time for Finland to react and change our national tax legislation accordingly. With EU regulation already enabling ELTIFs and national legislation standing ready, the only thing standing in the way is the tax legislation. We need a revision without delay”, says Ahosniemi.
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