Tax planning is every entrepreneur's right – and a smart entrepreneur takes full advantage of it. Deducting financing costs is one of the most effective ways to legally optimize your tax burden. According to Statistics Finland, SME financing costs average 3.2% of revenue, so the significance of tax deductions is tangible. As an entrepreneur, I have personally benefited significantly from financing cost deductions.
Deductibility of Financing Costs in 2026
According to Finnish Tax Administration guidelines, business financing costs are generally fully deductible. This covers interest, commissions, service fees, and other financing-related costs. The exception is the interest deduction limitation, which however only applies to large net interest expenses.
Taxation of Invoice Financing
Invoice financing service fees and commissions are fully deductible business expenses. In bookkeeping, they are recorded either as financing costs or other operating expenses – both methods are acceptable.
Example: Tax deduction impact of invoice financing Company's annual invoice financing costs: EUR 12,000 Corporate tax rate: 20% Tax deduction impact: 12,000 x 0.20 = EUR 2,400 Actual net cost: 12,000 - 2,400 = EUR 9,600 The tax deduction reduces the actual cost by 20%.
In invoice financing, it is worth noting that the VAT treatment depends on the financing type. Pure financing service fees are VAT-exempt (financial service), but collection service fees may include VAT.
Interest Costs and Interest Deduction Limitation
Interest costs on bank loans, credit facilities, and other interest-bearing debts are deductible. According to the Bank of Finland, the average SME loan interest rate was 4.8% in 2025. The interest deduction limitation applies only to situations where the company's net interest expenses exceed EUR 500,000 per year.
Key features of the interest deduction limitation:
- Applies only to net interest expenses over EUR 500,000/year – does not practically affect SMEs
- Net interest expenses = interest costs - interest income
- Limitation: Net interest expenses are deductible up to 25% of adjusted business income
- Undeducted net interest expenses can be deducted over the following 10 tax years
- Intercompany interest payments are scrutinized more closely (transfer pricing)
Laskutusrahoitus
Invoice financing costs are fully deductible
Taxation of Leasing Payments
The taxation of leasing payments depends on the type of lease. Operating lease payments are deducted in full as business expenses. Finance lease (financial lease) is recorded on the balance sheet, and depreciation and the interest portion are deducted separately.
Leasing in taxation:
- Operating lease: The full rental payment is a deductible expense
- Finance lease: Depreciation + interest portion are deductible
- VAT: VAT on leasing payments can be deducted (if the company is VAT-liable)
- Car leasing: Special rules for passenger cars (deduction right limited for the private use portion)
Taxation of Factoring Costs
The taxation of factoring costs is straightforward: the commission and interest are deductible business expenses. If factoring includes credit loss protection, its cost is also deductible.
Tax Planning for Investments
Taxation of investments is based on depreciation. Machinery and equipment typically have a 25% declining balance depreciation per year. Software and intangible rights can be depreciated on a straight-line basis over 10 years. Small purchases (under EUR 1,200) can be deducted at once.
Depreciation rates 2026:
- Machinery and equipment: 25% declining balance depreciation
- Buildings: 4–7% declining balance depreciation (depending on type)
- Software: Straight-line depreciation over 10 years or at once (under EUR 1,200)
- Small purchases (under EUR 1,200): Immediate deduction
- R&D expenses: 150% enhanced tax deduction (in effect 2025–2027)
Note: The 150% enhanced tax deduction for R&D expenses is in effect 2025–2027. If your company's R&D expenses are EUR 100,000, you can deduct EUR 150,000 in taxation. This means an additional EUR 10,000 in tax savings (20% x EUR 50,000). Take advantage of this benefit!
Practical Tax Planning Tips
Tips for entrepreneurs:
- Time financing costs to the right financial year – costs can be allocated on an accrual basis
- Take advantage of the enhanced R&D deduction in 2026 – ensure documentation
- Compare the tax impacts of different financing types – leasing vs. bank loan vs. invoice financing
- Retain profits in the company – corporate tax of 20% is often more favorable than personal taxation
- Plan dividend distribution optimally – reduced dividend taxation at 8% of net asset value
- Document all financing costs carefully – inadequate documentation leads to loss of deductions
- Consult an accounting firm or tax expert – especially in complex arrangements
Choosing a Financing Type from a Tax Perspective
The tax impacts of different financing types differ from each other. In my own tax planning, I have learned that the choice of financing type should also be made considering the tax perspective.
Most Common Tax Planning Mistakes
Avoid these mistakes:
- Failing to record financing costs – all costs must be recorded in the correct financial year
- Inadequate documentation – keep contracts, invoices, and receipts for 6 years
- Failing to utilize the R&D deduction – document R&D expenses carefully
- Failing to optimize depreciation – compare depreciation methods for investments
- Unplanned dividend distribution – optimize the split between corporate and personal taxation
"Tax planning is not tax fraud – it is an entrepreneur's fundamental right. Every euro you legally deduct in taxation is an additional euro for your company's growth. Use it wisely."
Summary
Deducting financing costs is the entrepreneur's fundamental tool in tax planning. Invoice financing service fees, interest costs, leasing payments, and factoring costs are mostly fully deductible. The interest deduction limitation applies only to large net interest expenses and does not practically affect SMEs. Remember to time costs correctly, document carefully, and take advantage of the enhanced R&D deduction.
📌 Summary
Financing costs are mostly deductible: invoice financing service fees 100%, interest costs 100% (interest deduction limitation applies only to >EUR 500,000 net interest expenses), operating leases in full, factoring in full. The 150% enhanced R&D deduction is in effect 2025–2027. Corporate tax 20% – financing cost deductions reduce the actual cost by 20%.
Laskutusrahoituksen verovaikutukset
A deeper look at invoice financing taxation
Yritysrahoituksen ABC
All financing types explained and compared
