Trust

The institution of trusts came into force more than 10 years ago, and the new Civil Code has designated them as a type of contract and introduced a separate law with detailed rules.

Fiduciary trusts are a responsible but also a great option for natural persons with large private assets, as they can offer tax advantages, and solve management, succession, matrimonial property, private property protection, succession challenges or even provide as a preparation for a sale. A well-constructed contract can plan the fate of the assets for years, or even decades, with regular review. We find that our clients who opt for this structure are at first reluctant, but then increasingly brave, to address issues during the provisions that affect their fundamental life situations:

• How can I ensure the successful future of a company built up over many years of work, and the predictable future of employees?
• What role can individual family members play in the fate of the company?
• Do they want to be involved in management at all and is there a Plan B if I cannot hand over the running of the company to the person I care most about?
• What happens to all the assets I have built up from my own resources after my death?
• How can I ensure that my family members can live their own lives in peace and prosperity after I am no longer able to help them?

To consult on these issues is a matter of great trust for us, and we approach such trust with the same care and respect.

At the same time, however, we often come across offers and opinions on the market which identify the tax advantage of asset management – which is otherwise welcome – as the most important objective and which make everything subject to this – but, in our view, the goal does not justify the means in this case either.

The recent joint statement of the Tax and Information Department of the Tax Authority and of the Ministry of National Economy clarifies a position we have previously held under the Civil Code, the Accounting Act and the Income Tax Act, that dividend claims to be placed in trust (which can be done at the time of the conclusion of the trust deed or at a later date), does not alter the liability to pay public tax under the public law, i.e. if the dividend has already been declared in the concerned tax year, it is taxable as a dividend regardless of whether it is paid or placed in trust.

The fact that the Ministry-Tax Authority have published their position paper and that the audit of trusts is a priority in the 2025 audit plan means three things in our view:

• those who have not assigned the assets in the above manner, based on the combined interpretation of the Civil Code, the Accounting Act and the Tax Act, are expected to be subject to self-audits;
• those who have not paid due attention to the “substance principle” in the process of disposing of their assets are recommended to review their contracts and adapt the relevant provisions;
• those who plan to set up a trust this year should take into account that there are different tax consequences for dividends already declared and amounts placed in the profit and loss reserve.

We believe that if we know the rules of the game well, it is possible to win by playing the game cleanly, even collectively.

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