Proposal on tax-deductible donations is step forward for Finnish civil society

The Finnish Ministry of Finance has published a draft legislative proposal to reform the tax legislation on donation deductibility. The proposed changes aim to expand the scope of donations eligible for tax deductions and to harmonise the rules applicable to private individuals and legal entities.

Donation deductibility has been part of the Finnish tax system in some form for decades. Originally introduced to support national defence and other wartime needs, it reached its broadest scope in the late 1980s before being significantly limited during Finland’s comprehensive tax reform, which aimed for a simpler and more neutral tax system by eliminating various deductions.

Current rules allow:

• Private individuals to deduct donations of €850–500,000 if given to publicly funded universities in the European Economic Area (EEA).
• Legal entities to deduct donations of €850–250,000 given to EEA-based universities, and €850–50,000 given to associations or foundations (nominated by the Tax Administration) supporting science, arts, or Finnish cultural heritage.

The newly proposed reform introduces several key updates:

• Expanded eligibility of donation purposes and recipients: Tax-deductible status would extend to cash donations made for purposes that promote science, arts, the preservation of Finnish cultural heritage, youth work or youth activities, physical activity and sports and the welfare of children.
• For private individuals:  The tax deduction is 30% for donations of at least 500 euros. Annual caps: €50,000 for EEA-based universities, €5,000 for associations and foundations.
• For legal entities: The tax deduction is equal to the amount of corporate tax for donations of at least €850. Annual caps: €250,000 for EEA-based universities, €50,000 for associations and foundations.

Finnish fundraising association VaLa: A good development, but further improvements needed

VaLa’s response, from Pia Tornikoski, secretary general, and Tessa Robertsson, communication & advocacy coordinator, is as follows:

This reform is an important step toward strengthening a culture of giving in Finland. It has the potential to enhance the fundraising opportunities for civil society organisations by making private donations more attractive. We see the direction of the proposal as positive — especially if its implementation is carried out in close dialogue with the nonprofit sector. To ensure effectiveness, it is essential to avoid unnecessary duplication of efforts and to provide clear guidance to organisations.

However, several concerns remain that need to be addressed for the reform to be truly inclusive and impactful.

VaLa welcomes the proposal to broaden the range of eligible recipients. Nevertheless, the current draft excludes, by estimate, at least one-third, and potentially up to two-thirds, of all nonprofit associations and foundations from being eligible for tax-deductible donations. This means that many organisations working in environmental protection, animal welfare, health and social services, and international development would be left out.

Ironically, these are often among the most popular causes among Finnish donors, as numerous studies have shown. The exclusion of these organisations has been justified in the draft proposal only from a financial standpoint, without a transparent explanation of the underlying policy rationale.

VaLa strongly believes that all nonprofit associations and foundations holding an official fundraising permit should be eligible to apply for tax-deductible donation status. This would be the clearest, fairest, and most donor-respecting solution. There is broad consensus within the Finnish civil society sector on this point.

It’s important to note that Finland is an exception among many European countries in that all fundraising activities require either a fundraising permit (granted by the National Police Board) or, in the case of small-scale fundraising campaigns up to €10,000, a prior notification to the police. This means that Finnish organisations are already subject to significant regulatory oversight when raising funds. Adding another filter for eligibility would place an unnecessary burden on many nonprofits that are otherwise highly trusted and well-governed.

Since tax-deductible donations would be a new concept for many Finnish donors, a broad and coordinated public communication effort is essential. Civil society organisations alone cannot shoulder the burden of building public trust and awareness around this new framework. Clear, supportive messaging from public authorities is crucial to explain the purpose of the tax deduction, the value of giving, and the societal role of civil society organisations.

Final thoughts

VaLa considers the reform of donation deductibility an important part of a broader effort to strengthen the Finnish civil society. It must be seen not in isolation, but as one piece of a comprehensive framework that supports the diversity, sustainability, and resilience of the nonprofit sector.

While important, tax deductibility alone cannot compensate for recent cuts in public funding. VaLa stresses that additional supportive measures are needed to improve the fundraising environment, such as:

• reforming gambling legislation to allow nonprofit-led lotteries and raffles,
• introducing VAT relief options for nonprofit organisations.

Based on VaLa’s experience, fostering more inclusive and participatory dialogue between public authorities and civil society actors is essential for effective and future-proof fundraising development.