Capital loan in Finland: legal terms, balance sheet and tax
A capital loan (pääomalaina) is a loan to a Finnish limited company (Oy) on the terms of the Limited Liability Companies Act (osakeyhtiölaki, OYL) chapter 12: it is paid after all other debts in liquidation and bankruptcy, repaid and paid any interest only out of surplus, and unsecured. Because of those terms, a capital loan counts as equity when the board checks whether the company has lost its share capital. If an Oy's equity is negative, the board must notify the Trade Register without delay, and a capital loan or an SVOP investment can bring equity back. All the ways to fix negative equity, step by step, are in our guide to negative equity and SVOP investments.
What a capital loan is: the three conditions
A loan is a capital loan only if the written agreement meets all three conditions in OYL 12:1:
| Condition | What it means |
|---|---|
| Ranks last | in liquidation and bankruptcy, principal and interest are paid after all other creditors |
| Paid only from surplus | principal and interest only to the extent free equity and all capital loans at the time of payment exceed the loss on the balance sheet in the financial statements for the last ended financial year, or in newer ones |
| No security | neither the company nor its subsidiary may secure principal or interest |
The agreement must be in writing, and a later change of terms or a security that breaks these conditions is void (OYL 12:2). A repayment, interest payment or security that breaks these conditions is treated as an unlawful distribution, which the recipient may have to return, and the Act's penalty provision applies (OYL 12:1, 13:4, 25:1).
A capital loan can be interest-free. Agreed interest that cannot be paid is not lost: it moves forward to the first financial statements that allow it (OYL 12:2).
Capital loan, ordinary owner loan or SVOP
An owner can put money into a struggling Oy in three ways. A loan from the company to the owner is a different thing: see shareholder loan.
| Option | Balance sheet and OYL 20:23 | Getting the money back |
|---|---|---|
| Ordinary loan from the owner | liability; does not count as equity | under the loan terms, with any agreed interest |
| Capital loan | separate line, normally in liabilities; counts as equity | only from surplus, any agreed interest too |
| SVOP investment | equity | by a distribution decision, no interest |
An SVOP investment comes back only through a distribution decision, taxed as explained in our SVOP fund article.
On the balance sheet
The Companies Act requires capital loans to be shown as a separate item (OYL 12:2). The Accounting Act allows them in equity only if their terms make them equity under international accounting standards; otherwise they go in liabilities (KPL 5:5 c).
The small company balance sheet scheme (PMA 2:4) has no line for capital loans, but new items may be added (PMA 2:6), so a small Oy adds "Capital loans" (Pääomalainat) as its own line under liabilities. The board's report or the notes to the financial statements give the main terms of the capital loans and any interest accrued but not expensed (OYL 8:5).
Negative equity: the duty to notify PRH
If the board finds that the company's equity is negative, it must without delay file a notice of loss of share capital (osakepääoman menettäminen) for the Trade Register (OYL 20:23). This applies even if the company has no share capital. (A public company, Oyj, has an extra duty: when its equity falls below half of share capital, the board must prepare financial statements and call a general meeting.)
For this test, the board adds to balance-sheet equity:
- capital loans under chapter 12, unless they are already presented in equity,
- the accumulated depreciation difference (poistoero) and voluntary reserves,
- an asset's probable sale price above its book value, if materially and not just temporarily higher.
The additions must be made with special caution and explained with reasons in the board's report or the notes.
According to the Finnish Patent and Registration Office (PRH):
- File in the YTJ e-service; paper forms are not accepted from 1 January 2026.
- A board member or the managing director signs; a procuration holder cannot.
- The notice needs no attachments and costs 55 euros.
- Removing the entry is a separate notice, also 55 euros, with a balance sheet showing equity above half of share capital (above zero if share capital is 0 euros) and a statement of any additions; for a capital loan, a mention in the equity calculation is enough. Both are audited if the company must have an auditor.
A change is proposed. Under government bill HE 126/2026, the notice would be due without undue delay and at the latest within two months; no notice would be needed if equity stops being negative within that time; and the entry could be removed once equity is no longer negative. The laws are intended to enter into force on 1 July 2027. Until an amendment is enacted and in force, the current rule applies.
For PRH filings in general, see changing company details at PRH.
Curing negative equity with a capital loan or SVOP
Equity for OYL 20:23 rises by the full amount of a new capital loan or SVOP investment. The owner and the company can also agree in writing that an earlier ordinary loan becomes a capital loan on the chapter 12 terms.
With the lender's consent, a capital loan can later be converted into SVOP equity, used to pay a share capital increase or used to cover the company's loss (OYL 12:1).
A board member may not take part in handling an agreement between themselves and the company (OYL 6:4), so in a company with several board members the others decide, in board meeting minutes. When the owner is the only board member, the shareholders decide unanimously instead (OYL 5:2). A shareholders' decision made without a meeting must be written down, dated, numbered and signed (OYL 5:1), like general meeting minutes.
A worked example
A small Oy has share capital of 2 500 euros. After two loss-making years, its balance sheet on 31 December 2026 looks like this. The owner has lent the company 10 000 euros on ordinary terms.
| Before | Euros |
|---|---|
| Assets: equipment 4 000, receivables 3 000, cash 2 000 | 9 000 |
| Share capital | 2 500 |
| Losses from earlier years | −6 000 |
| Loss for 2026 | −12 500 |
| Total equity | −16 000 |
| Owner's ordinary loan | 10 000 |
| Trade payables 9 000, other liabilities 6 000 | 15 000 |
| Equity and liabilities | 9 000 |
Seeing these figures in early 2027, the board files the loss of share capital notice. Converting the owner's loan alone would not be enough: −16 000 + 10 000 = −6 000.
In March 2027 the owner and the company therefore sign a written capital loan agreement of 20 000 euros: the existing 10 000 euro loan is converted, and the owner pays in 10 000 euros of new money. The table shows the position right after, assuming nothing else changed.
| After | Euros |
|---|---|
| Assets: equipment 4 000, receivables 3 000, cash 12 000 | 19 000 |
| Total equity (unchanged) | −16 000 |
| Capital loan | 20 000 |
| Trade payables 9 000, other liabilities 6 000 | 15 000 |
| Equity and liabilities | 19 000 |
The bookkeeping: debit the owner's loan 10 000 and credit capital loan 10 000; debit bank 10 000 and credit capital loan 10 000.
For OYL 20:23, equity is now −16 000 + 20 000 = 4 000 euros. That is more than half of the share capital (1 250 euros), so the company can file to remove the entry. The removal notice needs a balance sheet drawn up after the transactions, audited if the company must have an auditor. Any interest agreed on the loan can be paid only when the surplus test in OYL 12:1 is met; until then it moves forward.
Had the owner converted the loan into an SVOP investment and paid the new money into the SVOP fund instead, balance-sheet equity itself would be +4 000 euros, with no interest and no loan to repay.
Tax: the company and the lender
The company. Interest on a capital loan taken for the business is the company's interest expense when the loan is treated as debt (vieras pääoma), and interest on business debt is deductible even when it depends on the company's result. The interest limitation rule (EVL 18 a §) does not restrict the deduction when net interest expenses are at most 500 000 euros in the tax year, counting interest to group-related parties (konserniyhteysosapuolet) and to outsiders together. Other rules, such as the hidden dividend rule below, still apply.
The lender. For an individual shareholder taxed in Finland, interest at a fair rate is capital income, taxed at 30 % on the year's total capital income up to 30 000 euros and 34 % above. The part above a fair rate is a hidden dividend. If the loan is shown to be necessary because of the company's financial position, a fair rate is what a bank would charge for a similar loan; otherwise the Tax Administration treats the loan like an investment, with a fair rate of about the base rate (peruskorko, 2.75 % for July to December 2026) plus one percentage point.
If the company fails. Under the Tax Administration's guidance of 29 October 2026, an individual shareholder's capital loan lost in bankruptcy is added to the acquisition cost of the shares, so it becomes part of the capital loss on the shares. An ordinary loan is not added: its loss is generally not deductible. An ordinary loan turned into a capital loan just before bankruptcy, purely for tax reasons and with no business reason, may not be accepted as an investment.
Frequently asked questions
Is a capital loan equity or debt?
Both. In the books it is normally a liability on its own line, and only rarely in equity. For the loss of share capital test in OYL 20:23 it counts as equity.
Capital loan or SVOP?
A capital loan keeps a right to repayment and any agreed interest; an SVOP investment improves the balance sheet itself and comes back only as a distribution. Both count as equity for the PRH test.
About Karma Accounts
We keep the books for small Oys, prepare the financial statements and the equity calculation, and flag negative equity when the numbers show it, so the board can file and fix it in time. See limited company accounting or request a quote.
Sources
- Finlex: Limited Liability Companies Act 624/2006, chapters 5, 6, 8, 12, 13, 20 and 25 (in Finnish)
- Finlex: government bill HE 126/2026 amending the Limited Liability Companies Act (in Finnish)
- Finlex: Accounting Act 1336/1997, chapter 5 section 5 c (in Finnish)
- Finlex: Decree on the financial statements of small and micro undertakings 1753/2015, chapter 2 (in Finnish)
- PRH: loss of share capital (in Finnish)
- Tax Administration: disposals and losses of capital loans and other loans to companies, VH/5240/00.01.00/2026 (in Finnish)
- Tax Administration: limitation of interest deductions in business taxation (in Finnish)
- Tax Administration: hidden dividend, VH/3393/00.01.00/2025 (in Finnish)
- Tax Administration: tax bases
- Ministry of Finance: base rate (in Finnish)
Please note: this is general information about Finnish rules, not advice for your own situation, and the rules change. Ask us before you act on it.
Your Oy's books and year-end
Bookkeeping, VAT, the financial statements and the tax return for 199 € a month plus VAT up to 240 000 € of turnover, 249 € up to 500 000 € and a written quote above that. See accounting for limited companies.
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