After the partial demerger, the original acquisition cost of UPM shares will be allocated between the UPM shares and the WISA Group shares for Finnish income tax purposes. As a general rule, the acquisition cost of the shares in the demerging company is allocated between the shares of the demerging company and the receiving company in proportion to their respective net asset values.
The acquisition cost attributable to the receiving company’s shares corresponds to the portion of the demerging company’s net assets transferred to the receiving company, and the acquisition cost attributable to the remaining shares of the demerging company corresponds to the portion of the net assets retained. However, if it is evident that the ratio based on the fair market values of the shares deviates significantly from the allocation based on net asset values, the acquisition cost may be allocated based on fair market values. In Finnish tax practice, a deviation of approximately 20 percentage points has been considered significant.
The allocation of the acquisition cost between UPM shares and WISA Group shares can only be determined once calculations showing the allocation of net assets between UPM and WISA Group are available, and once the weighted average prices of UPM shares and WISA Group shares for the first listing day and for the first five listing days are known.
The Finnish Tax Administration is expected to issue separate guidance and confirm the allocation ratio of the acquisition cost. UPM does not provide tax advice.
The acquisition cost allocation described above applies only to shareholders who are generally taxable in Finland. Shareholders who are tax resident in other countries are advised to consult their own tax advisor or local tax authorities regarding the determination of the acquisition cost of the shares for income tax purposes after the partial demerger.
