Tanak reported an engine issue with his Ford Puma after clocking the fastest time following the first pass of the 4.08km shakedown stage on Thursday morning.
The 2019 world champion was forced to be towed back to the service park to all his M-Sport team to investigate the problem.
M-Sport declared the problem to be a "fairly significant" issue which prompted the British squad to change the engine.
Teams are able to change engines under the WRC sporting regulations but the installation of a new power unit will incur a five-minute penalty, effectively ending Tanak's hopes of challenging for victory at his home round.
"We don't know exactly," said M-Sport team principal Richard Millener when asked to diagnose the issue.
"What we do know is it is fairly significant engine issue so we have no option but to change the engine which we can do by regulation but it will mean we will get a penalty before we start the rally.
"It is a really frustrating beginning to the rally and possibly the worst start we can have but that is the situation we find ourselves in.
"It will be a time penalty and regulations state that it will be five minutes, so that is going to put us at a serious disadvantage.
"We have got to switch focus and there is nothing we can change about what has happened. The focus will have to be on trying to salvage as much as possible from the event which will be very difficult obviously.
"The biggest disappointment is for Ott and for Martin [Jarveoja - co-driver] his team and I fully appreciate the situation in being in their home country and the expectation and the support from their home fans. There is nothing more frustrating about what is going on but we can't do much about it."
Millener revealed that it is unlikely the team will be able to carry out a thorough investigation into the problem until later this year due to the regulations.
"I would say it has surprised us," Millener added.
"Everything goes through its pre-event checks and everything is thoroughly checked and that was all passed and everything worked in the UK, so we are very surprised to see a problem very early on.
"But it is one of those things that we won't b able to look at for a considerable time as the engines are sealed for effectively the season. It is a tough one to swallow."
Tanak is expected to line up for this evening's opening stage which begins at 0805 BST.
Toyota driver and championship leader Kalle Rovanpera ultimately set the pace in shakedown by clocking a time in his fourth run that was 1.2s faster than Hyundai's Thierry Neuville. Hyundai team-mate Esapekka Lappi is third, a further 0.5s back.
