Finland: Amended relief at source and quick refund procedure for dividend distributions with withholding tax rates below 15%

Further to our Taxflash, Clearstream Banking¹ would like to inform customers that, effective

1 July 2020

relief at source and quick refund requests for withholding tax rates below 15% will only be available through Clearstream Banking for Finnish dividends paid with value date on or after 1 July 2020 by following the new procedure described below.

The amended procedure follows clarifications obtained from the Finnish Tax Authorities (FTA), which have clarified that relief at source and quick refund requests for withholding tax rates below 15% may only be applied by beneficial owners claiming in accordance with the Double Taxation Treaty (DTT) provided that, prior to each dividend payment, a declaration is issued by the beneficial owner himself in which he confirms that:

• his entitlement to the dividend payment is not restricted by any contractual arrangements which would require that the dividend paid to the recipient is transferred further (such as securities lending/borrowing arrangements);
• he is entitled to the application of withholding tax at the reduced tax rate in accordance with the DTT.

It is further clarified that such a declaration may not be issued by an intermediary bank but must be issued by the actual beneficial owner himself.

Impact on customers

Following the FTA’s requirements, customers may continue to request relief at source or quick refund for withholding tax rates below 15%, provided that the following new documentation is submitted:

Customers holding proprietary assets

• A one-time certificate for Finnish equities - withholding tax rates below 15% - own assets
  
  The one-time certificate must be completed by the Clearstream customer, being the final beneficial owner of the dividend income, and remains valid until 31 December 2020.
• A per-payment declaration (if applicable)
  
  The per-payment declaration is only to be provided by beneficial owners that are requesting a reduced tax rate in accordance with the DTT and must be provided by the Clearstream customer via SWIFT (formatted MT565), CreationOnline or Xact Web Portal message, by using the following template:

Att. Tax Operations
Clearstream Banking account: XXXXX (the “Account”)
ISIN: FIXXXXXXXXXX
Payment date: XX.XX.2020

Per-payment declaration for dividend payments received from Finnish equities with withholding tax rates below 15%

For the purpose of ensuring that relief at source (or quick refund) from Finnish withholding tax is granted on the above dividend payment, paid to our Account, with a withholding tax rate below 15%, we hereby certify that we:

Name of beneficial owner (full name): XXXX
Tax residence of beneficial owner (full address): XXXX
Tax identification number of the beneficial owner (local TIN): XXXX

• are the final economic beneficial owner(s) of the Finnish dividend payment related to the ISIN FIXXXXXXXXXX and paid to our Account on VD XX/XX/2020, and that our entitlement to such dividend payment is not restricted by any contractual obligations (such as lending and borrowing arrangements) which would require that the dividend paid to us is transferred further to an actual investor; and
• are entitled to the application of withholding tax at reduced tax rate of XX%, in accordance with double taxation treaty.

This per-payment declaration complements the “One-time certificate for dividend payments received from Finnish equities with withholding tax rates below 15%” dated XX.XX.2020

• A tax-at-source card (if applicable)
  
  The tax-at-source card is only to be provided by beneficial owners that qualify for the tax exemption in accordance with Finnish domestic law.
  
  The tax-at-source card must be issued by the FTA to the beneficial owner and confirm that the beneficiary is eligible for tax exemption on Finnish dividend payments.
  
  The tax-at-source card must be renewed on an annual basis or as per validity as stated on the card.

And upon request:

• A certificate of tax residence issued by the tax authorities of the beneficial owner's country of residence, valid for the pay date with respect to all income for which a reduced tax rate is claimed, as required by Finnish law.

Customers holding assets on behalf of clients

• A one-time certificate for Finnish equities - withholding tax rates below 15% - client’s assets
  
  The one-time certificate must be completed by the Clearstream customer and remains valid until 31 December 2020.
• A per-payment list of beneficial owners
  
  The per-payment list of beneficial owners must be submitted via Clearstream's Online BO Application, disclosing the details of the beneficial owners, including the quantity of securities held and the tax rates to be applied;
• A tax-at-source card (if applicable)
  
  The tax-at-source card is only to be provided by beneficial owners that qualify for tax exemption in accordance with Finnish domestic law. The tax-at-source card, issued by the FTA, must confirm that the beneficiary is eligible for tax exemption and be valid for the pay date with respect to all income for which such exemption is claimed.

Customers holding for third- parties are furthermore required to submit to Clearstream, immediately upon request, at any time:

• A per-payment declaration (if applicable)
  
  The per payment declaration is only to be provided by customers holding on behalf of beneficial owners that are requesting a reduced tax rate in accordance with the DTT. The per-payment declaration must be issued by the final beneficial owner at the time of receipt of each dividend payment, certifying that:
   
  • he is the final economic beneficial owner of the relevant Finnish dividend payment paid on VD XX.XX.XXXX on ISIN FIXXXXXXXXXX and that his entitlement to such dividend payment is not restricted by any contractual obligations (such as lending and borrowing arrangements) which would require that the dividend paid to him is transferred further to an actual investor; and
  • he is entitled to a reduced tax rate in accordance with the DTT concluded between Finland and his country of residence.

The per-payment declaration must be provided by the beneficial owner (via the Clearstream customer) in the form of either a SWIFT message (if the final beneficial owner has access to SWIFT) or via a signed paper format.

• A certificate of tax residence issued by the tax authorities of the beneficial owner's country of residence, valid for the pay date with respect to all income for which a reduced tax rate is claimed, as required by Finnish law.

Deadlines

To benefit from relief at source the new documentation must be received by Clearstream Banking no later than the deadlines below:

The deadline to obtain a quick refund is 1 November of the year of the dividend payment.

Beneficial owners that are eligible for withholding tax rates below 15% may in addition continue to request a standard reclaim, as per existing procedures.

Please note that the one-time certificate forms for Clearstream Banking S.A. and Clearstream Banking AG relating to withholding tax rates below 15% for both client’s assets and own assets can be accessed via the “Tax Forms to use – Finland” page.

Further information

We continue to monitor the Finnish market and will provide more information as it becomes available.

For further information, please contact the Clearstream Banking Tax Help Desk, Clearstream Banking Client Services or your Relationship Officer.

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1. Clearstream Banking refers collectively to Clearstream Banking S.A., registered office at 42, avenue John F. Kennedy, L-1855 Luxembourg, and registered with the Luxembourg Trade and Companies Register under number B-9248, and Clearstream Banking AG (for Clearstream Banking AG customers using Creation Accounts), registered office at 61, Mergenthalerallee, 65760 Eschborn, Germany and registered in Register B of the Amtsgericht Frankfurt am Main, Germany under number HRB 7500.