Finland: Advance ruling concerning Luxembourg FCPs

The Finnish Central Tax Board has issued an advance final (binding) ruling that reflects the conclusion that a Luxembourg Fonds Commun de Placement (FCP) is considered comparable to a Finnish resident investment fund and that dividends paid by a Finnish company to a Luxembourg FCP should not be subject to Finnish withholding tax because dividends paid to a Finnish investment fund in a similar situation would be tax-exempt.

The Finnish Tax Administration (FTA) can be expected to provide further clarification on the implications of this ruling and the effects on the tax procedures; however, the time frame for this is still open.

In relation to any European Economic Area (EEA) exemption issue, the FTA and our local depository Nordea Bank Finland Plc. recommend that tax be reclaimed from the FTA via the standard refund procedure after the year of payment, so that the FTA can take the decision on the taxation conditions.

The statutory deadline for withholding tax reclaims is five years from the end of the year in which the income payment was made. Customers who file reclaim applications to the FTA before further instructions are received should include with their reclaim form at least such documents as can confirm the basis of the reclaim and the basic characteristics of the fund.

The FTA has unofficially indicated that, in general, in assessing the comparability of the fund, it will probably continue to be required that:

• The fund is a contractually based foreign UCITS-type investment funds (in reference to Council Directive 2009/65/EC); and
• The basic characteristics of the fund are similar to those of a Finnish investment fund entitled to exemption from withholding tax; and
• The tax withheld cannot be fully returned in the recipient’s country of residence.

The FTA may also request further clarification or documentation, as necessary. Until the FTA has provided further advice on this matter, a positive outcome for issued reclaims cannot be guaranteed.

We will provide information on further developments (for example, further instructions from the FTA on the implications of the ruling and on withholding tax refund applications) as it becomes available.