Finland: Amendment of Tax Act for dividend payments to non-resident pension funds approved

On 2 December 2014, the amended Tax Act (No. 975/2014) concerning dividend payments to non-resident pension funds was approved and published in the Official Gazette.

This is further to our TaxFlash T14117, dated 2 October 2014.

The amended legislation will come into force on 1 January 2015 and applies to dividends paid on or after that date. It will allow pension funds in other European Union (EU) and European Economic Area (EEA) Member States, that were previously taxed at 15%, to be eligible (provided certain preconditions are met) to deduct the pension liabilities from their tax base, as cost, which in practice will make the applicable effective tax rate for pension funds lower than the stated 15%.

Impact on customers

In accordance with the amended legislation, eligible foreign pension funds must provide, in addition to the normal reclaim documentation, supporting documentation of the grounds and the amount of the requested deduction. The eligibility of foreign pension funds will be reviewed on a case-by-case basis by the Finnish Tax Administration and as a result such reduced rate of withholding tax is only available via standard refund.

However, at this stage the Finnish Tax Administration is still to provide further clarifications about the exact impact on the reclaim procedures and consequently, such standard refund for eligible qualifying pension funds, is currently only available directly via the Finnish Tax Administration. Clearstream Banking¹ does not assist in this matter.

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

Further information

For further information, customers may contact the Clearstream Banking Tax Help Desk or Clearstream Banking Client Services or their Relationship Officer.

1. Clearstream Banking refers collectively to Clearstream Banking AG, registered office at 61, Mergenthalerallee, 65760 Eschborn, Germany and registered in Register B of the Amtsgericht Frankfurt am Main, Germany under number HRB 7500, and 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.