Finland: FTA publishes guidance on taxation of foreign pension funds

Further to our Announcement A14165, dated 5 December 2014, regarding the amended Tax Act (No. 975/2014) concerning dividend payments to non-resident pension funds, Clearstream Banking¹ would like to advise customers that the Finnish Tax Authorities (FTA) has now published guidance on its website in regards to the taxation and reclaim procedure for foreign pension funds.

The amended legislation came into force on 1 January 2015 and applies to dividends paid on or after that date. It allows pension funds in other European Union and European Economic Area 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. In practice, this will make the applicable effective tax rate for pension funds lower than the stated 15%.

In accordance with the amended legislation and issued guidelines, eligible foreign pension funds must provide, in addition to the normal reclaim documentation, supporting documentation setting out the grounds for 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 standard refund for eligible qualifying pension funds is only available directly via the FTA. Clearstream Banking does not assist in this matter.