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Entitlement to dividend tax exemption


Following a court case a new precedent has been set regarding dividend tax exemptions for foreign companies. Taxand Finland examines the implications of this unexpected event.

The Supreme Administrative Court applied the EU principle of free movement of capital and ruled that the company in question, US based Delaware Statutory Trust, is objectively comparable to a Finnish public limited company, and therefore is entitled to tax-exempt dividend from Finnish public limited companies.

Under EU law all restrictions on the movement of capital between Member States and third countries shall be prohibited. Under the Finnish Business Income Tax Act, the dividends a Finnish public limited company receives from another Finnish public limited company are tax-exempt. It is also provided in the act that an investment fund could be compared to a corporation.

In its decision, the SAC considered the case law of the Court of Justice of the EU concerning free movement of capital and confirmed that different treatment between comparable resident and non-resident public limited companies is in breach of EU law.

Discover more: US company entitled to dividend tax exemption

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Janne Juusela
T. +358 9 6153 3431

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Taxand's Take

Based on the ruling, foreign investment funds and public limited companies may be entitled to  tax refunds for withholding tax levied on Finnish-source dividends. Under Finnish legislation, the withholding tax reclaim has to be filed within five years following the year of relevant dividend payment.

Taxand's Take Author

Janne Juusela

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