Finland: Tax refund opportunities for investment funds

Finland: Tax refund opportunities for investment funds

The Helsinki administrative court granted a refund of taxes to a German real estate investment fund. The decision may also benefit non-UCITS funds and allow them a refund of taxes based on EU law.

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In this case, an open-end, non-quoted and non-UCITS investment fund (Spezial-Sondervermögen) was established under German. It was not a separate legal entity in Germany; it was managed by a management company; and its assets were held by a custodian entity. Under the German regulations, the number of unit holders in the fund was limited.

The fund filed a claim for refund of taxes paid in Finland. The Helsinki court concluded that the fund was comparable to a Finnish real estate investment fund and as such, would be exempt from tax under Finnish tax law. Further, the court found that imposing tax on the German fund would be discriminatory under EU law. 

KPMG observation

The decision is viewed as clarifying the tax position of German real estate investment funds and other foreign non-UCITS investment funds in Finland, although comparability to Finnish tax-exempt funds would need to be analyzed on a case-by-case basis.

Given the five-year statute of limitations for filing refund claims, eligible funds may want to consider filing claims for refund of taxes paid in 2010 and later years. Also, foreign real estate investment funds can request a waiver of the requirement to make pre-payments of income tax on real estate income or apply for tax exemption with respect to new investments.

In addition, this decision may have positive implications for Luxembourg investment funds that suffered withholding taxes on dividend payments in Finland.

 

Read an August 2015 report [PDF 73 KB] prepared by the KPMG member firm in Luxembourg: Helsinki Administrative Court grants reimbursement of taxes to German real estate investment fund

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