Recent developments in Finland concern the treatment of claims for refund of withholding tax or exemption from withholding tax by non-residents of Finland.
A decision of the Supreme Administrative Court of Finland concludes that a Luxembourg-based insurance company that offers unit-linked insurance policies to Finnish insurance companies can file a claim for refund (“reclaim”) the withholding tax imposed with respect to dividends paid to the Luxembourg insurance company.
The court decision found that the tax treatment of life insurance companies was comparable to the tax treatment of pension funds, and looked to a judgment of the Court of Justice of the European Union (CJEU) that held it was discriminatory to impose withholding tax on dividends received by a non-resident pension fund whereas domestic pension funds were allowed a deduction that resulted in neutral tax consequences.
The Finnish Supreme Administrative Court concluded that given resident and non-resident life insurance companies were put in different tax paying positions, this treatment was in breach of provisions of the EU treaty.
Read a June 2016 report [PDF 46 KB] prepared by the KPMG member firm in Finland
The Finnish tax administration issued a decision that expands the application of a decision of the Supreme Administrative Court, concluding that a Norwegian government entity was entitled to an exemption from tax (much as a Finnish government entity would be allowed the tax exemption).
A provision of Finland’s income tax law lists Finnish government entities that are exempt from tax. In the prior court case, the high court allowed a Canadian public entity requested an exemption from withholding tax because that Canadian entity had identical or comparable activities to exempt Finnish entities.
Based on the decision, the Finnish tax administration concluded that third-country public entities that perform similar task and have a similar purpose to Finnish public entities listed in the tax law are to be allowed refunds of withholding tax on dividends distributed to such non-resident entities (in this situation, one located in Norway).
Read a June 2016 report [PDF 43 KB] prepared by the KPMG member firm in Finland
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