The Finnish tax administration concluded that an Australian public entity was comparable to the Finnish government and public entities as listed in section 20 of Finland's income tax law and as such was exempt from withholding tax on dividends paid from sources in Finland.
The findings are in line with previous conclusions concerning Canadian public entities, and together these rulings expand the application of a decision of Finland's Supreme Administrative Court (SAC) which held that a Norwegian government entity was entitled to the same tax exemption allowed for corresponding Finnish government entities.
In Finland, section 20 of the income tax law provides that several Finnish government and public entities, as listed, are tax-exempt.
In the current proceedings, the applicant for a refund of withholding tax on dividends received from Finland was an Australian public entity that had been established by virtue of a special act. The applicant was wholly owned by the government of Australia and its legislative purpose was to make provision for unfunded superannuation liabilities that will become payable in the future. The applicant was exempt from Australian income tax under Australian law.
In Finland, a withholding tax of 15% based on the Finland-Australia income tax treaty had been applied on dividends and the applicant filed a claim for refund of the withholding tax on basis of Article 63 of the EU treaty (TFEU). Also, in effect were rules for the exchange of information between Finland and Australia under the income tax treaty.
With reference to Article 63 TFEU, the Finnish tax administration concluded that the Australian public entity was comparable to the Finnish government and public entities listed in section 20, specifically with the social insurance institution and the state pension fund in Finland.
Tax professionals in Finland note that the findings of the tax administration are clearly influenced by the SAC’s decision in which the court highlighted that comparable entities do not need to be identical, but rather only need to have a similar purpose and function. Accordingly, the differences among government entities are mainly formal and immaterial, and do not justify discriminatory taxation.
As a result, third country public entities that perform similar tasks, in accordance with similar purpose, to those entities listed in Finland's income tax law would be entitled to dividend withholding tax refunds in Finland. Consequently, the position of entities based in other countries and seeking refunds of withholding tax is viewed as generally having been strengthened.
For more information contact a tax professional with the KPMG member firm in Finland:
Jussi Järvinen | +358 (0)20 760 3077 | firstname.lastname@example.org
Kristiina Äimä | +358 (0)20 760 3698 | email@example.com
Suvi Lamminsivu | +358 (0)20 760 3151 | firstname.lastname@example.org
The KPMG logo and name are trademarks of KPMG International. KPMG International is a Swiss cooperative that serves as a coordinating entity for a network of independent member firms. KPMG International provides no audit or other client services. Such services are provided solely by member firms in their respective geographic areas. KPMG International and its member firms are legally distinct and separate entities. They are not and nothing contained herein shall be construed to place these entities in the relationship of parents, subsidiaries, agents, partners, or joint venturers. No member firm has any authority (actual, apparent, implied or otherwise) to obligate or bind KPMG International or any member firm in any manner whatsoever. The information contained in herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's Federal Tax Legislative and Regulatory Services Group at: + 1 202 533 4366, 1801 K Street NW, Washington, DC 20006.