Finland: Delaware LLC exempt from withholding tax | KPMG | GLOBAL
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Finland: Delaware trust exempt from Finnish dividend withholding tax

Finland: Delaware LLC exempt from withholding tax

The Finnish tax administration determined, based on a taxpayer’s advance ruling application, that a Delaware trust series fund was comparable to a Finnish special investment fund and thus exempt from withholding tax on dividends from Finnish sources.


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Finnish tax law

Section 20 of Finland’s tax law provides that investment funds are tax-exempt. The section also covers “special investment funds,” which are regarded as alternative investment funds, meaning that their rules may deviate from the requirements imposed by the EU UCITS Directive and certain provisions of Finland’s law.


The taxpayer was an open-ended Delaware trust series fund. However, its shares were not publicly quoted and its investor group was restricted, meaning that the shares were offered and sold only to insurance company separate accounts, certain qualified plans, and other mutual funds. The fund was supervised by the U.S. Securities and Exchange Commission (SEC) and its assets were managed by a separate management company. The fund purported annually to satisfy the requirements of a U.S. regulated investment company (RIC), which are subject to specific risk spread rules. Under the U.S. tax laws, the fund was liable to pay income tax, but it was entitled to deduct the profits distributed to its shareholders as expenses. Therefore, in practice the fund was tax-exempt. 

Advance ruling

The fund applied for an advance ruling for its tax treatment in Finland. With reference to the provisions of Finland’s income tax law and Article 63 TFEU, the Finnish tax authority decided 30 September 2016 that the U.S. open-ended Delaware trust series fund was comparable to a Finnish investment fund. As such, it was exempt from withholding tax on dividends.

KPMG observation

The advance ruling continues a previous line of comparability cases. Read for example TaxNewsFlash-Europe. Entities subject to the comparison do not need to be identical, but comparable. Since Finnish law provides more relaxed regulation for non-UCITS based funds, this in turn provides a broader comparison base for different fund structures. As a result of the decision, non-UCITS based special funds may have good chances of obtaining withholding tax refunds from Finland. It also appears that trust structured funds may be comparable to Finnish special investment funds.


For more information contact a tax professional with the KPMG member firm in Finland:

Kristiina Äimä | +358 (0)20 760 3698 |

Henri Lyyski | +358 (0)20 760 348 760 3485 |

Aki Kokko | +358 (0)20 760 3000 |

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