Guidance on how to withhold tax on dividends paid to a Finnish tax resident shareholder when the underlying shares are nominee-registered has been published

News, 1/30/2020

The Tax Administration has published the detailed guidance How to withhold tax on dividends paid to a Finnish tax resident shareholder when the underlying shares are nominee-registered. The guidance goes through the circumstances when the payor (issuer) must withhold 50% on dividends paid on shares recorded in nominee accounts, in reference to the provisions of § 4 a of the Prepayment Act, if the payor does not receive identity information on the dividend beneficiary in the case of a Finnish resident taxpayer who receives dividends. The new provision of § 4 a of the Prepayment Act is applied to dividends paid on 1 January 2020 or thereafter.

The guidance instructs the payor on how to identify the Finnish tax resident beneficiary when the dividend is paid to nominee-registered shares. The payor is entitled to delegate its responsibility to obtain information on beneficiaries to the custodian nearest to the dividend beneficiary. This custodian will then follow the agreed procedure in the custody chain and deliver the identity information to the payor. However, it is worth noting that the payor is the one liable for the taxation and for giving the information to the Tax Administration.

The guidance replaces the previous guidance dated 25 April 2016 "On the tax treatment of domestic shareholding" – Hallintarekisteröidyn kotimaisen osakeomistuksen verotusmenettelystä (record no A18/200/2016, only available in Finnish and Swedish).

The guidance will be updated regarding the upcoming regulations on nominee-registered shares that come into force in 2021. These new regulations will include the implementation of the OECD Treaty Relief and Compliance Enhancement (TRACE) model.

Please note that the guidance in question is in relation to dividends paid to Finnish tax residents. The Tax Administration will publish more detailed guidance on withholding tax on dividends paid to nominee-registered shares held by nonresidents later this year.

For more information, see