Withholding taxation, tax-at-source, and annual information returns in the financial sector
Financial institutions withhold and report taxes both in the role of a payor as well as on behalf of other payors.
For example, a custodian typically withholds and reports tax on dividend income. Tax is withheld on the basis of whether the beneficiary is classified as a resident or nonresident for tax purposes.
Nominee-registered shares and taxation of dividends - the payor withholds the tax-at-source
The payor must withhold tax-at-source on dividends that it pays out to nonresidents, whether shares are owned directly or through nominee-registered accounts.
The payor must submit annual information returns
Once a year, as a payor, you are obligated to give us details on certain payments you have made to nonresidents, such as dividends.
Actors in the financial sector provide the following annual information returns:
- Purchase and sale itemization for Securities and Derivatives (VSAPUUSE)
- Insurance payments made to private and agricultural traders (VSVMAKSE)
- FATCA, CRS and DAC2
- Annual Information Return concerning Interest calling for Taxation at Source (VSKTVYSL)
- Annual Information Return On Issued Loan Principal, and On Receipts of Interest (VSLAINAE)
- Annual Information Return of those who charge Asset Management fees (VSOMHOIE)
- Annual information return on dividends, Summary section and Itemization section (VSOSVYHT ja VSOSERIE)
- Annual Information Return concerning Refunds of capital (VSPAOPAL)
- Long-term savings (ps): itemization of purchases/sales of securities and derivatives (VSAPPSPS)
- Annual notification for payments to persons with limited tax liability in Finland (VSRAERIE)
- Annual Information Return concerning Payments governed by Income Tax Act (VSTVERIE)
- Payments for voluntary pension insurance and restricted long-term saving (PS-saving) (VSELVAKE)
- Annual information return concerning transferred foreign dividends (VSULKOSE)
Applying for a refund of withholding tax on dividends
The rate of withholding depends on the provisions of the applicable bilateral tax treaty between Finland and the country of residence of the foreign company. If too much tax has been withheld at source, a nonresident is entitled to ask for a refund from the Finnish Tax Administration after the year of payment. There are separate application forms for individuals and corporate entities.
Under certain circumstances, the custodian bank can provide treaty benefits at source. More information is available here: Hallintarekisteröidyille osakkeille maksetun osingon verotus (only available in Finnish and Swedish). For related guidance in English, read through the detailed guidance on Payments of dividends, interest and royalties to nonresidents.
You can also apply for a tax-at-source card from the Finnish Tax Administration during the year of payment. The entity can present the card to the Finnish payor before the income is paid, allowing the payor to withhold the correct amount of tax-at-source when the payment is made. In cases where the payment has already been made, and too much tax was withheld upon payment, the holder of a tax-at-source card can apply for a quick refund from their custodian bank, but only during the payment year itself.
Tax treatment of carried interest
Carried interest is a share of the profits granted as a reward for equity investment. In tax assessment, it may be treated as earned income or capital income depending on the case.
Please contact us by e-mail at konserniverokeskus(at)vero.fi so that we can make a preliminary decision on your tax treatment. This allows us to settle any unclear points effectively and in real time. The tax issues of equity investment business are coordinated at the Tax Administration by the Large Taxpayers’ Office.
- Tax-at-source card applications in 2020, 12.2.2020
- What is new in tax-at-source on dividends
- Application for Refund of Finnish Withholding Tax - Foreign Corporations and Organisations (6163e, 6167e and 6165e)
- Application for refund of Finnish withholding tax - individual (6164e, 6167e and 6166e)
- Foreign corporation’s tax-at-source card application for dividend, interest and royalty income (6211e)
- Payments of dividends, interest and royalties to nonresidents
- Taxation of dividends received by foreign entities offering statutory pension insurance
Only in Finnish and in Swedish
- Ennakonpidätys osingosta ja Verohallinnolle annettavat ilmoitukset
- Ennakonpidätyksen toimittaminen
- Hallintarekisteröidyn kotimaisen osakeomistuksen verotusmenettelystä
- Osinkotulojen verotus
- Osingon sijaan maksettu rahakorvaus
- Arvopaperien luovutusten verotus
- Korkotulojen verotus
- Joukkovelkakirjalainojen verotuksesta tuloverolain mukaan
- Sijoitusrahastosta saatavien tulojen verotus
- Johdannaisten verotus
- Omaisuuden luovutusvoitot ja -tappiot luonnollisen henkilön tuloverotuksessa
- Osuuskunnan ja sen jäsenen verotuksesta
- Kapitalisaatiosopimuksen verotus
- Pitkäaikaissäästämissopimuksen ja vapaaehtoisen yksilöllisen eläkevakuutuksen verotus