What responsibilities and liabilities does an authorised intermediary have?
An Authorised Intermediary refers to an intermediary, that is registered in the Tax Administration's Register of Authorised Intermediaries. Intermediaries can be, for example, credit institutions, investment service companies and central securities depositories.
These instructions and frequently asked questions are for Authorised Intermediaries on their responsibilities and liabilities.
See the path diagram for authorised intermediaries. The path for authorised intermediaries outlines the different stages, the available service channels, and describes the action to take at every stage.
An Authorised Intermediary (AI) can assume responsibility for dividends and granting tax at source benefits to dividend beneficiaries that are its customers.
Concerning the dividends that the AI has taken responsibility for, the AI must
- investigate and identify the dividend beneficiary and verify their eligibility for tax at source benefits, and
- report the information on the dividend beneficiary in an annual information return.
The annual information return is submitted every year by the end of January on dividends paid during the previous calendar year.
An AI can choose which of the dividends it takes responsibility for by informing of this fact to the dividend payor or another Authorised Intermediary closer to the payor.
The AI is liable for the tax at source that was not withheld due to its negligence, if the AI has informed taking responsibility of the dividends in question or the AI has reported the information on the dividend beneficiary to the Tax Administration on its annual information return. The AI is released from the liability if it shows proof that it has fulfilled its responsibilities to take reasonable measures so that it is not a question of the AI's negligence.
Frequently asked questions on Authorised Intermediary's responsibilities and liabilities
- There is no format requirement for the notification on taking responsibility and the Tax Administration does not regulate the procedure to be followed. Therefore, parties can agree themselves of the procedure that they follow. The AIs can inform taking responsibility for example by a separate notification per dividend payment or with account-specific agreements.
- It is essential that the AI can, if necessary, show proof to the Tax Administration of the dividends the other AI has taken responsibility for, including the information on the dividend distribution in question along with the total amount of dividends it has taken responsibility for and the total amount of tax at source withheld from the dividends. The Tax Administration may request the information for example if the information in the AI's annual information returns contradict and it is unclear, who is responsible for the error.
- AI A is deemed to be responsible for the unwithheld tax, if for purpose of correcting the tax it has reported a lower tax to be withheld and tax at source has been left unwithheld due to AI's erroneous reporting or negligence (§ 10 c(3), Tax at Source Act).
- AI B is not liable for the unwithheld tax, if it shows that it has forwarded the information it has received for the correction with the same content to the next AI in the chain or the payor. AI B must have also verified that the AI A that is submitting information through it is registered in the Register of Authorised Intermediaries when it reports the information for the correction. (§ 10 c(2), Tax at Source Act).
- AI A has the primary liability of tax that is left unwithheld due to its negligence. The payor has the secondary tax liability, which means that if the AI A fails to pay tax imposed on it, the tax is also imposed on the payor as a precautionary measure (§ 10 c(4), Tax at Source Act).
- Yes, an AI can take responsibility by informing a tax at source lower than 35 % to be withheld from the dividend while informing that it takes responsibility of the dividends in question (§ 10 c, Tax at Source Act).
- The AI is then responsible for verifying that the requirements for applying the tax at source benefit in question in accordance with the applicable national legislation are fulfilled.
- The AI is liable for the tax at source that was not withheld due to its error or negligence. In order to be released from the liability, the AI must show proof that the error is not due to its negligence.
- Yes, an AI can take responsibility of dividends also in situations where the AI itself is the beneficial owner of the dividend in accordance with the tax treaty.
- AI A takes responsibility of the dividends by informing a tax at source lower than 35 % to be withheld from the dividend while informing that it takes responsibility of the dividends in question.
- AI B is released from liability if it proves that it has forwarded the information received from AI A for the dividend payment and withholding of tax at source with the same content to the next AI in the custody chain or the dividend payor.
- If there is an underwitholding of tax, the AI is not released from liability on the basis of reasonable measures taken as an AI and the error being due to the dividend beneficiary alone, because the AI itself is the dividend beneficiary while operating in the role of an AI.
- The AI is not deemed to have taken responsibility of the dividends, because it has reported 35 per cent tax at source to be withheld from the dividend payment.
- The AI shows the Tax Administration that it has not taken responsibility of the dividends in question by reporting the dividends and the tax at source of 35 per cent withheld from the dividends in its annual information return, along with the name of the possible Contractual Intermediary closer to the beneficiary.