Tax at source on dividend, interest and royalty income

The payor must withhold tax at source on dividend, interest or royalty income paid to a non-resident foreign corporate entity. In principle, the tax withheld is:

•    20% for an identified entity
•    30% for an identified beneficiary when it is unclear whether the beneficiary is regarded as a corporate entity
•    35% for an unidentified holder of nominee-registered shares that receives dividend income from a publicly listed company.

The applicable tax-at-source rate can be lower if a tax treaty or other legal ground applies.

As a beneficiary, you can take action to amend the applied withholding tax rate in three different stages:

1. by presenting the relevant documents to the payor before the payment
2. by presenting the relevant documents to the payor after the payment during the year of payment, so that the payor can adjust the withholding tax during the year of payment (a so called Quick Refund procedure)
3. by requesting a refund of tax at source from the Finnish Tax Administration after the year of payment.

A required account refers to information that allows the payor, an account operator acting on the payor’s behalf or an Authorised Intermediary to identify you reliably and to verify your eligibility to either tax treaty benefits or benefits deriving from other legislation.

You will receive instructions on the required content of the accounts from the payor or from your bank.

The payor can refrain from withholding tax at source based on EU law only if you provide the payor with the Tax Administration’s decision concerning the matter, such as a tax-at-source card or an advance ruling. You can request a tax-at-source card or an advance ruling from the Tax Administration for the year of payment.

Dividend income

The  tax treaty between Finland and the foreign corporate entity’s country of residence, national legislation and EU law have an impact on the applicable withholding tax rate. The payor can withhold tax at source or refrain from withholding based on the tax treaty or national legislation if it can be certain that you are entitled to the tax treaty or national legislation benefits. However, dividends paid to a foreign investment fund or special investment fund can be exempt from tax at source only if you provide the payor with the Tax Administration’s decision on the matter, such as a tax-at-source card or an advance ruling.

The payor can refrain from withholding tax at source based on EU law on free movement of capital, for example in situations where your corporate entity is comparable to a Finnish corporate entity for which the corresponding dividend would be exempt from tax. In such cases, the dividend payor can refrain from withholding tax at source only if you provide it with the Tax Administration’s decision on the matter, such as a tax-at-source card or an advance ruling.

You can request a tax-at-source card or an advance ruling for the dividend payment year from the Tax Administration.

Even after the payment has been made, you can provide the payor with a reliable account of your entitlement to a lower tax rate, in which case the payor can adjust the tax at source withheld during the dividend payment year. You can also request a tax-at-source card from the Tax Administration for tax adjustment purposes during the payment year.

Relating to dividends paid on nominee-registered shares of publicly listed companies, legislation contains separate regulations regarding procedures at the time of payment, and those followed later during the year of payment. In such situations, an Authorised Intermediary (AI) registered in the Tax Administration’s Register of Authorised Intermediaries can assume tax liability for the dividends in question, in which case it can grant tax treaty benefits to its clients at the time of dividend payment or later during the dividend payment year.

Read more about the taxation of dividends for nominee-registered shares

If too much tax at source is still withheld on dividend income after the year of payment, you can request a tax-at-source refund from the Finnish Tax Administration. Submit the application to the Tax Administration no later than three calendar years from the beginning of the year following the year of dividend payment.

Interest and royalty income

Interest paid to a non-resident taxpayer is generally tax-exempt in Finland. The payor can refrain from withholding tax at source if the royalties fall within the scope of the Interest and Royalties Directive (2003/49/EC). The payor can withhold or refrain from withholding tax at source based on the tax treaty if it can be certain that you are entitled to the tax treaty benefits.

If needed, you can request a tax-at-source card for interest or royalty income from the Finnish Tax Administration before the income is paid to you. If tax at source has been withheld on interest or royalty income, you can request a tax-at-source refund from the Tax Administration within the next three calendar years after the year of payment in the case of interest income and during the year of payment in the case of royalty income.