Annual information return from foreign intermediary; exemption from transfer tax
- Date of issue
Pursuant to Asset Transfer Tax Act, transfer tax shall be paid for nongratuitous transfers of Finnish securities. Liable to pay the tax is the transferee (purchaser).
Transfer of publicly traded securities has been exempted from asset transfer tax if certain preconditions are satisfied. According to a law applied since 1999, asset transfer tax was not to be paid if stock exchange securities or market securities were bought or exchanged at a stock exchange in the public trade referred to in chapter 1, § 3 of Securities Market Act. An additional precondition for tax exemption was set, at that time, for the situation where the intermediary of the purchaser was other than a domestic securities broker (i.e. other than a Finnish investment firm or credit institution as well as a branch or office of a foreign investment firm or credit institution in Finland). The transfer was in these cases exempted from asset transfer tax only if the purchaser, liable to pay the tax, submitted a notification of the transfer with the tax office within two months from the transfer.
The National Board of Taxes issued, in 2003, an instruction on asset transfer tax in these cases (Reporting obligations for traders in securities of 15 December 2003 no 3233/415/2003). The instruction stated that purchaser´s notification was necessary for the purposes of tax control. Considering this, the instruction stated that the purchaser himself was not obliged to file a notification to obtain an exemption from asset transfer tax, if the intermediary submitted an annual information return of the transfer, in accordance with § 15, paragraph 4, Act on Assessment Procedure. The instruction also stated that the purchaser´s obligation to submit a notification and the annual information return from the intermediary applied to a transfer of a security in the following situation:
- the object of the transfer is a security issued by a Finnish corporation; and
- the purchaser’s liability to tax in Finland is unlimited; and
- the purchaser’s intermediary is a foreign securities broker who has neither a branch nor a branch office in Finland.
Amendments of 2007 in the Asset Transfer Tax Ac
The Asset Transfer Tax Act was amended in connection with the implementation of the Markets in Financial Instruments Directive (2004/39/EU). Pursuant to new provisions, the transfer of a security is exempted from asset transfer tax if the security is publicly traded. It is no longer a precondition for the tax exemption that the transaction has taken place at the trading place. However, it is a precondition for the tax exemption that a securities intermediary participates in the transfer, as a party or a broker, or that the transferee is accepted as a trading party at the market where the transfer takes place. Multilateral trading, foreseen in directive 2004/39/EU, is also considered as public trade.
In cases where the intermediary of the purchaser or the counterparty in the transfer is other than a domestic securities broker, a precondition for the exemption from asset transfer tax still is that the purchaser liable to pay the asset transfer tax submits a notification with the tax office within two months from the transfer. In connection with the 2007 amendments, a provision was included in Asset Transfer Tax Act, in § 15a, paragraph 3, pursuant to which the transfer is exempted from asset transfer tax also on condition that the securities intermediary submit an annual information return of the transfer, under the provisions in the Act on Assessment Procedure. This provision entered into force on 9 November 2007. It applies to transfers of securities that have taken place on 9 November 2007 and later.
The above-mentioned provision establishes no legal obligation towards the Finnish Tax Administration for the foreign intermediary or broker to submit an annual information return, nor does it change the earlier practice based on the instruction issued by the National Board of Taxes. It only supports a procedure convenient for all concerned parties according to which information on transfers of securities is received collectively instead of each purchaser being obliged to submit a separate notification of every transfer.
With regard to the tax control aspects underlying the provision in § 15a, paragraph 3, Asset Transfer Tax Act, the National Board of Taxes states that the purchaser’s notification or an annual information return from the intermediary is a precondition for the exemption from the Asset Transfer Tax and hence must be submitted solely in a situation where:
- the object of the purchase is a publicly traded security issued by a Finnish Corporation; and
- the purchaser is a person whose tax liability in Finland is unlimited; and
- the intermediary of the purchaser or his counterparty in the above-mentioned purchase is a foreign securities broker who has neither a branch nor a branch office in Finland.
Filing the annual information return
The annual information return of securities transactions shall be filed with the tax administration in an electronic form. It may be filed through the Tyvi service, the Ilmoitin service or by supplying the data to the Tax Administration on a data medium. To use the Tyvi service or the Ilmoitin service the Filer must identify himself through Katso identification.
The data medium shall be sent to the Tax Administration to the following address:
Verohallitus / National Board of Taxes
PO BOX 265
The data medium must be accompanied with a form stating the name and the address of the sender, name, telephone number and e-mail address of the contact person for questions concerning automatic data processing, information on the contents of the data medium and the number of records on the data medium. Whenever possible, the Technical data form issued by the Tax Administration 7826e, Technical data form, should be used and all relevant fields should be filled out.
The contents of the annual information must correspond to the description of the data records, as confirmed by the National Board of Taxes, for filing transactions with securities.
The description of the records for purchase and sale itemization for securities and derivatives applies to data that shall be filed for the year 2007. The description of records is in the instruction Itemization of purchases, sales, capital gains and capital losses for securities and derivatives – specification of data records (15/71/2007).
NB! The description of the records has been modified for the year 2008. The description of the records for itemization of purchases, sales, capital gains and capital losses for securities and derivatives applies to data to be filed for the year 2008. The description of records is in the instruction Itemization of purchases, sales, capital gains and capital losses for securities and derivatives - specification of data records (16/71/2008)
In the annual information return, the purchaser of the security must be individualized. For the purposes of individualization, the Finnish Personal Identity Code or the Finnish Business ID of the purchaser must be reported in the records. If the filer does not know the Finnish Personal Identity Code or the Finnish Business Identity Code of the purchaser, the date of birth, name and the address of the purchaser must be reported as foreseen in the description of the records.
For filing and for processing of the data on securities transactions the filer (in this case the foreign intermediary) must possess a Finnish Business Identity Code of his own.
If the filer does not already have a Finnish Business ID, the data may, however, be submitted on a data medium. The Tax Administration will then provide a Business ID for the filer and add it to the submitted data on securities transactions as an individualizing code. For issuing the Business ID for the filer following information should be provided in the form accompanying the data medium:
- the official name of the filer;
- state of residence
- contact person and other contact information.
After the issuance of the Business ID, the Tax Administration will notify the filer of the Business ID that has been issued. The filer should use this Business ID when next submitting data on securities transactions on a data medium or through either the Tyvi service or the Ilmoitin service.
The issuance of the Business ID for filing and processing the data on securities transactions establishes no obligations for the foreign remote intermediary with respect to Finnish taxation, e.g. no obligation to file a tax return in Finland.
Information on Business ID is available at www.ytj.fi.
Annual information return of securities transfers that have taken place during a calendar year must be submitted by the end of January, following the calendar year. Data regarding securities transfers, which have taken place during calendar year 2007, shall be submitted by the foreign remote intermediary by 30 April 2008. Data on securities transfers, which have taken place during year 2008, shall be submitted according to normal schedule, i.e. by 31 January 2009.
Assistant director Anneli Kukkonen
Senior adviser Matti Merisalo