# Dividends from abroad; capital gains

If you sell securities at a profit in another country, your capital gains will usually be liable to tax only in Finland.  However, if you receive dividends from another country, the tax authorities of that country will usually tax them at source.  Any such tax paid will be subject to relief and deducted from your final Finnish assessment.

If you receive dividends from a corporation in an EU country, or in another country with which Finland has a double taxation treaty, the same rules will apply as for those from a Finnish corporation:

• Dividends from listed companies are deemed 85 % investment income (capital income) and 15 % exempt income.
• Dividends from unlisted companies are deemed to be part investment income and part earned income.  The proportion is calculated on the basis of the stock’s mathematical value. In case there is no mathematical value available for the company stock, the proportion and the annual rate of return must be calculated on the basis of its market value.

For more information, click Osakkeet ja osingot (only in Finnish and Swedish).

If you receive dividends from a country outside the EU not covered by a tax treaty, the entire amount will be fully liable to tax as earned income.

Example: Jaakko received €100,000 in dividends in 2019 from a company in the United Kingdom that is not listed on the Stock Exchange. The market value of his holding in that company was €800,000 on 31 December 2018.  Jaakko received no other dividends from unlisted companies during the 2018 tax year.
 Dividends: €100,000 Market value ofunderlying shares: €800,000 The part of Jaakko's dividends treated as capital income: €64,000 Amount to be taxedas capital income: €16,000 The part of Jaakko's dividends treated as earned income: €36,000 Amount to be taxedas earned income: €27,000

The portion treated as capital income is an amount equivalent to an 8% return on the €800,000 holding, in other words €800,000 × 8% = €64,000.

In this case, it stays below the threshold of €150,000, so 25% of it is taxable capital income (i.e. €16,000), and the remaining 75% is exempt (i.e. €48,000).

The remainder - €36,000 - of Jaakko's dividends is treated as earned income (€100,000 - €64,000 = €36,000). However, only 75 percent of this (€36,000) is taxed as earned income, the remaining 25 percent (€9,000) being exempt.

## Foreign tax credits in Finland

Dividends from overseas are taxed at 30% (concerns the capital-income part); if your capital income exceeds €30,000, the rate is 34%.

Under a double taxation agreement, the source country may also levy tax at a rate specified in the treaty (such as 15%). If you have paid such tax, the Finnish Tax Administration will levy tax on the income at the usual rate of 30 per cent, but will give full credit for any tax paid in other countries.

The credit may not exceed an amount equivalent to the taxes that would have been payable in Finland after deductions. Occasionally, it may be the case – if, for example, you have sizeable deductions for interest payments on home loans - that insufficient capital income remains against which you may offset your foreign tax credits.  In such cases you will be able to carry them forward over the next five years.

If you receive dividend income from other countries, you may need to show foreign tax authorities a certificate of tax residence in Finland.  You will need it to prove that you are entitled to a lower tax rate.  The certificate can be obtained from your local tax office in Finland.

If you have taken out a loan to finance your purchases of ordinary shares, you are entitled to deductions for the interest payments. This deduction is against your capital income, and is called a deduction for the production of income.

## Selling foreign securities

If you live in Finland as a Finnish tax resident, any capital gains from sale of securities will be taxed only in Finland. The applicable rate is 30%, or 34% if your capital income amounts to more than €30,000 - the same as for all other capital income.

You can deduct capital losses of foreign stocks or other securities from any capital income. If you have no capital income or if you have less capital income than deductible capital loss, the deduction is transferred to the following five years. You cannot receive tax credit for deficit in the taxation of earned income due to capital loss.

## Investment funds

If your overseas investment fund has paid you profits and withheld tax on them at source, this is usually because the country in question treats any yields from investment funds in the same way as dividends. If this is the case, the withheld tax at source will usually be offset against Finnish tax in the final assessment.