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 2018 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 2017.  Jaakko received no other dividends from unlisted companies during the 2018 tax year.

Dividends:

€100,000

 

 

Market value of
underlying shares:

€800,000

 

 

The part of Jaakko's dividends treated as capital income:

€64,000

Amount to be taxed
as capital income:


€16,000

 

The part of Jaakko's dividends treated as earned income:

€36,000

Amount to be taxed
as 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. 

Starting 2016, you can deduct capital losses of foreign stocks or other securities from any capital income. Capital losses that have arisen before 2016 are deducted only from capital gains, not all capital income. The reform thus concerns only capital losses that have come about in 2016 or later.

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.

Income to be reported

Log in to MyTax to submit the information

If you don't use MyTax or other electronic filing, you must fill out Form 16B on paper – Statement on foreign income (capital income)

How to file information for your tax return on paper

You must fill in section 2 of Form 16B (Receipts of dividends from a foreign country) to give details on the foreign dividends and profit-shares of foreign investment funds you have received, including any taxes you may have paid to foreign countries.

If you have received capital gains or had capital losses from the sale of securities of listed foreign companies, log in to MyTax to submit the information or fill in Form 9A, Calculation of capital gains or losses for securities and book-entry shares (3064e).

Paid too much tax abroad?

If more tax has been withheld abroad than is provided under the tax treaty, you will not receive relief in Finland on the excess.  You must apply for a refund from the tax authorities of the country concerned.  Contact the foreign payer to ask for the relevant form.  You may need to show foreign tax authorities a certificate of tax residency in Finland.  This can be obtained from your local tax office.