Finland tax: finland Tax authorities scrutinizing foreign dividend recipients

The Finnish tax administration recently started sending letters to foreign investors asking detailed questions about their rights and entitlements under Finnish securities. For example, investors are being asked if there are any restrictions on their enjoyment of the rights attached to their securities, and if so, what those restrictions are. (Finnish companies must provide an annual report to the tax administration on dividends paid. For those who are nominee registered, custodians are responsible for proper withholding and reporting.)

It is our understanding that the tax authorities have been looking at, in particular, dividends flowing from Finland to the UK, not surprisingly given London's role as the principal finance center for the Nordic markets and the zero withholding tax for portfolio investors under the Finland-UK tax treaty.

This project is likely inspired by the recent International Fiscal Association round table and international discussion on the beneficial owner concept. Finland has broad substance-over-form and antiavoidance rules in its tax legislation and will look through arrangements that lack business-driven substance.

Parties that have received such inquiries should review their structures and contact their tax advisors to determine whether any action is necessary