DIVIDENDS
Tax is not withheld on dividends paid to resident companies and individuals. Dividends paid to non-residents, whether companies or individuals, are usually subject to final withholding tax of 28%, which may be reduced or eliminated under the terms of a tax treaty.
Non-resident shareholders are not entitled to an imputed tax credit, unless a tax treaty provides otherwise. See Section F.2, page 41.
INTEREST
Interest paid to resident companies is not subject to withholding tax.
Interest payments to resident individuals are subject to a 28% (in 1996) final withholding tax, or they are exempt. Exemption depends on the rate of interest paid and the type of debt instrument (see Section F.5, page 50).
Interest income received by a resident from abroad is subject to tax at a flat rate of 28%.
In general, withholding tax is not deducted from interest paid to non-residents. Non-residents are required to submit a declaration concerning tax at source even if the interest income is tax-exempt in Finland (declaration concerning relief from Finnish tax at source). In addition, if interest received from the same source exceeds FIM 30,000 during a calendar year, a non-resident recipient must provide the payer with a certificate proving eligibility to be taxed under provisions applicable to the taxation of non-residents or that the provisions in a tax treaty apply. The certificate may be obtained from the payer's local tax bureau. Before the the certificate is issued, the tax office must make sure that the recipient of income has limited tax liability and/or resides in the country of residence. For this purpose, the tax office must be provided with a necessary certificate of domicile.
ROYALTIES AND FEES
A 60% withholding tax is deducted from royalties paid to resident individuals, but not to resident companies. The withholding tax may be lower if the resident individual presents a tax card to the payer. The tax withheld represents a payment on account of the recipient's income tax liability. See Section F.5, page 50, for a discussion of whether royalties paid to resident individuals are taxed as earned income or investment income.
Royalties paid to non-residents, whether companies or individuals, are usually subject to a final withholding tax of 28%, which may be reduced or eliminated under a tax treaty. The recipient of royalty has to give the payer a declaration concerning relief from Finnish tax at source in a tax treaty situation.
The content of this article is intended to provide a general information on the subject matter. It is therefore not a substitute for specialist advice.
For further information contact Mr. Jukka Nisonen on +358 0 1727 7282, Tilintarkastajien Oy - Ernst & Young Kaivokatu 8, 00100 Helsinki, Finland or enter a text search 'Ernst & Young' and 'Business Monitor'.
