Finland has concluded tax treaties with almost 50 countries. If no tax treaty has been concluded, relief from double taxation can be achieved only by applying domestic laws based on ordinary credits limited to national taxes.

With the exception of a few older treaties, the treaty provisions are based largely on the Organisation for Economic Co-operation and Development (OECD) model treaty. The withholding taxes on dividends, interest and royalties that Finland is allowed to levy under various treaties are listed in Appendix 13, page 91. Finland's treaties may deviate from the OECD model because Finland has reserved the right to tax industrial royalties at source. Several treaties reflect this position by preserving a 5% tax on such royalties. Finland has also reserved the right to tax gains from the transfer of shares in residential housing companies and other real estate companies.

The principal methods used in treaties to eliminate double taxation are the exemption-with-progression method and the credit method. (Under the exemption-with-progression method, a treaty exempts specified income, but the rate applied to the taxpayer's remaining taxable income is the rate that would have been applicable if the exempt income had been included in taxable income.) Finland has primarily used the credit method in treaties negotiated since the mid 1970s. Treaties with many developing countries provide for tax-sparing credits based on the circumstances specified in the treaty. If a tax-sparing credit applies, the allowable tax credit is not limited to the actual amount of tax paid in the foreign country on the specified income.

Finland grants UK residents a partial imputation credit on dividends received from Finland. The credit ranges from 31% to 62.5% of that to which a Finnish resident would be entitled. A treaty amendment granting a partial credit to Irish resident portfolio shareholders was signed in 1992.

In addition to the income tax treaties listed in Appendix 13, page 91, Finland has negotiated treaties concerning death duties with Denmark, France, Iceland, the Netherlands, Norway, Sweden, Switzerland and the United States. It also has capital treaties with the following countries: Austria, Barbados, Belgium, Czechoslovakia, Denmark, France, Germany, Greece, Hungary, Iceland, India, Ireland, Israel, Italy, Luxembourg, Malta, Morocco, the Netherlands, Norway, Poland, Portugal, Romania, Spain, Sri Lanka, Sweden, Switzerland, Tanzania, Turkey, the United Kingdom, the United States, Yugoslavia and Zambia. Finland generally follows the OECD model in provisions or articles concerning capital.

Finland currently has comprehensive social security treaties in force with the other Nordic countries and with Austria, Canada (and a separate treaty with the province of Quebec), Germany, Spain, Switzerland, the United Kingdom and the United States. There are also five limited agreements in force.

Finland has concluded agreements for the avoidance of double taxation on income derived from shipping and air traffic with Argentina, Russia (for air traffic only), South Africa and the United States.

In addition, Finland has concluded a treaty with the other Nordic countries and Germany on executive assistance in tax matters. The OECD agreement and the Council of Europe agreement on executive assistance have been signed.

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'.