The statement is a response to several inquiries on how to withhold tax at source on dividends to be paid in 2020.
Tax treaty benefits at source:
The statement goes out by summarizing the formal documentation should provide for the payer of the dividend in order to be entitled to treaty benefits at source. In addition to formal requirements, the statement endorses the view that payor of the dividend shall (always) ascertain before a dividend payment that the recipient is the beneficial owner of the dividends within the meaning of the tax treaty. According to statement, such assurance is, for example, a declaration by the recipient of the dividend that recipient is the actual recipient of the dividend. Further, before the dividend is paid out the payor should check that the information received in the assurance is not in contradiction with any other information the payer has otherwise received on the recipient of the dividend.
Tax-at-source card may either be applied by the beneficiary of the income or by the payer to questions whether tax should be withheld or at what rate.
In the statement it is expressed that regardless of the tax-at-source card payor must ascertain that the circumstances that had been described in the application of tax-at-source card continue to prevail when the payor pays e.g. the dividends. Statement is expressly addressing that payor must ascertain that the beneficiary is the beneficial owner of the dividends within the meaning of the tax treaty even if tax-at-source card would have been obtained or the same would have secured through an advance ruling.
The topics addressed in the statement are utmost relevant and some of the views tabled by the Finnish tax authorities understandable. On the other hand, statement is addressing a topic that would require more detailed guidance and sadly, no further guidance, instructions or practical examples are provided on the concept of actual recipient of the dividend i.e. beneficial owner. On the same token statement is interestingly introducing a new requirement that payor of the divided should always – prior dividend distribution – obtain assurance that the recipient can be considered as beneficial owner and have certain control processes over the information contained in the assurance even if such views are somewhat conflicting with the previous tax practice and instructions of the tax authorities.
Statement of the Finnish Tax Authorities can be viewed here in English and in Finnish.
Kennet Pettersson, email@example.com, tel. +358 40 556 1181
Laura Lahdenperä, firstname.lastname@example.org, tel +358 50 364 1013
Eeva Pynnönen, email@example.com, tel. +358 50 426 0035.