Corporate Tax 2010 - BMR Advisors

Hannes Snellman
Finland
however, excluded from the general right of deduction.
3.4 Would relief for interest so paid be restricted by reference
to “thin capitalisation” rules
Finland
2.5 Are there any other transaction taxes
Yes, there is a transfer tax which is payable on the transfer of real
property located in Finland and the securities of Finnish companies.
The rate of the transfer tax is 4% of the transfer price of a real
property and 1.6% of the transfer price of securities. However, the
transfer tax is not payable on the transfers of publicly listed
securities.
The party liable to pay the tax is the transferee of the real property
or securities. If the transferee is neither a resident of Finland, nor a
Finnish branch of a foreign credit institution, financial services or
fund management firm, the transferor must collect the tax from the
transferee, as the tax authorities may collect the tax from transferor.
2.6 Are there any other indirect taxes of which we should be
aware
There are excise duties levied on alcohol, tobacco products, liquid
fuels, electricity, waste, oil waste and oil damage. During 2010 the tax
on sweets will also be reintroduced. Furthermore, there are custom
duties for goods imported from outside the internal EU market.
Finnish tax law does not include a thin capitalisation rule. However,
it is possible, in cases involving a clear tax avoidance situation, to
apply the general anti-avoidance rule to deny the tax deductibility of
interest on excess debt and to treat it as dividend for the purposes of
withholding taxes. Due to recently enacted restrictions in deductibility
of interest in many European countries, Finland is considering similar
restrictions including possible thin capitalisation rules.
3.5 If so, is there a “safe harbour” by reference to which tax
relief is assured
No, there are not any “safe harbour” provisions. However, in order
to avoid problems in the deductibility of interest payments, the (at)
arm’s-length principle should be applied.
3.6 Would any such “thin capitalisation” rules extend to debt
advanced by a third party but guaranteed by a parent
company
Not applicable.
3 Cross-border Payments
3.1 Is any withholding tax imposed on dividends paid by a
locally resident company to a non-resident
In the absence of a tax treaty and provided that the EC Parent-
Subsidiary Directive (90/435/EEC) does not apply, dividends paid
to a non-resident company are taxed at source. The rate of the
withholding tax is 28%. However, dividends paid to recipients
residing in the European Economic Area (“EEA”) are also
exempted from tax in such cases where a similar, Finnish recipient
would receive the dividends tax free. This may grant an exemption
from withholding tax, e.g. for certain foreign investment funds and
charitable entities. This amendment, which came into force in 2009,
is based on the practice of the Court of Justice of the European
Communities. Thus, any recipients of Finnish dividends within
EEA should consider reclaiming the withheld taxes retroactively.
Dividends paid to a Finnish permanent establishment (“PE”) of a
non-resident company are not subject to a withholding tax but are
taxed as an income of the PE.
3.2 Would there be any withholding tax on royalties paid by a
local company to a non-resident
Royalties paid to a non-resident are taxed at source, and thus subject
to a withholding tax of 28%, unless tax treaty provisions or the EC
Interest and Royalty Directive (2003/49/EC) prevent taxation in
Finland. However, the royalties paid to a Finnish PE of a nonresident
company are not subject to a withholding tax but are taxed
as an income of the PE.
3.7 Are there any restrictions on tax relief for interest
payments by a local company to a non-resident in addition
to any thin capitalisation rules mentioned in questions
3.4-3.6 above
As mentioned above under question 3.4, Finland is considering
introducing restrictions to the deductibility of interest costs. So far,
no government bill has been given, but in the spring of 2009 the
Ministry of Finance published a report on potential alternatives for
restricting interest deductions. The suggestions for restricting
interest deductions include, among others, traditional thin
capitalisation rules, interest deduction restrictions based on income
statements, general anti-avoidance rules and withholding taxation
of interest income for non-residents. The report is at the moment
circulating at different expert quarters for comments.
3.8 Does Finland have transfer pricing rules
Yes. The transfer pricing rules apply the arm’s-length principle to
all transactions between both domestic and international group
companies. The rules also lay down a documentation obligation in
cross-border situations.
4 Tax on Business Operations: General
4.1 What is the headline rate of tax on corporate profits
Corporate income in Finland is subject to a flat rate tax of 26%.
4.2 When is that tax generally payable
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3.3 Would there be any withholding tax on interest paid by a
local company to a non-resident
According to the internal law of Finland, interest paid to a nonresident
is usually exempt from taxation in Finland, so no withholding
tax is payable on interest payments. However, interest paid to a loan
comparable to equity may be subject to a withholding tax.
Corporate tax is payable annually, approximately eleven months
after the end of the financial year, but due to the advance tax system
it is generally paid as monthly instalments throughout the financial
year. The amount paid in the monthly instalments is determined on
the basis of an estimate of the taxable income during a respective
tax year provided by the taxpayer, or an estimation made by the
authorities based on the taxable income of the previous year. If
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