Finland: Draft legislation regarding interest on tax refunds payable to non-residents approved
On 17 October 2014, the Finnish parliament approved draft legislation (HE 95/2014) concerning interest on tax refunds that must be paid to non-resident beneficial owners.
This is further to our Announcement L14072, dated 19 June 2014 and our Taxflash LT14105, dated 14 August 2014.
The amended legislation is planned to come into force on 1 January 2015. In practice, however, the Finnish Tax Administration (FTA) has already implemented the new legislation from this year and has been reimbursing interest on refund request.
Furthermore, our local custodian has obtained information from the FTA that the calculation of interest to be paid to beneficial owners that are corporate entities will depend on the accounting period of the corporation, as follows:
| Details provided | Calculation base |
| Confirmation1, provided with the reclaim request, of the beneficial owner's accounting period at the time of the dividend payment. | The beneficial owner's accounting period. |
| No confirmation of accounting period provided with the reclaim request. | The standard calendar year accounting period. |
Impact on customers
In accordance with the amended legislation, customers of LuxCSD2 are requested to take the following actions, as appropriate.
New or pending reclaim request
- Non-resident individuals:
No action to take, as the FTA will reimburse interest on refund request automatically. - Non-resident corporate entities:
A confirmation1 of the beneficial owner's accounting period at the time of the dividend payment must be provided with the reclaim request if the applicant wants to have the interest applied according to this period.
N.B.: The FTA has already started to request the accounting period for certain outstanding reclaims for corporate entities and, if this is applicable, customers should provide such confirmation in addition to the normal required reclaim documentation.
Important note:
Where a reclaim has already been submitted to the FTA, LuxCSD will assist with the submission of the relevant new confirmation of the accounting period to the FTA on a "best efforts" basis. LuxCSD cannot be held liable if the new confirmation is not considered and the refund is assessed according to the pending reclaim (that is, according to the accounting period of the standard calendar year).
Reclaims already paid
Beneficial owners that believe they are eligible for interest on refunds already paid can claim the interest by:
- Filing an appeal no later than five years from the end of the year in which the original refund decision was made; or
- Lodging a new reclaim no later than five years from the end of the year in which the dividend was paid.
In either case, such request must be submitted to the FTA directly.
The FTA has announced that it will provide further guidance regarding the exact impact of the court ruling and the calculation rules applicable to the interest to be paid on refunds. It is consequently expected that the processing of reclaims will be delayed by the FTA.
Note: With respect to tax reclaims in general, customers are reminded that LuxCSD accepts no responsibility for their acceptance or non-acceptance by the tax authorities of the respective country.
Further information
For further information, customers may contact the LuxCSD Tax Help Desk or LuxCSD Client Services or their Relationship Officer.
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1. The new reclaim form, released earlier this year by the Finnish Tax Authorities, includes the fields necessary for the calculation of interest. Further details are therefore normally not requested from the beneficial owner if such new form has been submitted with the relevant accounting details. However, if the old version of the reclaim form has been submitted, then a copy of the extract from local trade register preferably in English that confirms the accounting period must be provided.
2.LuxCSD refers to LuxCSD S.A., registered office at 42, avenue John F. Kennedy, L-1855 Luxembourg, and registered with the Luxembourg Trade and Companies Register under number B 154.449.