Corporate tax in Finland

Summary

Corporate Income Tax Rate (%) 20
Capital Gains Tax Rate (%) 20 (a)
Branch Tax Rate (%) 20
Withholding Tax (%) (b)
Dividends 0 / 15 / 20 (c)
Interest 0 / 20 (d)
Royalties 20 (e)
Branch Remittance Tax 0
Net Operating Losses (years)
Carryback 0
Carryforward 10 (f)

a) See Section B.

b) The withholding taxes apply only to payments to nonresidents. The rates may be reduced by tax treaties.

c) No withholding tax is imposed on dividends paid to a parent company resi­dent in another European Union (EU) country if the recipient of the dividends satisfies the following conditions:

  •  It holds directly at least 10% of the capital of the payer.
  •  The recipient of the dividend is a company qualifying under Article 2 of the EU Parent-Subsidiary Directive.

Companies resident in EU or European Economic Area (EEA) member states are generally eligible for the tax exemption for dividends under the same conditions as comparable Finnish companies if the Finnish withholding taxes cannot be credited in the company’s state of residence and if sufficient exchange of information may take place between Finland and the state of residence of the recipient. Dividends paid to a company resident in an EU/ EEA member state are subject to withholding tax at a rate of 15% if the shares constitute investment assets of the recipient company and the recipient owns less than 10% of the Finnish company.

d) Interest paid to nonresidents is generally exempt from tax unless the loan may be deemed comparable to an equity investment. In general, interest paid to resident individuals is subject to a final withholding tax of 30% if it is paid on bonds, debentures and bank deposits.

e) No withholding tax is imposed on royalties paid to nonresidents if all of the following conditions are satisfied:

  • The beneficial owner of the royalties is a company resident in another EU country or a permanent establishment located in another EU country of a company resident in an EU country.
  • The recipient is subject to income tax in its home country.
  • The company paying the royalties, or the company whose permanent estab­lishment is deemed to be the payer, is an associated company of the company receiving the royalties, or of the company whose permanent establishment is deemed to be the recipient.

A company is an associated company of another company if any of the follow­ing apply:

  • The first company has a direct minimum holding of 25% in the capital of the second company.
  • The second company has a direct minimum holding of 25% in the capital of the first company.
  • A third company has a direct minimum holding of 25% in both the capital of the first company and the capital of the second company.

Royalties paid to resident individuals are normally subject to salary withhold­ing.

(f)   See Section C.

Taxes on corporate income and gains

Corporate income tax. Companies resident in Finland are taxed on their worldwide income. Nonresident companies are taxed only on their Finnish-source income. Resident companies are gener­ally those incorporated in Finland.

Rate of corporate income tax. The corporate income tax rate is 20%.

Capital gains. Gains derived by companies from the disposal of business assets are treated as ordinary business income. Gains de­rived from the disposal of machinery and equipment are deduct­ed from the remaining book value of similar assets, reducing the depreciable basis of the remaining assets. Gains derived from the disposal of buildings are calculated separately for each building by deducting the remaining acquisition cost from the sales price.

Gains derived by corporate entities, other than companies engaged in private equity investment activities, from the sale of shares are exempt from tax if all of the following conditions are satisfied:

  • The shares are part of the seller’s fixed assets.
  • The seller has owned at least 10% of the shares in the company, including the shares sold, for an uninterrupted period of at least one year.
  • The shares sold are shares in either a Finnish company, a com­pany as defined in Article 2 of the EU Parent-Subsidiary Direc­tive or a company resident in a country with which Finland has entered into a tax treaty that applies to dividends distributed by the company whose shares are sold.
  • The shares are not shares in a real estate company.

Even if the above conditions are satisfied, a sale of shares under certain circumstances may result in the generation of taxable in – come. If the acquisition cost of the shares has at any time been depreciated on the grounds that the fair market value of the shares has declined or if a reserve has been deducted, this part of the consideration received (that is, the deducted depreciation or re­serve) is taxable income. The same principle ap plies if the shares have at any time been the subject of a transaction between related companies and if this transaction resulted in a tax-deductible loss. Under these circumstances, the consideration received for the shares is taxable up to the amount of the earlier tax-deductible loss.

A loss incurred on the sale of shares is not tax-deductible if a gain on the sale of such shares would have been exempt from tax. If the above-mentioned requirements of tax exemption are not fulfilled, a loss from sale of shares that are part of seller’s fixed assets is deductible from profit resulting from sale of such shares during the five years following the loss-making year.

The participation exemption rules concerning capital gains, which are described above, do not apply to shares owned by capital in vestors. For capital investors, capital gains derived from the sale of shares are taxable income and capital losses incurred on shares are tax-deductible.

Administration. Companies must file the corporate income tax return within four months after the end of their accounting period.

Corporate income tax is prepaid in 12 monthly installments dur­ing the accounting period. After the tax return is filed and pro­cessed by the tax authorities, a final settlement or refund is made. The taxation is finalized within 10 months after the end of the accounting period. If the final assessment exceeds the total of the prepaid installments, interest at a rate of 2.5% (for 2016) is added to the final assessment. If the prepaid taxes exceed the final assessment, a refund with interest at a rate of 0.5% (for 2016) is paid. Supplementary tax prepayments may also be made before the final assessment.

The tax authorities have the right to carry out tax audits within five years from the end of the assessment year. Consequently, a company’s 2015 fiscal year is open for adjustment until end of December 2021.

All major corporations can expect a tax audit, usually every fifth year to seventh year.

As a result of an audit, a penalty of up to 30% of the adjusted amount of taxable income may be imposed on a corporation. A penalty charge can be added even though the adjustment does not result in additional income taxes (a change in the taxable income amount is sufficient). Also, interest is charged on the additional tax (but not on the penalties) at a specified rate (7.5% for 2014 and 2015). Neither the penalty nor the interest is deductible when calculating taxable income.

Dividends. Under the current rules, a dividend distribution by a Finnish com pany cannot result in liability for the distributing company to pay additional income taxes on the basis of the distri­bution alone. This applies to dividends distributed to both Finnish residents and nonresidents.

A dividend received by a Finnish corporate entity from a company resident in Finland or from a “company,” as defined in Article 2 of the EU Parent-Subsidiary Directive, is usually exempt from tax. The exemption also applies to dividends received from any other company resident in another EU/EEA country if the com­pany paying the dividends is liable to pay income tax of at least 10%. If a Finnish corporate entity receives a dividend from a company resident in a non-EU/EEA country, the dividend is usu­ally fully (100%) taxable.

By exception, a dividend received by an unlisted Finnish corpo­rate entity from a listed company resident in Finland or in an EU/ EEA country is fully (100%) taxable if the unlisted company owns less than 10% of the shares in the distributing company. If a dividend is received by an unlisted Finnish corporate entity from a listed company that is resident in Finland or an EU/EEA country and if the recipient owns at least 10% of the shares in the distrib­uting company, the dividend is exempt from tax.

Distribution of funds from invested unrestricted equity capital. The return of invested unrestricted equity to shareholders in listed companies is taxed as dividend income, effective from 1 January 2014. The return of the invested unrestricted equity from an un­listed company continues to be treated as a repayment of capital if the recipient can show that the recipient has made an investment to the company and that the invested capital is returned within 10 years from the time the investment was made. The new provi­sions apply to unlisted companies, effective from 1 January 2016, if the investment was made before 1 January 2014.

Foreign tax relief. If no tax treaty is in force, domestic law pro­vides relief for foreign tax paid. The credit is granted if the recip­ient Finnish corporation pays corporate income tax on qualifying foreign-source income in the same year. If the Finnish company does not have any corporate income tax liability that year, no credit is granted. Foreign tax credits may be carried forward five years under certain conditions. Foreign tax credits may not be carried back.

Under tax treaties, foreign tax is most frequently relieved by ex­emption or a tax credit. With developing countries, tax sparing may also be granted.

Determination of trading income

General. Taxable income is very closely tied to the income in the statutory accounts. Most of the deductions must be booked in the statutory accounts to be valid for tax purposes. As stated in the tax law, the definitions of both income and expenses are general and broad and include all expenses that are incurred to maintain or create new taxable income.

In general, expenses are deductible if they are incurred for the purpose of acquiring or maintaining taxable income. For the 2014 financial year, entertainment expenses are fully nondeduct­ible for corporate income tax purposes. However, effective from 1 January 2015, 50% of entertainment expenses is deductible for tax purposes. Expenses incurred to obtain tax-free income, as well as income taxes and penalties, are not deductible.

Inventories. Inventories are valued at the lowest of cost, replace­ment cost or market value on a first-in, first-out (FIFO) basis. Companies may allocate fixed manufacturing overhead to the cost of inventory for accounting and tax purposes if certain con­ditions are met. Obsolete inventories should be provided for or discarded.

Provisions. In general, the possibility of establishing provisions or reserves for tax purposes is relatively limited. Deductions of warranty reserves and provisions for doubtful debts are limited to the amount of actual expected costs. These provisions are avail­able for certain types of taxpayers under certain conditions.

A corporation may create a replacement reserve if it derives a capital gain on the disposal of its business premises or if it re­ceives in surance compensation for a fixed asset because of a fire or other accident. The replacement reserve must be used to buy new depreciable assets during the next two years. This time limit can be extended on application.

If created from the profit on the sale of a previous office, a re­placement reserve can only be used to buy a building or shares that entitle the holder to the use of office space and to the main­tenance of that space.

Inventory and operating reserves are no longer allowed.

Tax depreciation. The Business Tax Act provides detailed rules for the depreciation of different types of assets. The depreciable base is the acquisition cost, which includes related levies, taxes and in­stallation costs. The depreciation expense for tax purposes is not permitted to exceed the cumulative depreciation expense reported in the annual financial statements in the current year or in previ­ous years. Plant machinery, equipment and buildings are gener­ally depreciated by using the declining-balance method.

Machinery and equipment are combined into a pool for deprecia­tion purposes. Companies may vary the annual depreciation in this pool from 0% to 25%. All machinery and equipment with a life of more than three years are classified as depreciable assets. The depreciable basis is decreased by proceeds from sales of assets in the pool. If the sales price exceeds the depreciable basis, the excess is added to taxable income. If it can be proven that the remaining balance of all machinery and equipment is higher than the fair market value as a result of injury, damage or a similar circumstance, additional depreciation may be claimed for the bal­ance of the machinery.

Equipment with a short life (up to three years), such as tools, is us ually expensed. Equipment with an acquisition price of less than EUR850 may also be expensed, with a maximum deduction of EUR2,500 per year.

The maximum depreciation rates for buildings vary from 4% to 20%. The depreciation percentage depends on the use of the build­ing. The depreciation rate for factories, warehouses, shops and similar buildings is 7%.

Intangible assets, such as patents and goodwill, are depreciated using the straight-line method over 10 years, unless the taxpayer demonstrates that the asset’s useful life is less than 10 years.

The Finnish government has decided to temporarily double the depreciation rights relating to certain investments used in produc­tive activities for the 2013 through 2016 tax years. This measure allows accelerated depreciation for buildings, machines and de­vices that are brought into use during the period of 2013 through 2016.

Relief for losses. Losses may be carried forward for 10 years. How­ever, a direct or indirect change in the ownership of the com pany involving more than 50% of the shares results in the forfeiture of the right to set off losses against profits in future years. An indi­rect change occurs if more than 50% of the shares in the parent company owning at least 20% of the shares of the loss-making company are transferred and accordingly all of the shares owned by the parent company in the loss-making company are deemed to have changed ownership. An application may be made to the tax office for a special permit for re instating the right to use the tax losses. The tax office has extensive discretion as to whether to grant the permit.

Losses may not be carried back.

Groups of companies. Corporations are taxed individually in Fin­land. No consolidated tax returns are applicable. A kind of group taxation is, however, introduced by allowing group contributions for limited liability companies. Group contributions are tax-deductible for the payer and included in the income of the recipi­ent. By transfers of these contributions, income can be effectively allocated among group companies in Finland. To qualify, both companies must be resident in Finland, and at least 90% owner­ship, direct or indirect, must exist from the beginning of the tax year. Both companies must carry out business activities and be taxed under the Business Tax Act. Also, they must have the same accounting period. The taxpayer cannot create a tax loss by mak­ing group contributions.

If the local tax authorities allow tax losses to be deducted regard­less of a change in ownership, these losses may generally not be cover ed by group contributions. However, on application, the local tax authorities may allow such tax losses to be covered by group contributions only in special circumstances.

If a corporate entity or a group of corporate entities owns at least 10% of the share capital of another company, the losses of any receivables from the other company (other than sales receivables) are not tax-deductible. With the exception of the group contribu­tions described above, the same rule applies to all other financial assistance granted to the other company without compensation that is intended to improve the other company’s financial situation.

Other significant taxes

The following table summarizes other significant taxes.

Nature of tax Rate (%)
Value-added tax, on the sale, rental, importation
or repair of goods, and on services unless
specifically exempt; exempt services include
Financial services and insurance services
24
Transfer tax on the purchase of real estate
located in Finland; calculated as a percentage
Of the purchase price
4
Transfer tax on the purchase of shares relating
to real estate; calculated as a percentage of
The purchase price or other consideration
2
Transfer tax on the purchase of shares in
Finnish companies; calculated as percentage
Of the purchase price or other consideration
1.6
Social security taxes, paid by the employer
As a percentage of salaries
Health insurance premium (2016 rate) 2.12
Employment pension premium; average rate (2016) 18
Group life, accident and unemployment insurance premium, on total salaries paid by the employer (average rates for 2016)
Up to EUR2,044,500 1
Amount in excess of EUR2,044,500 3.9

Miscellaneous matters

Foreign-exchange controls. No restrictions are imposed on the re patriation of earnings, interest and royalties abroad. The com­mercial bank involved in the transfer must notify only the Bank of Finland for statistical purposes.

Transfer pricing. Related-party transactions are accepted if they are carried out at arm’s length. Corporate income can be adjusted if the transactions are not as they would have been between inde­pendent parties.

Under Finnish transfer-pricing rules, group companies must pre­pare transfer-pricing documentation if specific circumstances exist. The aim of the documentation is to prove the arm’s-length nature of the prices used in cross-border intercompany transac­tions. On request of the tax authorities, the transfer-pricing docu­mentation for a specified fiscal year must be submitted within 60 days, but not earlier than 6 months after the end of the financial year. Additional clarifications concerning the documentation must be submitted within 90 days of a request by the tax authorities.

A tax penalty of up to EUR25,000 can be imposed for a failure to comply with the transfer-pricing documentation requirements, even if the pricing of the transactions was at arm’s length. The adjustment of taxable income may also result in a separate tax penalty of up to 30% of the adjusted amount of income as well as penalty interest.

Debt-to-equity rules. Direct investments are generally made with a combination of equity and foreign or domestic loans. Finland does not have any specific thin-capitalization legislation. The law does not provide a specific debt-to-equity ratio, and a very limited amount of case law exists. Interest determined on an arm’s-length basis is normally fully deductible. If interest is paid to non-tax treaty countries or if a tax treaty does not contain a specific non­discrimination clause concerning interest, the deductibility of the interest might be challenged on grounds related to thin capital­ization. To ensure deductibility, an advance ruling procedure is available.

Restrictions on the tax deductibility of interest expenses entered into force on January 2013 and were applied for the first time with respect to taxation for the 2014 tax year. They do not apply to financial, insurance and pension institutions or to mutual real estate and housing companies. In addition, the restrictions do not apply if the taxpayer establishes that the ratio of its book equity to total assets in the financial statements is equal to or higher than the corresponding ratio in the consolidated financial statements of its ultimate parent company.

Under the new provisions, interest expenses are fully deductible against interest income. Any interest expenses exceeding interest income (that is, net interest expenses) may be fully deducted if the total amount of net interest expenses does not exceed EUR500,000 during the fiscal year.

If the EUR500,000 threshold is exceeded, net interest expenses may be deducted only to the extent that they do not exceed 25% of the taxable business profit (calculated under Section 3 of the Finnish Business Income Tax Act) after adding back the following:

  • Interest expenses
  • Tax depreciation
  • Group contributions received (group contributions paid are subtracted)

The maximum amount of nondeductible net interest expenses cor­responds to the amount of net interest expenses incurred between related parties.

The nondeductible amount of interest expenses may be deducted during subsequent years within the respective limitations for each tax year.

Controlled foreign companies. Under Finland’s controlled foreign company (CFC) legislation, a Finnish shareholder is subject to tax on its respective share of the CFC’s income if the taxpayer, alone or together with certain related parties, directly or indirectly owns at least 25% of the CFC’s share capital or is entitled to at least 25% of the return on capital of the company.

A company is considered to be “controlled” if one or more Fin­nish tax residents directly or indirectly own at least 50% of the share capital or voting power of the company or if one or more Finnish tax residents is entitled to at least 50% of the return on capital of the company.

A foreign permanent establishment (PE) of a foreign corporation is categorized as a CFC under the same conditions as subsidiaries if the foreign PE is located in a different state than the foreign corporation and if the income of the foreign PE is not taxed in the residence state of the foreign corporation. A transitional period ap plied until 1 January 2015 to PEs that already existed before 31 Decem ber 2007.

To determine whether a company is a CFC, the steps described below must be followed.

It first must be determined whether the company is controlled by Finnish residents. If not, the CFC rules do not apply. Under the act, a company is controlled by Finnish residents if residents of Finland for tax purposes own more than 50% of the share capital or the voting shares of the company, or if certain other circum­stances exist.

If the company is controlled by Finnish residents, the income of the company must be analyzed. The CFC rules do not apply to income derived from following activities if the activities are car­ried out in the state of residence of the company:

  • Industrial production or similar production activity
  • Shipping
  • Sales or marketing activity regarding the first two categories of activities
  • A company deriving its income as payments from group com­panies that are carrying on any of the activities mentioned above and that are resident in the same country as the company itself

If the company is not excluded from the CFC rules based on the nature of its income, it must be determined if the company is resident for tax purposes in a tax treaty country.

For a company not resident for tax purposes in a tax treaty coun­try, it must be determined if the effective tax rate (the effective tax rate is computed by determining the tax on taxable income calcu­lated according to Finnish tax rules) of the company is at least 3/5 of the Finnish corporate tax rate of 20% (that is, 12%). If it is determined that the effective tax rate is below 12%, the CFC rules apply to the company.

For a company resident in a tax treaty country for tax purposes, if the effective tax rate is below 12%, the theoretical tax rate in the treaty country (corporate income tax rate according to the tax law of the country) must be determined. If the theoretical tax rate is at least 75% of the 20% corporate tax rate in Finland (that is, 15%), it must be determined whether the company has taken advantage of any special tax reliefs.

Special tax reliefs are reliefs that are not available to all compa­nies in the company’s country of residence. These reliefs include reliefs for foreign companies and reliefs for all companies based on location. If the company in a tax treaty country has not taken advantage of special tax reliefs and if the overall tax rate in its home country is at least 15%, the CFC rules do not apply. Such company is not subject to the CFC rules even if the effective tax rate for the company is less than 12%.

If the company has taken advantage of special tax reliefs, it must be determined whether the effective tax rate for the company is at least 12%. If yes, the CFC rules do not apply. However, the CFC rules do not apply to a company that has taken advantage of special tax reliefs if it is established in the following states:

  • An EU or EEA member state, provided that the company is genuinely established in its state of residence and is carrying on genuine economic activities in this state (substance require­ment).
  • A tax treaty state with sufficient information exchange, exclud­ing countries mentioned in the black list, provided that the com­pany satisfies the substance requirement mentioned above. The black list is a tentative list of tax treaty countries that are con­sidered to have substantially lower corporate income tax rates than Finland. The list includes Barbados, Bosnia and Herze­govina, Georgia, Kazakhstan, Macedonia, Malaysia, Moldova, Montenegro, Serbia, Singapore, Switzerland, Tajikistan, the United Arab Emirates, Uruguay and Uzbekistan.

Anti-avoidance legislation. Under a general anti-avoidance pro­vision in the law, the tax authorities may look through certain transactions.

Treaty withholding tax rates

The rates in the table below reflect the current double tax treaty rates. As a result of domestic legislation, lower rates may apply. Certain other exceptions may also apply. Please consult your local tax specialist for more information.

Dividends (aa)

%

Interest (w)

%

Royalties (cc)

%

Argentina 10/15 (b) 15 (ff) 3/5/10/15 (gg)
Armenia 5/15 (b) 5 5/10
Australia 0/5/15 (ll) 0/10 (p) 5
Austria 0/10 (ee) 0 5
Azerbaijan 5/10 (h) 0/10 (mm) 5/10 (z)
Barbados 5/15 (f) 5 0/5 (c)
Belarus 5/15 (b) 5 5
Belgium 5/15 (b) 0/10 (nn) 0/5 (c)
Bosnia and Herzegovina (v) 5/15 (b) 0 10
Brazil (qq) 20/30 20/30 20/30
Bulgaria 10 0 0/5 (c)
Canada 5/15 (f) 0/10 (mm) 0/10 (e)
China 5/10 (b) 10 10
Croatia (v) 5/15 (b) 0 10
Cyprus 5/15 (f) 0 0
Czech Republic 5/15 (b) 0 0/1/5/10 (hh)
Denmark 0/15 (ee) 0 0
Egypt 10 0 25
Estonia 5/15 10 5/10 (x)
France 0 0/10 (p) 0
Georgia 0/5/10 (y) 0 0
Germany 10/15 0 0/5 (c)

 

Dividends (aa)

%

Interest (w)

%

Royalties (cc)

%

Greece 13 10 0/10 (c)
Hungary 5/15 (b) 0 0/5 (c)
Iceland 0/15 (ee) 0 0
India 10 0/10 (q) 10
Indonesia 10/15 (b) 10 10/15 (g)
Ireland 0 0 0
Israel 5/15 (f) 10 10
Italy 10/15 (rr) 0/15 (mm) 0/5 (j)
Japan 10/15 (k) 10 10
Kazakhstan 5/15 (f) 10 0/10 (ss)
Korea (South) 10/15 (b) 10 (i) 10
Kosovo (v) 5/15 (b) 0 10
Kyrgyzstan 5/15 (b) 0/10 (tt) 5
Latvia 5/15 (b) 10 5/10 (x)
Lithuania 5/15 (b) 10 5/10 (x)
Luxembourg 5/15 (b) 0 0/5
Macedonia 0/15 (u) 10 0
Malaysia 5/15 (ee) 15 (i) 5
Malta 5/15 (b) 0 0
Mexico 0 0/10/15 10
Moldova 5/15 (b) 0/5 (jj) 3/7
Montenegro (v) 5/15 (b) 0 10
Morocco 7/10 (b) 10 10
Netherlands 0/15 (n) 0 0
New Zealand 15 10 10
Norway 0/15 (ee) 0 0
Pakistan 12/15/20 (ii) 10/15 (p) 10
Philippines 15/20/30 (ww) 0/15 (mm) 15/25 (m)
Poland 5/15 (b) 0/5 (uu) 5
Portugal 10/15 (b) 15 10
Romania 0/5 (d) 0/5 (jj) 2.5/5 (l)
Russian Federation 5/12 (s) 0 0
Serbia (v) 5/15 (b) 0 10
Singapore 5/10 (f) 5 5
Slovak Republic 5/15 (b) 0 0/1/5/10 (pp)
Slovenia 5/15 (b) 5 5
South Africa 5/15 (ee) 0 0
Spain 10/15 (b) 10 5
Sri Lanka 15 0/10 (i) 10
Sweden 0/15 (ee) 0 0
Switzerland 0/10 (ee) 0 0
Tajikistan 5/15 (b) 0/10 (uu) 0
Tanzania 20 15 20
Thailand 15/20/30 (o) 10/25 (p) 15
Turkey 5/15 (b) 0/5/10/15 (vv) 10
Ukraine 5/15 (a) 0/5/10 (xx) 0/5/10 (dd)
United Arab Emirates 0 0 0
United Kingdom 0 0 0
United States 0/5/15 (f)(r) 0 0
Uruguay 5/15 (b) 10 5/10 (oo)
Uzbekistan 5/15 (f) 0/5 (jj) 0/5/10 (kk)
Vietnam 5/10/15 (bb) 10 10
Zambia 5/15 (b) 15 0/5/15 (t)
Non-treaty
countries
20 20 20

 

a) The lower rate applies if the recipient is a corporation owning at least 20% of the payer.

b) The lower rate applies if the recipient is a corporation owning at least 25% of the payer.

c) The rate is 0% for royalties received for the use of, or the right to use, copy­rights of literary, artistic or scientific works, including cinematographic films or tapes for television or radio broadcasting.

d) The lower rate applies if the recipient is a corporation owning at least 15% of the payer.

e) Copyright royalties for the production or reproduction of any literary, dra­matic, musical or artistic work (other than motion picture films) are exempt from tax.

f) The lower rate applies if the recipient is a company owning at least 10% of the voting power of the payer.

g) The rate is 10% for royalties for copyrights of literary, artistic or scientific works, including films and tapes; otherwise, the rate is 15%.

h) The 5% rate applies if the recipient is a corporation owning at least 25% and more than EUR200,000 of the capital of the payer.

i) Interest on certain loans is exempt from withholding.

j) The rate is 0% for royalties received for the use of or the right to use any copyright of literary, artistic or scientific work, excluding cinematographic films or films and tapes for television or radio broadcasting.

k) The 10% rate applies if the recipient has owned at least 25% of the voting rights of the payer for at least six months before the end of the payer’s fiscal year. The 15% rate applies to other dividends.

l) The lower rate applies to royalties paid for the use of computer software and for equipment leasing.

m) The rate is 15% for royalties paid by an enterprise registered with and engaged in preferred areas of activities, for royalties for cinematographic films or tapes for television or broadcasting, and for royalties for the use of, or the right to use, any copyright of literary, artistic or scientific work.

n) The 0% rate applies if the recipient is a corporation owning at least 5% of the payer.

o) The 20% rate applies if the recipient of the dividends is a corporation that owns at least 25% of the payer. The 15% rate applies to dividends paid by industrial enterprises to recipients described in the preceding sentence. Other­wise, the domestic rates of 20% or 30% apply.

p) The lower rate applies if the recipient is a financial institution.

q) A lower tax rate applies in certain cases. Please consult the tax treaty.

r) The 0% rate applies if the receiving company owns at least 80% of the voting power of the paying company for at least 12 months and qualifies under cer­tain provisions of the limitation-on-benefits article of the treaty.

s) The 5% rate applies if, at the time the dividend is payable, the recipient of the dividends owns at least 30% of the share capital of the payer and has invested in the payer foreign capital in excess of USD100,000. The 12% rate applies to other dividends.

t) The 0% rate applies to royalties paid for copyrights of literary, artistic or scientific works. The 5% rate applies to royalties paid for the use of cinemat­ographic films and tapes and films for television or radio broadcasting. The 15% rate applies to royalties paid for the use of, or the right to use, patents, trademarks, designs or models, plans, secret formulas or processes, or indus­trial, commercial or scientific equipment, or for information concerning in­dustrial, commercial or scientific experience.

u) The 0% rate applies if the recipient of the dividends owns at least 10% of the voting rights of the payer. The 15% rate applies to other dividends.

v) Finland is honoring the Yugoslavia treaty with respect to Bosnia and Herze­govina, Croatia, Kosovo, Montenegro and Serbia.

w) Under Finnish domestic law, interest paid to nonresidents is generally exempt from tax.

x) The 5% rate applies to royalties paid for the use of industrial, commercial or scientific equipment. The 10% rate applies to other royalties.

y) The 0% rate applies if, at the time the dividend is payable, the recipient of the dividends owns at least 50% of the share capital of the payer and has invested in the payer foreign capital of EUR2 million or more. The 5% rate applies if the recipient of the dividends owns at least 10% of the share capital of the payer and has invested in the payer foreign capital in excess of EUR100,000. The 10% rate applies to other dividends.

z) The rate is 10% for royalties received for the use of, or the right to use, copy­rights of literary, artistic or scientific works, including cinematographic films or tapes for television or radio broadcasting. For other royalties, the rate is 5%.

(aa) No withholding tax is imposed on dividends paid to a parent company resi­dent in another EU country if the recipient of the dividends satisfies the following conditions:

  • It holds directly at least 10% of the capital of the payer.
  • The recipient of the dividend is a company in a form mentioned in the EU Parent-Subsidiary Directive.

Companies resident in EU or EEA states are generally eligible for the tax exemption for dividends under the same conditions as comparable Finnish companies if the Finnish withholding taxes cannot be credited in the com-pany’s state of residence.

(bb) The 5% rate applies if the recipient is a corporation owning at least 70% of the share capital of the payer. The 10% rate applies if the recipient is a corporation owning at least 25%, but less than 70%, of the share capital of the payer. The 15% rate applies to other dividends.

(cc) No withholding tax is imposed on royalties paid to nonresidents if all of the following conditions are satisfied:

  • The beneficial owner of the royalties is a company resident in another EU country or a permanent establishment located in another EU country of a company resident in an EU country.
  • The recipient is subject to income tax in its home country.
  • The company paying the royalties, or the company whose permanent establishment is deemed to be the payer, is an associated company of the company receiving the royalties, or of the company whose permanent establishment is deemed to be the recipient.

A company is an associated company of another company if any of the fol­lowing apply:

  • The first company has a direct minimum holding of 25% in the capital of the second company.
  • The second company has a direct minimum holding of 25% in the capital of the first company.
  • A third company has a direct minimum holding of 25% in both the capi­tal of the first company and the capital of the second company. (dd) The 0% rate applies to royalties for software programs, patents, models or drawings. The 5% rate applies to other industrial royalties. The 10% rate applies to royalties for literary, artistic or scientific works, including cine­matographic films or tapes for television or radio broadcasting. (ee) The lower rate applies if the recipient is a corporation owning at least 10% of the payer.

(ff)      A lower rate applies in certain circumstances. Please consult the tax treaty. (gg) The 3% rate applies to royalties paid to a news agency. The 5% rate applies

to artistic royalties. The 10% rate applies to industrial royalties. The 15%

rate applies to other royalties.

(hh) The 0% rate applies to royalties paid for the use of, or the right to use, copy­rights of literary, artistic or scientific works, including cinematographic films or tapes for television or radio broadcasting. The 1% rate applies to amounts paid under financial leases of equipment. The 5% rate applies to amounts paid under operating leases of equipment and computer software. The 10% rate applies to other royalties.

(ii)      The 12% rate applies if the recipient of the dividends is a corporation own­ing at least 25% of the payer. The 15% rate applies if the recipient of the dividends is a corporation owning less than 25% of the payer. The 20% rate applies to other dividends.

(jj)      The 0% rate applies in certain circumstances. Please consult the tax treaty.

(kk) The 0% rate applies to royalties paid for the use of, or right to use, computer software, patents, designs, models or plans. The 5% rate applies to royalties paid for the use of, or the right to use, secret formulas or processes, or for information concerning industrial, commercial or scientific experience (know-how). The 10% rate applies to royalties for the use of, or right to use, trademarks and copyrights of literary, artistic or scientific works, including cinematographic films, and films or tapes for television or radio broadcasting.

(ll)      The 5% rate applies if the recipient is a corporation owning at least 10% of the payer’s voting rights. The 0% rate applies if the Australian company has held at least 80% of the Finnish company’s voting power for at least 12 months and meets certain other conditions.

(mm) The lower rate applies to, among other interest payments, interest paid by public bodies.

(nn) The lower rate applies to, among other interest payments, interest on cur­rent accounts and on advance payments between banks.

(oo) The 5% rate applies to royalties paid for the use of, or the right to use, industrial, commercial or scientific equipment, or software. The 10% rate applies to royalties paid for the following:

  • The use of, or the right to use, copyrights of literary, artistic or scientific works, including cinematographic films, and films or tapes for television or radio broadcasting
  • The use of, or the right to use, patents, trademarks, designs or models, plans, secret formulas or processes
  • Information concerning industrial, commercial or scientific experience

(pp) Copyright royalties are exempt from withholding tax. The 1% rate applies to royalties paid for finance leases of equipment. The 5% rate applies to royal­ties paid for operating leases of equipment, or for the use of, or the right to use, cinematographic films, films and tapes for television or radio broad­casting, or computer software. The 10% rate applies to royalties paid for the use of, or the right to use, patents, trademarks, designs, plans, formulas or processes, or for information concerning industrial, commercial or scien­tific experience.

(qq) A tax treaty is in force between Finland and Brazil. However, the tax-sparing articles of the treaty applied only for the first 10 years since the signing of the treaty. This period ended on 25 December 2007.

(rr) The lower rate applies if the Italian company holds directly more than 50% of the capital in the Finnish company.

(ss) The beneficial owner of royalties paid for the use of, or the right to use, industrial, commercial or scientific equipment may elect to be taxed, in the contracting state in which such royalties arise, as if the equipment were effectively connected with a permanent establishment in that state. In such case, the provisions of Article 7 (Business income) of the treaty apply to the income and deductions attributable to such equipment.

(tt)            The 0% rate applies if the interest is paid to the state or a local authority thereof, to the national bank, or to an institution of which the capital is wholly owned by the government.

(uu) The lower rate applies to loans granted by banks.

(vv) The 0% rate applies if the interest is paid to the state or national bank. The 5% rate applies to interest on loans to certain public entities promoting export. The 10% rate applies to loans granted by banks.

(ww) The 15% rate applies if the recipient is a company owning at least 10% of the voting power of the payer. Otherwise, the domestic rates of 20% or 30% apply.

(xx) The 5% rate applies to interest paid with respect to sales on credit. The 0% rate applies in certain circumstances. Please consult the tax treaty.