Dividends paid to a nominee-registered share held by a Finnish tax resident

• Yes. If the dividend beneficiary is a foreign entity and dividend beneficiary information is not provided to the Tax Administration, the 35% tax at source can be withheld.
• If an entity is registered in Finland or established in accordance with the Finnish legislation or it's place of effective management is located in Finland, it is considered as a Finnish entity. In this case, the 50% domestic withholding tax should be withheld, if the dividend beneficiary information is not provided to the Tax Administration.

No, it is not. It is not required to investigate the beneficial owners of the entity in order to determine whether 50% withholding tax must be withheld on the dividend. On dividend paid to a foreign entity can be withheld 35% tax at source, when the dividend beneficiary information is not provided to the Tax Administration.

No, it is not required. The existing due diligence procedure is sufficient and 35% tax at source can be withheld on dividend.

• The income will be taxed on the Finnish tax resident dividend beneficiary. If 35% source tax has been withheld on the dividend and the dividend beneficiary self reports the income, this tax can be credited in the assessment of the beneficiary's annual income taxation for the benefit of the beneficiary. The income tax is a maximum of 25,5% on dividends paid to a Finnish tax residents by a Finnish publicly listed company, which means that the tax to be credited is always higher than the tax actually due on the dividends.
  
  • If the dividend beneficiary does not report the divided income, the income will be taken into account on tax authorities' initiative and a tax increase may be imposed on the beneficiary.
• If in the investigation of the dividend beneficiary has been followed the described in the guidance "How to withhold tax on dividends paid to a Finnish tax resident shareholder when the underlying shares are nominee-registered", for example a valid self-certification for CRS reporting declares that the dividend beneficiary is not a Finnish tax resident, the payor can be deemed to have acted diligent and therefore no tax consequences are imposed on the payor.
• Principally, there is no need to impose tax on the payor in order to secure that enough tax is collected in a situation, where the tax withheld is higher than the tax credited for the benefit of dividend beneficiary (Section 51 (1) and (2), the Act on Assessment Procedure for Self-Assessed Taxes)

The term "dividend beneficiary" refers to the shareholder (the owner of the shares), who has the right to the dividend on the record date according to the Finnish Companies Act (Osakeyhtiölaki).

In the Finnish tax legislation there is no rules on how to collect the documents. The documents can be collected in electronic or in physical form.

Example:

• The payor provides a response stating that either the payor itself, or a custodian acting on its behalf, has informed the custodians in the custody chain of the application of section 4 a of the Prepayment Act and related guidance issued by the Tax Administration. Simultaneously the chain has been informed, that Finnish citizens and Finnish companies cannot hold their Finnish shares in a nominee-registered account.
• The payor has agreed with the local custodians, that the custodian itself and/or the intermediary in the custody chain closest to the beneficiary has checked their nominee-registered accounts according to the procedures described in the Tax Administration's official guidance, and on the basis of which they have found there to be no Finnish tax residents among the dividend beneficiaries.
• Custodians or intermediaries who are not closest to the beneficiary rely on following procedures including:
  1. informing clients during the account opening process that they may not open an account to hold Finnish shares on behalf of a Finnish national in a nominee registered account,
  2. informing custodian or intermediary clients of their obligation to determine if the accounts hold Finnish tax resident shareholders and disclose the information to the payor prior to income payment.

Yes, the aforementioned procedure is found acceptable to show that the payor has to the best of its abilities identified that the dividend beneficiary is not a Finnish tax resident.