Article 24 May 2016

Dividends received by non-Finnish life insurance companies – ruling on withholding tax exemption

The Finnish Supreme Administrative Court has issued a ruling (KHO:2016:77) based on which the dividends received by a Luxembourgian life insurance company were to be treated exempt from Finnish withholding tax to the extent such dividends effectively increased the statutory transfers to meet the obligations in respect of insurance liabilities booked by the insurance company.

Decision in line with earlier ruling

This decision is in line with the earlier ruling by the European Court of Justice in case C-342/10 (issued on 8 November 2012) concerning Finnish sourced dividends received by non-Finnish pension funds and the free movement of capital.

The Finnish tax law was amended after the ruling by the ECJ so that the withholding tax treatment of foreign pension funds was aligned with the tax treatment of equivalent Finnish pension funds, subject to certain requirements.

Now the Supreme Administrative Court found that also non-Finnish life insurance companies shall be treated equally to their domestic equivalents.

Practical implications of ruling

This means that dividends from Finland received by insurance companies offering unit-linked insurance policies and being resident within the EEA (or in a country with which Finland has concluded an agreement concerning exchange of information in tax matters) are tax-exempt, with the exception of fees charged by the insurance companies. The taxpayer must present sufficient clarification to be able to obtain the exemption.

We are pleased to assist you in assessing whether you can benefit from the ruling, either for future dividends or to claim refunds of past years' withholdings of dividend tax in Finland.

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