When investing in Finnish securities, foreign investment funds must meet the requirement of having at least 30 investors to be eligible for the withholding tax exemption. Otherwise, if there are less than 30 investors, they need to meet the following criteria:
- Annual distribution of 75% of profits per financial year
- Capital of at least EUR 2 million
- Unitholders are professional investors or equivalent high net worth individuals
Recent development
Two recent Helsinki Administrative Court decisions, both not final, address key aspects of the Finnish investment fund tax-exemption regime.
In the first case (decision dated 13 October 2025), the court held that sub-funds of a Jersey‑based umbrella fund, in the corporate form of Open-ended investment company (OEIC), do not qualify for Finland’s investment fund tax exemption because (1) indirect investors cannot be counted toward the “30 or more investors” threshold and (2) sub-funds that only issue accumulating units (no profit distributions) fail the distribution requirement.
In the second case (decision dated 11 September 2025), the court held that a newly established Luxembourg SCSp (société en commandite spéciale) that is organized as an AIF and open‑ended can be treated as a Finnish tax‑exempt special investment fund for Finnish investment fund exemption purposes despite its partnership legal form. The fund’s fiscal transparency in Luxembourg, profit distributions and genuine collective investment character was decisive.
KPMG comment
If the 13 October decision becomes binding, it will likely undermine pending cases that rely on counting indirect investors and adversely affect non‑fiscally‑transparent funds that do not distribute profits. KPMG recommends appealing any negative rulings on investor count and profit distribution to preserve the claims.
The 11 September decision, consistent with a 2024 ruling, confirms that a fund’s partnership legal form is not decisive. AIFM‑regulated partnership funds can be treated as comparable to Finnish tax‑exempt special investment funds. If the decision becomes binding, it should help regulated partnership funds that have struggled to obtain withholding‑tax or treaty benefits in Finland to seek qualification under the fund exemption regime, depending on the specific facts.
