Finland: Withholding tax refund awarded Luxembourg SICAV (court decision); possible refund opportunities

Finish court holds Luxembourg SICAV is entitled to refund of withholding tax

Finish court holds Luxembourg SICAV is entitled to refund of withholding tax

A court in Helsinki in October 2021 held that a Luxembourg-based listed Société d'investissement à Capital Variable (SICAV) fund (the taxpayer) was entitled to a refund of withholding tax.

The decision relates to the early 2000s when Finland applied the “avoir fiscal” system to dividend taxation, during which time period the claimant received dividends from Finnish entities. The court reasoned that considering that the taxpayer was an open-end investment fund with variable capital and that its units were traded at an exchange, the taxpayer was comparable to a tax-exempt Finnish investment fund. 

KPMG observation

This case is the first time that a Finnish court recognized that a SICAV was to be treated as a fund, rather than as a company. The court’s decision regarding the comparability of SICAVs with Finnish funds was influenced by a judgment of the Court of Justice of the European Union (CJEU) that it was contrary to a provision of the EU Treaty to levy withholding tax on dividends received by the fund.   

In addition, the CJEU Advocate general issued an opinion in case C-420/323, finding that the new Finnish tax legislation concerning the tax exemption of foreign investment funds reflects a restriction of the free movement of capital as enshrined in the EU Treaty. Read TaxNewsFlash

Although the claim in the instant case concerns tax years during which the Finnish corporate dividend taxation system was different from the current system (under which dividends between listed companies are tax-exempt), the court’s decision supports that the taxpayer is entitled to a refund of the excess withholding tax.

Taxpayers that want to consider a refund of withholding tax as well as potential interest due from the Finnish tax authorities (accruing from the early 2000s) need to consider filing an appeal as soon as possible against the tax administration’s denial of the refund.

Read a January 2022 report prepared by the KPMG member firm in Luxembourg


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