Finland: Withholding tax refunds for Luxembourg SICAV funds
Tax administration has granted SICAV funds with full withholding tax refunds with respect to Finnish-sourced dividends
Luxembourg SICAV funds
The Finnish tax administration has accepted the EU law-based comparability of non-listed Luxembourg-based Société d'investissement à Capital Variable (SICAV) funds with Finnish tax-exempt contractual-based funds. As a result, the tax administration has granted the SICAV funds with full withholding tax refunds with respect to Finnish-sourced dividends.
The tax administration for over a decade has refused to hold Luxembourg-based SICAV funds comparable under EU law with Finnish tax-exempt contractual-based funds. The core reasoning of the approach has been the difference in the legal form:
- SICAV fund is a corporate form fund with separate legal personality
- Finnish tax-exempt funds are contractual arrangements between the management company, the custodian, and the investors without separate legal personality and independent liability in general
Part of the reasoning has also been the CJEU’s landmark Aberdeen case (C-303/07, Aberdeen Property Fininvest Alpha), which never solved the comparability question between a SICAV and a Finnish contractual-based fund.
At the same time, some other foreign corporate form funds have been treated as comparable with Finnish contractual-based funds and have received full withholding tax refunds in Finland.
However, following the CJEU’s judgment in C-342/20, Veronsaajien oikeudenvalvontayksikkö (Exonération des fonds d’investissement contractuels), the tax administration has now issued several rulings treating Luxembourg-based SICAV funds comparable under EU law with Finnish tax-exempt contractual-based funds. As a result, the Luxembourg-based SICAV funds have received full withholding tax refunds for the tax withheld at source on Finnish dividend income.
The change in the tax administration’s approach affirms that under EU law the legal form of an investment fund does not justify a different tax treatment between corporate form and contractual-based investment funds. However, the new rulings concern undertakings for the collective investment in transferable securities (UCITS) funds and thus it remains to be seen whether the cases concerning non-UCITS funds, and those SICAV funds that fall outside the scope of UCITS and alternative investment fund managers (AIFM) Directives, will be similarly resolved.
Foreign corporate form funds are still encouraged to claim EU law-based tax benefits in Finland through advance rulings, withholding tax reclaims, and appeals, irrespective of the legal form in order to safeguard their interest and avoid the lapse of limitation periods.
For more information, contact a KPMG tax professional in Finland:
Kristiina Äimä |firstname.lastname@example.org
Aki Kokko| email@example.com
Read a September 2022 report prepared by the KPMG member firm in Luxembourg
The KPMG name and logo are trademarks used under license by the independent member firms of the KPMG global organization. KPMG International Limited is a private English company limited by guarantee and does not provide services to clients. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's Federal Tax Legislative and Regulatory Services Group at: + 1 202 533 3712, 1801 K Street NW, Washington, DC 20006.