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.
Background
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.
KPMG observation
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 |kristiina.aima@kpmg.fi
Aki Kokko| aki.kokko@kpmg.fi
Read a September 2022 report prepared by the KPMG member firm in Luxembourg
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