Finland ready to refund withholding tax to Luxembourg FCPs
Positive ruling of the Finnish Central Tax Board regarding refund of withholding tax levied on dividends distributed to a Luxembourgish FCP.
On 20 March 2013, the Finnish Central Tax Board (hereafter CTB) issued an advance ruling regarding a Luxembourg FCP. According to this ruling, withholding tax should not be levied on dividend distributions from a Finnish company to a Luxembourg Fonds Commun de Placement (FCP).
The CTB found that the fund was objectively comparable to Finnish resident investment funds that are tax-exempt in Finland. When assessing the comparability of the fund, it is relevant that the fund satisfies the requirements of UCITS Directive. The comparison with the Finnish investment fund must be made at the level of the fund and the situation of the unit holders must not be taken into account since investment funds resident in Finland are tax exempt irrespective of the tax treatment of the investors. The CTB referred to article 63 of the Treaty on the Functioning of the European Union.
Please note that the ruling is not final. The Tax Recipients’ Legal Services Unit and the City Board of Helsinki may lodge an appeal within 30 days of the decision date.
This advance ruling is excellent news for all Luxembourg resident FCPs that are UCITS compliant. In principal, all contractual based UCITS funds should be entitled to a refund of the withholding tax levied in Finland. Neither the tax treatment of the unit holders nor the fact whether the fund is a separate taxable entity in its state of residence and subject to the benefits of the applicable double tax treaty should have an impact on the comparability of the funds.
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