Tax Treaty Case Law around the Globe 2013

S. 211 Finland: Do Investment Fund Distributions Constitute Dividends?

Marjaana Helminen

1. S. 213 Introduction

In case KVL 2/2012 the Central Tax Board of Finland (KVL) was required to give an advance ruling concerning the proper tax treaty classification of investment fund distributions. The KVL had to consider whether investment fund distributions are dividends or other income for tax treaty purposes and whether Finland as the source state has the right to tax the distributions.

2. Facts of the case

The case was initiated by a Swedish resident, who wanted to invest in a Finnish investment fund engaged in real estate investment. The non-resident investor would receive yearly investment fund distributions from the Finnish investment fund. The investor wanted to know whether the investment fund distributions qualified as a dividend or as other income under the Nordic Multilateral Tax Convention and asked for an advance ruling from the Central Tax Board of Finland. The question is relevant because in accordance with the dividend article of the Nordic Convention (Article 10) the source state (Finland) can levy a 15% tax on the gross amount of dividends received by Swedish resident individuals, but t...