New opportunities of refunds for Luxembourg FCPs - 17/06/2013
Prior decisions regarding comparability between foreign funds and Finnish funds
In its 2009 Aberdeen decision, the European Court of Justice (ECJ) held that there were no differences between a Luxembourg SICAV and a Finnish corporation. Because the dividends would have been tax exempt if received by a Finnish corporation in a similar situation, no Finnish withholding tax should consequently be imposed on dividends paid to a Luxembourg SICAV. However, the ECJ did not explicitly draw a comparison between Finnish funds and investment funds situated in another European Union (EU) /European Economic Area (EEA) State.
The Finnish Tax Authorities published Guidance in 2011 stating that if the essential features of an UCITS investment fund established abroad are comparable to those of a Finnish investment fund, no withholding tax should be levied on income received from Finland. Thus, the Guidance still left the Tax Authorities some discretion on whether the essential features of the foreign UCITS investment fund are comparable to those of a Finnish investment fund. Furthermore, the Finnish Tax Administration has not yet published a list of comparable vehicles to a Finnish investment fund.
Following this ECJ decision, exemption has however been granted by the Finnish Central Tax Board (CTB) to Norwegian investment funds in 2011 and by the Administrative Court of Helsinki to Swedish investment funds in 2012.
New ruling from the Finnish Central Tax Board regarding Luxembourg FCPs
In a March ruling, the CTB held that a Luxembourg FCP registered as a UCITS is comparable to a Finnish investment fund and therefore no withholding tax should be levied on dividend distributions from a listed or non-listed Finnish company to such Luxembourg FCPs.
The Luxembourg FCP in question:
- Was established in the form of an UCITS;
- Had both accumulating and dividend distributing shares; and
- Was managed by a management company, which was a limited liability company resident in Luxembourg.
Impact for Luxembourg investment funds
The decision is now final as no appeal was lodged against it. Luxembourg UCITS FCPs should therefore benefit from an exemption on dividends withholding tax in Finland and should be entitled to a refund for withholding taxes already suffered (within the rules governing the statute of limitation). Please consider that the Finnish Tax Administration still applies a case-by-case assessment and that Luxembourg non-UCITS FCP may not automatically benefit from this exemption of withholding tax yet.
We will follow up on the process and continue to keep you updated in case of any new developments.
If you have any queries regarding the above, please do not hesitate to contact us.
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