The financial sector, which opposed the tax, was pleased with the group’s conclusions. The SDP announced that the tax should be decided in the autumn in a budget debate.
Ministry of Finance According to the (VM) expert group, there is no reason to impose a 5% withholding tax on dividends in Finland. The tax has been driven in particular by the Prime Minister’s Party Sdp.
According to the Ministry of Foreign Affairs’ report, there are grounds for withholding tax from the point of view of consolidating the tax base. There are also no legal obstacles to the tax.
However, according to the working group, the tax is not compatible with the current dividend tax system and would make it more complex. The tax would also require technical changes to the taxation. In addition, the tax could affect investment behavior.
“The withholding tax would be applied only to certain operators on a point-by-point basis and would differ from the current dividend taxation procedure,” the report says.
Withholding tax the idea is to tax foreign operators in particular.
Pension funds, mutual funds, companies managing the insurance envelopes of their customers, as well as non-profit associations and foundations, among others, are exempt from dividend tax. The tax exemption generally also applies to similar foreign entities. Foreign entities raise dividends from Finland tax-free.
According to a report published on Tuesday, due to EU regulations, the tax treatment of domestic tax-exempt dividend recipients must also be changed if foreign dividend recipients are to be taxed.
This is because, under EU law, foreign dividend recipients can be treated in the same way for tax purposes as Finnish mutual funds, non-profit organizations and employment pension insurance companies.
In Finland There are also agreements under which Finland would not be able to levy tax on the majority of dividends paid abroad, even if a new withholding tax on dividends is introduced.
Finland has such tax treaties that prevent the taxation of dividends with Ireland, Great Britain, Mexico and France. In addition, under a tax treaty with the United States, among others, pension funds are exempt from tax.
The working group also explored the possibility of levying a reasonable tax on real estate investments made by foreign funds and other tax-exempt entities. The working group does not present the actual conclusions, but recommends further consideration.
Withholding tax was featured in a mid-term government dispute, when the government decided to look for more than 100-150 million euros in additional tax revenue. No decisions were made because the final report of the withholding tax working group was not yet ready.
The withholding tax will next come up next autumn in the government’s budget debate. The introduction of a withholding tax is still not impossible, although the report of the working group was critical of it.
Withholding tax the opposition advocacy organization Finanssiala was pleased with the group’s conclusions.
“New types of tax cuts on ownership and investment would not support domestic ownership, so the working group’s policy is therefore very significant and impressive. Now there is no need for new tax sticks on investment income flows in the wheelchair of the economy, ”says the leading tax expert of the Financial Services Association (FA) Lauri Luukkonen.
Parliamentary Chairman of the Tax Section of the Finance Committee Pia Viitanen (sd) shows that different tax models for taxing funds and other institutional investors are already in place in many countries.
“In other Nordic countries, real estate income from foreign investors is widely taxed. Denmark is introducing a 15% withholding tax on fund dividends, and Germany already has such a model. The 5% tax level has been discussed in Finland. The government should outline measures in the autumn budget debate so that Finland’s tax base can be secured and thus the financing of services improved, ”says Viitanen.
According to Viitanen, the report of the working group shows that both the withholding tax for large investors and the tax on foreign real estate funds could be implemented and could generate well over one hundred million euros a year.
“Strengthening the tax base on capital can even lower taxes on low-income earners and retirees,” he said.
Sanna Marinin (sd) In the government program, the government decided to investigate whether the tightening of the tax base will make it possible to introduce a withholding tax on dividends received by foreign funds and other exempt entities by 2022.
Marin referred among other things, in an interview with HS last Sundaythat a withholding tax would be a way to increase government revenue.
“There is a lot to be done on the tax side without raising taxes on work or entrepreneurship. We have presented a number of different entities that could be used to fill the gaps in taxation. Such is, for example, the withholding tax for institutional investors. It doesn’t affect the wallet at work in any way, nor does it make it harder to do business, ”Marin said.