Finland: TRACE - New relief at source and quick refund process on publicly listed Finnish equities
Following the Finnish government’s decision to implement a new tax relief at source procedure in accordance with the Organisation for Economic Co-operation and Development (OECD) Treaty Relief and Compliance Enhancement (TRACE) model from 1 January 2021, Clearstream Banking1 would like to inform customers that effective
1 January 2021
a new process will be applicable to customers wishing to benefit from relief at source or quick refunds on dividends from publicly listed Finnish equities that are held through Clearstream Banking.
The new process is a consequence of the amended Finnish legislation regarding the documentation and eligibility requirements.
Authorised and Contractual Intermediaries
Following the amended legislation, a new concept of Authorised and Contractual Intermediaries will be implemented.
Authorised intermediaries (AI)
By registering as an AI in Finland, the applicant undertakes certain responsibilities and liabilities towards the Finnish tax authorities (FTA) such as:
- Endorsing due diligence in accordance with the FTA’s guidelines and requirements in order to identify the beneficial owner(s) and validate that such beneficial owner(s) for whom relief at source and or quick refund is requested is indeed eligible for it;
- Being liable for withholding tax, if incorrect information is provided on beneficial owners;
- Performing annual reporting directly to the FTA.
Customers planning to become an AI are strongly recommended to seek advice from their own tax advisor to ensure they are fully aware of all their responsibilities and liabilities.
To apply for the AI status and subsequently be registered and publicly listed in the FTA’s online Register of Authorised Intermediaries, customers must make an application directly to the FTA. Clearstream Banking does not assist in this regard.
Further information regarding the application process, eligibility criteria and the AI’s responsibilities and liabilities can be found directly on the FTA’s website.
Contractual Intermediaries
Intermediaries that do not elect to become an AI are by default considered as a Contractual Intermediary (CI).
New default rate for undisclosed non-residents
Customers are reminded that effective 1 January 2021, with the implementation of the new TRACE regime, the current withholding tax rate of 30% will be increased to 35% for non-disclosed non-resident beneficial owners.
Service offering
Following the amended legislation, Clearstream Banking will, at this stage, offer relief at source or quick refund to customers that:
- Are holding own assets; or
- Have registered with the FTA and been approved as an AI; and
- For Clearstream Banking S.A. (CBL) customers: Are holding publicly listed Finnish equities, through Clearstream Banking’s account at Euroclear Finland (EFI), operated by Nordea Bank Abp; and
- For Clearstream Banking AG (CBF) customers: Are holding publicly listed Finnish equities, though Clearstream Banking AG, via Clearstream Banking S.A’s account at Euroclear Finland (EFI), operated by Nordea Bank Abp.
Important note: Relief at source and quick refund is, at this stage, not offered to customers holding Finnish equities or ADR’s that are:
- Unlisted;
- Held in a collateral account held via Clearstream Banking (regardless of place of holding). Note: In the event of an upcoming dividend payment on a collateral account, such dividend will be substituted by Clearstream Banking, if possible. The only case where a dividend would be paid on a collateral account is in the event where there are no securities available to substitute.”; or
- Held remotely, via other Clearstream Banking depositories.
Any tax certification received from customers for such accounts, for the purpose of obtaining relief at source or quick refund, will be rejected by Clearstream Banking.
Relief at source process
The below relief at source process is currently only applicable for customers holding publicly listed Finnish equities, through Clearstream Banking’s account at Euroclear Finland (EFI) in Finland, operated via Nordea Bank Abp (dep. 86).
Eligible beneficial owners
The following beneficial owners are eligible to obtain relief at source from withholding tax on dividend payments on publicly listed Finnish equities:
Beneficial owner type | Tax rate |
Non-treaty individuals (domestic law) | 30% |
Non-treaty corporations (domestic law) | 20% |
Residents of a double taxation treaty (DTT)
| DTT rate |
Tax exempt entities (domestic law)
| 0% |
Documentation requirements
For the purpose of obtaining relief or exemption at source on behalf of eligible beneficial owners, qualified customers must submit to Clearstream Banking, before the relevant deadlines, the following documentation depending on their own status and the status of the underlying beneficial owners.
Clearstream Banking customers that are holding own assets
- One-Time Certificate publicly listed Finnish Equities – Own assets (OTC);
- ISD-E form;
- Tax-at-source card (if applicable);
- Certificate of residence with reference to special articles (if applicable);
- Per-payment beneficial owner declaration (if applicable);
- Direct Investment confirmation (if applicable)
- Parent-Subsidiary confirmation (if applicable);
Beneficial owner certification - Entities | DTT | Domestic law | |||||||||
Certification type | DTT- | DTT - | DTT- | 20% - | 0% - Comparable to Finnish exempt entity | 0% -Parent Subsidiary Directive | 0% - Other Domestic law | ||||
ISD-E | X | X | X | X | X | X | X | ||||
Tax-at-source card | X | X | X | ||||||||
Certificate of residence - with reference to articles of DTT | X | X | |||||||||
Per-payment beneficial owner declarationa | X | X | X | ||||||||
Parent-Subsidiary confirmation | X | ||||||||||
Direct Investment confirmation | X | ||||||||||
a. only required for DTT rates below 15% and when the dividend gross amount, per dividend payment and per beneficial owner, is EUR 10.000,00 or above
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Clearstream Banking customers that are Authorised Intermediaries (AI)
- One-Time Certificate Finnish publicly listed Equities – AI;
- Per-payment pooled tax breakdown (if applicable)
Form descriptions
One-Time Certificate
The One-Time Certificate (various versions depending on the status of the Clearstream customer) must be completed and signed by the Clearstream Banking customer and remains valid until revoked.
Important: Customers must select one One-Time Certificate, either for CBL, or CBF, as applicable for their account, meaning:
- CBL customers are requested to provide the CBL version of the form;
- CBF customers, including those with CBF-i accounts, are requested to provide the CBF version.
Per-payment pooled tax breakdown
The per-payment pooled tax breakdown must be submitted by customers who have:
- AI status; and
- Hold an omnibus accounts structure on behalf of beneficial owners that are eligible for different tax rates/resident in a different country than of tax residence.
The per-payment pooled tax breakdown must be provided per each country of tax residence and tax rate required (one instruction per tax rate required), via SWIFT formatted MT565, CreationOnline or Xact Web Pportal message, and must include the following details:
- Customer account number;
- ISIN code;
- CBL Corp ID;
- Tax rate to apply: to be included in field :92A::TAXB// for SWIFT users, or tax rate field for Xact Web Portal and CreationOnline users;
- Country of residence for tax purposes, to be specified as follows:
- SWIFT users: BENODET sequence in field :94C::DOMI// country of tax residence in ISO format, and in field :95V::OWND// country and “beneficial owners”, for example: “German beneficial owners; or
- Creation Online or Xact users: in the beneficial owner details sequence under “benfplace”;
- Holding for which the reduced/ exempt tax rate applies.
Important note: It is mandatory to send per-payment instructions in the format stated above. Per-payment instructions sent via the “BO Upload” or other format will be rejected.
ISD Form
The Clearstream Banking version of the ISD-E form (entities) must be provided by customers holding own assets. It must be completed and signed by the final beneficial owner, confirming its status and country of tax residence.
The ISD-E form must in addition be provided to Clearstream Banking in original and remain valid for either:
- five years from the end of the calendar year in which it is signed and dated by the Investor; or
- until further notice, if the Investor is a government or international organisation.
Certificate of Residence
The Certificate of Residence (COR) must be provided by beneficial owners requesting a reduced tax rate/ full tax exemption, according to either the “special” or “direct investment” articles of the DTT. The COR must be provided in original and must fulfil the below requirements:
- Be issued by the beneficial owner’s local tax authority;
- Include the beneficial owner’s full name, full address and country of tax residence;
- Include the Tax Identification Number (TIN);
- Confirm that the beneficial owner is resident in accordance with the relevant DTT with Finland;
- Confirm that the DTT eligibility requirements for special rates/tax exemption are met by specifying the relevant DTT article under which the beneficial owner qualifies for the “special” or “direct investment” articles of the DTT.
- The COR must cover the payment date and remains valid until there is a change in circumstances.
Tax-at-source card
The tax-at-source card must be provided for beneficial owners that are eligible for full tax exemption (0%) under domestic law.
It must be issued by the FTA, confirm that the beneficiary is eligible for tax exemption on Finnish dividend payments and be valid for the pay date with respect to all income for which such exemption is claimed
Per-payment beneficial owner declaration
The per-payment beneficial owner declaration must be provided by customers holding own assets in the event where the DTT rate requested is less than 15% and the dividend gross amount is EUR 10.000,00 or more.
It must be provided by the beneficial owner at the time of the relevant dividend payment in the form of a SWIFT (formatted MT565 message) or via CreationOnline or Xact Web portal message and state the following in the CETI:
"I am the final economic beneficial owner of the relevant Finnish dividend payment and my entitlement to this dividend payment is not restricted by any contractual obligations (such as lending and borrowing arrangements) which would require that the dividend paid to me is transferred further to an actual investor; and
I am entitled to a reduced tax rate in accordance with the DTT concluded between Finland and my country of residence".
Direct investment confirmation
The confirmation must be provided by beneficial owners requesting full tax exemption, under the “direct investment” articles of the DTT. The confirmation must be provided per payment in original and must fulfil the below requirements:
- Be issued by the issuing company;
- Confirm that on record date the beneficial owner meets the conditions for exemption under the “direct investment” articles (such as holding 10% of the capital of the company distributing the dividends).
Parent-Subsidiary confirmation
The confirmation must be provided by beneficial owners requesting full tax exemption, according to the Parent-Subsidiary regime. The confirmation must be provided per payment in original and must fulfil the below requirements:
- Be issued by the issuing company;
- Confirm that on record date the beneficial owner held a substantial holding in the company (at least 10% of the capital of the company distributing the dividends);
- Confirm that the beneficial owner/ company takes one of the forms listed in the Annex I, Part A of the Directive; and
- Confirm the beneficiary's country of residence is in the European Economic Area (EEA).
Deadlines
The deadlines for the submission of the documentation to obtain relief or exemption at source of withholding tax on dividends on publicly listed Finnish equities are as follows:
Document | Deadline for receipt by Clearstream Banking |
One-Time Certificate publicly listed Finnish Equities (various versions) | Four business days prior to the record date of the first dividend payment by 10:00 CET. |
Per-payment pooled tax breakdown | One business day after the record date of each relevant dividend payment by 10:00 CET. |
ISD-E form | Four business days prior to the record date of the first dividend payment by 10:00 CET. |
Certificate of Residence | Four business days prior to the record date of the first dividend payment by 10:00 CET. |
Tax-at-source card | Four business days prior to the record date of the first dividend payment by 10:00 CET. |
Per-payment beneficial owner declaration | One business day after the record date of each relevant dividend payment by 10:00 CET. |
Direct Investment confirmation | Four business days prior to the record date of the first dividend payment by 10:00 CET. |
Parent-Subsidiary confirmation | Four business days prior to the record date of the first dividend payment by 10:00 CET. |
TIN requirements
Customers are required to use the exact format, as stated in the COR, as applicable, whenever the Tax Identification Number (TIN) is required in the above Clearstream Banking documentation.
Quick refund
A quick refund is available for eligible beneficial owners, if full or partial relief of withholding tax on publicly listed Finnish equities has not been obtained at source.
To apply for a quick refund of withholding tax on dividends, the same documentation requirements are applicable as for the relief at source process, except, customers must in addition also send a per-payment request for a quick refund.
The per-payment request for quick refund, must be provided per each country of tax residence and tax rate required, via SWIFT formatted MT568, CreationOnline or Xact Web portal message and must include the following details:
- Request for quick refund
- Customer account number;
- ISIN code;
- CBL Corp ID;
- Tax rate to apply: to be included in field :92A::TAXB// for SWIFT users or tax rate field for Xact Web Portal and CreationOnline users),
- Country of residence for tax purposes, to be specified as follows:
- SWIFT users: BENODET sequence in field 94C::DOMI//country of tax residence in ISO format, and in field 95V::OWND//country and “beneficial owners”, for example: “German beneficial owners; or
- CreationOnline or Xact users: in the beneficial owner details sequence under “benfplace”);
- Holding for which the reduced/ exempt tax rate applies.
Deadline
The quick refund can be applied for between 1 June and 1 November of the year of the dividend payment.
Annual TRACE reporting requirements
To comply with Finnish disclosure and reporting requirements, Clearstream Banking, as an AI, is requested to provide the following details about certified intermediary banks/ beneficial owners holding publicly listed Finnish equities:
Certified status of customer | Details |
Own assets | Name, TIN, address, legal status and dividend income details of the Clearstream Banking customer (beneficial owner). |
AI | Name, Finnish and local TIN, address, legal status and dividend income details of the Clearstream Banking customer. |
To ensure the details included in the Clearstream Banking annual TRACE reporting are correctly reflected towards the FTA, AI customers will be requested to validate and confirm to Clearstream Banking that the reportable figures are correct and in line with the reporting that the AI customer will include in its own annual reporting to the FTA.
Further details regarding the exact reconciliation procedure will be communicated to customers, in a separate announcement, at a later stage.
Important note: Customers are reminded that it is at all times the customer's full responsibility to ensure that final beneficial owners are eligible for the tax rates applied (including the Clearstream Banking default rates), and that all information provided for tax purposes is complete, accurate and up to date. Furthermore, customers shall hold Clearstream Banking harmless of any loss or liability incurred by Clearstream Banking as a result of a breach of this responsibility.
Impact on customers
Customers must, as of 1 January 2021 and prior to the relevant Clearstream Banking deadline, provide the new certification as per above guidelines, as Clearstream Banking, will otherwise apply the new default rate of 35% withholding tax on dividends received from publicly listed Finnish equities.
Further information
For further information, please contact the Clearstream Banking Tax Help Desk, Clearstream Banking Client Services or your Relationship Officer.
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1. Clearstream Banking refers collectively to Clearstream Banking S.A., registered office at 42, avenue John F. Kennedy, L-1855 Luxembourg, and registered with the Luxembourg Trade and Companies Register under number B-9248, and Clearstream Banking AG (for Clearstream Banking Frankfurt (CBF) customers using Creation accounts), registered office at 61, Mergenthalerallee, 65760 Eschborn, Germany and registered in Register B of the Amtsgericht Frankfurt am Main, Germany under number HRB 7500.