To safeguard residents and enterprises from the possibility of double taxation, one nation enters into a double tax treaty with another nation. Taxpayers would only be required to pay taxes in one jurisdiction where there is a double taxation treaty between two nations. Like Finland, UK, Malaysia and other countries have double taxation treaties to help their citizens avoid double taxation.
If you need information regarding double tax treaties in Finland, you are welcome to get in touch with our consultants. Our company formation agents can provide you with comprehensive guidance about how you can benefit from such treaties.
Countries that have double tax treaties with Finland
An agreement to prevent or reduce the territorial double taxation of the same income by the two nations is known as a double taxation agreement (DTA). Please find below the name of countries with which Finland has signed double taxation treaties over the years:
Argentina, Armenia, Australia, Azerbaijan, Austria, Aruba, Barbados, Belarus, Bermuda, Belgium, Bosnia and Herzegovina, Brazil, Bulgaria, Canada, China, Croatia, Cyprus, Cayman Islands, Czech Republic, Denmark, Egypt, Estonia, Faroe Islands, France, Georgia, Germany, Greece, Guernsey, Hungary, Iceland, India, Indonesia, Ireland, Israel, Italy, Isle of Man, Japan, Jersey, Kazakhstan, Korea, Kyrgyzstan, Lithuania, Latvia, Luxembourg, Macedonia, Malaysia, Malta, Mexico, Moldova, Montenegro, Morocco, Netherlands, New Zealand, Norway, Pakistan, Philippines, Poland, Portugal, Romania, Russia, Serbia, Singapore, Slovakia, Slovenia, South Africa, Spain, Sri Lanka, Sweden, Switzerland, Tanzania, Tajikistan, Thailand, Turkey, Turkmenistan, United Kingdom, Ukraine, United Arab Emirates, United States of America, Uzbekistan, Uruguay, Vietnam, and Zambia are the countries which have signed double tax treaties with Finland over the years.
The necessity of signing these treaties occurred after seeing that the incomes earned by a company with foreign capital were taxed in Finland and also in the foreign company. If you need to know if Finland has a double taxation treaty with your home country or not, you can interact with our agents. They can provide you with further detailed information in this regard. In Finland, a company’s revenue is not subject to municipal or local income taxes. On their international income, Finnish resident businesses are required to pay Finnish corporate income tax (CIT). Additionally, non-resident corporations’ Finnish permanent establishments (PEs) are liable to Finnish CIT on their worldwide revenue owing to the PE. 20% is the CIT rate in Finland. So, if you are interested to open a company in Finland, you should get in touch with our agents. They can guide you in detail about corporate income tax.
Purpose of double tax treaties (DAT)
DTAs promote mutual investment and trade between nations. When trade between two nations is expanding and both nations expect it to continue increasing, they typically facilitate the signing of a DTA to end double taxation and advance trade. The DTA develops guidelines for how revenue from cross-border transactions is handled and makes sure that it is not subject to double taxation.
A DTA may stipulate that tax be levied in the investor’s country of residence and exempt in the nation where the income is produced. As an alternative, an investor may be taxed where the money is generated and earn a foreign tax credit in their country of residence. For more information about double tax treaties in Finland, you are recommended to get in touch with our experts.
Forms of double taxation
Please find below the two forms of double taxation treaties:
- Economic double taxation: When a capital or income is subject to taxation in two or more states during the same tax period but is held by distinct taxpayers, the following occurs: It happens when assets are connected to various people by the domestic law of the two states in question, such as when the tax law of one state establishes a connection between an item of capital and its legal owners while the tax law of the other state connects that item of capital to the person who has control over possession or receives an economic benefit. For more understanding of economic double tax treaties in Finland, you can rely on our experts;
- Judicial double taxation: When states impose taxes on foreign capital and foreign economic activities concerning the benefit of a resident taxpayer, in addition to domestic assets and domestic economic transactions. A resident either natural or legal who has overseas income or capital is frequently taxed based on their place of residence.
If you still have any questions about the double tax treaties in Finland, you can acquire information from our agents. Furthermore, they can also assist you if you are interested in obtaining a virtual office in Finland.
How are individual taxes levied in Finland?
Earned income is taxed at progressive national rates, including salaries, wages, pensions, in-kind benefits, and some profits from unlisted firms. Additionally, a flat-rate municipal tax that varies with each municipality is imposed. In principle, a taxpayer may write off costs incurred to generate revenue as long as certain statutory restrictions are met. Capital gains, interest, rental income, the yield from life insurance, dividends from listed firms, and some payouts from non-listed corporations are all types of returns on capital investments. Only the national tax is applicable on capital gains.
Taxes are not levied on some specific kinds of capital gains. Only capital gains made in the year of the loss or in the three years after are eligible for a capital loss deduction. Capital income and earned income are allocated between income from a business and a partner’s portion of a partnership’s income. If as an individual, you need help regarding tax deductions, you can consult with our Finnish agents. They can help you to comply well with tax regulations in Finland.
How are corporate taxes levied in Finland?
Generally, companies with a Finnish presence are subject to a national tax on their worldwide profits. Whether or not the money is dispersed to shareholders, the gross income of a resident corporation includes all income, including capital gains. However, if the selling corporation has owned at least 10% of the share capital of the firm whose shares are being sold for one year or more, capital gains from the sale of shares that are a part of a corporation’s fixed assets are free from tax.
Similar to this, dividends that a Finnish corporation receives from a Finnish firm are often tax-free. Dividend income is only partially tax-exempt in some situations, such as when the corporation receiving the dividends owns less than 10% of the stock of the corporation paying the dividends. As a foreigner, you can interact with our experts to learn about the advantageous treaties in Finland.
Tax exemptions on dividends, interests, and royalties
Besides the exemption granted to the incomes, the treaties signed with Finland also stipulate special withholding taxes for interests, dividends, and royalties that are paid by the countries. These rates are lower than the applicable taxes paid by the non-treaty countries and range between 0% and 15%. The taxes paid by the non-treaty countries reach 28 % for dividends, interests, and royalties.
Certain countries have signed treaties that assure 0% withholding taxes on dividends, interests, and royalties: France, Ireland, the United Kingdom, and the United Arab Emirates. Besides withholding taxes on interests, dividends, and royalties, Finland has signed tax treaties regarding inheritances and gifts. Usually, this tax is smaller than the domestic tax which can vary from 10 % to 32 %, with minimum inheritance taxation of 20.000 EUR and a 4000 EUR gift tax. To learn more about double tax treaties in Finland, you are welcome to interact with our experts.
OECD model for treaties
As a general rule, Finland is signing contracts mostly with the countries which have a tax system much like the Finish tax system. The model used to elaborate these treaties is the OECD model. The OECD Model Tax Convention, which serves as a guide for nations drafting bilateral tax agreements, is essential in reducing tax-related obstacles to international commerce and investment. It serves as the foundation for the negotiation and implementation of bilateral tax treaties between nations, which are intended to support commerce while assisting in the struggle against tax avoidance and evasion. The OECD Model also offers a method for uniformly resolving the most frequent issues that come up in the area of international double taxation. If you are seeking expert knowledge about OECD Model Tax Convention, you are welcome to get in touch with our agents. Besides providing you with information about tax avoidance in Finland, they can also practically assist you to open a branch office in this country.
Please contact our company formation experts to learn more about their list of services provided in Finland.