183
[ESTABLISHING A BUSINESS ENTITY IN FINLAND]
Foreign Corporate Acquisitions Act (2012/172), the Finnish Ministry of Economic Affairs and Employment monitors foreign corporate acquisitions and may restrict them if key national interests require. These key national interests may concern national defense, security of supply or functions fundamental to the society. The guiding principle of the Foreign Corporate Acquisitions Act is a positive attitude to foreign ownership. The Finnish authorities could, however, exercise control over the ownership of companies considered essential in terms of security of supply and national security and, if necessary, restrict foreign ownership in such companies. As regards the defense material industry, monitoring covers all foreign owners. In other sectors, monitoring only applies to foreign owners residing or domiciled outside the EU or European Free Trade Area. 4.4 Thin Capitalization In Finland, interest limitation rules have been implemented instead of thin capitalization rules. The deductibility of a company’s net financing expenses is limited to 25 % of the adjusted taxable income of the company (EBITD’). The restrictions on the deductibility of interests apply to all financing expenses, to both group undertakings and external parties. If the total net financing expenses exceed EUR 500,000, the interest deduction limitations will apply. When the total net financing expenses exceed the threshold of EUR 500,000, the deductible net financing expenses are limited to 25% of the company's adjusted taxable income. It should be noted however that external net
financing expenses are fully deductible up to EUR 3 million and will be deducted before internal financing expenses. 4.5 Restrictions on remitting funds out of the jurisdictions If the receiver is not a resident in Finland and gets dividends, interest or royalties, the Finnish payer must withhold tax at source. As general rule, the tax at source is 20 percent if the receiver is corporate entity and 30 percent if the receiver is individual or other than corporate entity. Depending on the provisions of different tax treaties, a lower rate - or even a full exemption from taxation - may be applied. Finland has agreements with many countries to avoid double taxation, meaning the applicable treaty governs the tax treatment. If too much withholding tax has been applied, the foreign recipient may apply for refund from the Finnish Tax Administration. Reporting obligations may also apply, particularly for larger transfers or intra- group payments. The rules cover all payments that can be classified as dividends, interest, or royalties, regardless of the payment method.
ILN Corporate Group – Establishing a Business Entity Series
Made with FlippingBook Ebook Creator