July 2019
Taxing rights of Finland: new tax practice from the Administrative Court
In the recent case heard by the Administrative Court of Helsinki (11.7.2019 19/0508/3), a limited liability company established in the Hong Kong Special Administrative Region of the People's Republic of China had received income related to a temporary work project in Finland. The company was a Finnish non-resident and had no permanent establishment for income tax purposes in Finland. The company had applied for a so-called 0% withholding tax card from the Finnish Tax Administration.
Finland and Hong Kong had no double tax treaty in place at the time since the treaty did not enter into force until 1st of January 2019. Therefore, only the domestic tax legislation was applied when reviewing the company’s tax liability in Finland. According to the Administrative Court, the Tax Administration should not have granted the 0% tax-at-source card. The Administrative Court argued that Finland had the right to tax so-called Finnish source income in the absence of a double tax treaty even though no permanent establishment has been created in Finland. Thus, the Finnish payer should have been liable to withhold a tax of 13% from any compensation paid to the company. This decision is not final and may be appealed to the Supreme Administrative Court.
Finland and Hong Kong had no double tax treaty in place at the time since the treaty did not enter into force until 1st of January 2019. Therefore, only the domestic tax legislation was applied when reviewing the company’s tax liability in Finland. According to the Administrative Court, the Tax Administration should not have granted the 0% tax-at-source card. The Administrative Court argued that Finland had the right to tax so-called Finnish source income in the absence of a double tax treaty even though no permanent establishment has been created in Finland. Thus, the Finnish payer should have been liable to withhold a tax of 13% from any compensation paid to the company. This decision is not final and may be appealed to the Supreme Administrative Court.
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The information in this site has been prepared for general informational purposes only and it should not be used as a substitute for consultation with a professional tax, legal or other competent advisor. While we have made every attempt to ensure that the information contained in this site has been obtained from reliable sources, Effektiivi Oy is not responsible for any errors or omissions, or for the results obtained from the use of this information.
The information in this site has been prepared for general informational purposes only and it should not be used as a substitute for consultation with a professional tax, legal or other competent advisor. While we have made every attempt to ensure that the information contained in this site has been obtained from reliable sources, Effektiivi Oy is not responsible for any errors or omissions, or for the results obtained from the use of this information.
