Finnish TRACE implementation may cause surprises to non-Finnish resident investors

Finnish TRACE implementation may cause surprises

As from January 2021 Finland started to apply its amended withholding tax provisions on dividends paid by Finnish listed companies on nominee-registered shares of non-Finnish residents. Changes are due to Finland being the first country to implement the so-called OECD TRACE model in its legislation.


Finnish TRACE implementation may cause surprises to investors when they receive dividends and lead to different withholding tax net amount in the hands of investors, depending on selection made by their custodian. 

In order for tax treaty relief-at-source to be granted at source to non-Finnish resident investors, there must be an Authorized intermediary (AI) in the custody chain which has taken liability for the correctness of the withholding tax on dividends. The previous Foreign Custodian Register of the Finnish tax administration has been abolished and replaced by the new Register of Authorised Intermediaries.

All custodians must re-register to the new AI register. AI register entails certain obligations and liabilities to custodians but enables granting treaty benefits to investors at source. Alternatively custodians can act as Contractual Intermediaries (CI) if they do not wish to register but conclude an agreement with an AI who assumes tax liability on their behalf.

The list of AIs is published here and currently includes more than 50 AIs (situation on 19.2.2021).

Key responsibilities of an AI include determining the tax country and the beneficial owner status of the investor. Such information is typically collected from investors with an Investor-Self-Declaration (ISD) form. The AI also annually files a TRACE report to the Finnish tax administration with dividend recipient information.

If there is no AI in the custody chain, investors may face surprise

If the investor holds shares with a custodian that has not registered as an AI or agreed with another AI on the CI position, no treaty benefits can be granted at source to the investor. This leads typically to withholding levied at the new rate of 35% at source. In such case information on the dividend recipient is not reported to the Finnish tax administration by the custodian and lower tax rates are not available.

Investors can reclaim the excess withholding tax from the Finnish tax administration by way of filing a reclaim application. Also the custodian can file claims on behalf of its clients if it wants to provide such service. 

Custodians have possibility to register as AI now or at a later stage

Also custodians who have not registered yet, can file an application and become able to provide treaty benefits to the clients in respect of Finnish dividends as from the time they are accepted as an AI. I

f you have any questions, KPMG Finland is happy to provide more information on the impact of the new provisions on custodians and issuers and assist with the AI registration process. 

For more information:

Pauliina Laine

+358 40 750 6662

© 2022 KPMG Oy Ab, a Finnish limited liability company and a member firm of the KPMG global organization of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved

For more detail about the structure of the KPMG global organization please visit

Ota yhteyttä


Kuinka KPMG voi auttaa?


loading image Jätä tarjouspyyntö