Fund Taxation Alert 2021-02

Fund Taxation Alert 2021-02



WHT reclaim – Recent development for non-resident corporate form funds

The Finnish Administrative Court ruled in favor of US based corporate funds in four cases and admitted that they were comparable to Finnish contractual funds under EU law. The decision became final in October 2020 and US funds were entitled to receive tax exempt dividend income from Finland. The decisions are expected to support the development of Finnish tax practice towards the direction in which non-resident corporate funds are held comparable to Finnish contractual based funds.


The situation of non-resident corporate funds has been so far challenging, not only for the funds established in third countries, but also for European corporate funds (e.g., funds taking the legal form of a corporation, such as Luxembourg SICAVs). These have been entitled to EU law-based tax benefits in very limited situations, unlike contractual non-resident funds (e.g., funds to which the participants by contractual arrangement participate and share in the fund’s property as co-owners, such as the Luxembourg FCPs). This was specifically the case where EU corporate funds were not listed on a stock exchange and similar platforms.

The Administrative Court decision

The four cases concerned open-ended umbrella funds, organized as Maryland Corporations and established in accordance with the Investment Company Act 1940. Some of the funds were open to private persons and institutions, and some of the funds were open solely to institutional investors or other funds. In all four cases, the funds were treated as regulated investment companies for US federal income tax purposes.

In the reasoning of all four cases, the Administrative Court accepted that the funds are authentic collective investment undertakings. The Administrative Court also stated that from the perspective of the legal form the funds are comparable to a Finnish limited liability company. However, it is to be considered that in Finland limited liability companies are not used for the purposes of collective investment because of the Finnish legal and regulatory environment. Therefore, and especially given the open-ended nature of the funds, such funds are comparable to Finnish funds.

KPMG Comments

Even though all four decisions concern US funds, this is also a positive development for European corporate funds. There should not be reasons to treat European corporate funds differently from third country corporate funds. There are also other pending cases before the Finnish courts and the Court of Justice of the European Union which are addressing the comparability of EU corporate form with Finnish investment funds.

With this latest decision, we highly recommend non-resident corporate funds to continue filing EU law based withholding tax reclaims in Finland and appeal from negative withholding tax refund decisions. KPMG can support you with the filing of the claims and filing of appeals in case of rejection. 

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