Finland: French corporate-form fund held comparable with contractual-based fund; refund opportunities (CJEU judgment)

A landmark judgment expected to change the tax treatment of non-resident investment funds

Held comparable with contractual-based fund; refund opportunities (CJEU judgment)

The Court of Justice of the European Union (CJEU) on 7 April 2022 issued a judgment concluding that a French corporate-form fund was in a comparable position with a Finnish contractual-based fund. Therefore, the CJEU concluded that the Finnish statutory investment fund tax-exemption regime, that applied solely to contractual-based investment funds, was contrary to the EU principle of free movement of capital.

The case is: Veronsaajien oikeudenvalvontayksikkö (Exonération des fonds d’investissement contractuels), C-342/20 (7 April 2022). Read the CJEU judgment (Finnish)

KPMG observation

The judgment is a landmark decision and is expected to change the Finnish non-resident investment fund tax practice.


In a “negative” advance ruling, the Finnish tax administration ruled that a French real estate investment fund that was established as an investment company with a variable capital (Societe Civiles de Placement Immobilier Capital Variable—SCPI) could not qualify for the Finnish statutory investment fund tax-exemption regime—because the statutory regime applied solely to contractual-based funds and, in this matter, the French fund was a corporate-form fund.

The French fund appealed to the Finnish Administrative Court which stayed its proceedings and referred the following question to the CJEU:  

Are Articles 49, 63 and 65 TFEU to be interpreted as meaning that they preclude national legislation under which only foreign open-ended investment funds constituted by contract can be regarded as equivalent to Finnish investment funds exempt from income tax, meaning that foreign investment funds established in a legal form other than by contract are subject to withholding tax in Finland, even though there are otherwise no significant objective differences between their situation and that of Finnish investment funds?

CJEU judgment

The judgment includes several important remarks on which the CJEU based the reasoning of its judgment. The core of this reasoning can be summarized as follows:

  • The requirement of contractual form is conducive to discourage foreign investment funds from investing in Finland and, thus, position Finnish investment funds in a more favorable position (although the requirement of contractual form can be also fulfilled by foreign funds). With this finding, the CJEU seemed to recognize the existence of indirect discrimination.
  • A foreign corporate-form fund that is fiscally transparent or tax-exempt in its residence state is in a comparable position with Finnish contractual-based funds that are part of the tax-exemption system (a system that seeks to place investments made through investment funds in a similar position with direct investments for tax purposes). In essence, the CJEU reaffirmed that the comparability assessment needs to take into account the purpose and aim of the relevant domestic rules.

KPMG observation

Tax professionals have observed that the CJEU judgment ought to clarify a long-debated and often-litigated issue in Finland—that is, under EU law, the legal form of an investment fund should not create such an objective difference that would justify different tax treatment between corporate-form and contractual-based investment funds.

The subject Finnish statutory regime was effective in 2020. However, tax professionals believe the CJEU judgment could also have positive effects for taxpayers with regard to cases that are being considered and processed under the former exemption regime. Accordingly, foreign corporate-form funds need to consider claiming EU law-based tax benefits in Finland through advance rulings, refund claims for withholding tax, and if appropriate, appeals (regardless of the funds’ legal form).

For more information, contact a KPMG tax professional in Finland:

Kristiina Äimä |

Aki Kokko |

Read an April 2022 report prepared by KPMG’s EU Tax Centre


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