The European Union Savings Directive is set to bite in Finland, where the authorities are expected from 2006 to levy an automatic withholding tax of 15% on all payments to nominee accounts.
Investors in jurisdictions which have a double taxation treaty with Finland with a rate below 15% - notably the UK, where the rate is 0% - cannot escape the levy unless the authorities are equipped with full information about the beneficiary, including proof of residence. Residents of non-treaty countries will continue to pay the non-treaty rate of 28% unless they supply the same information.
According to a spokesman for SEB in Helsinki, the reduced rate of 15% will be subject to investors agreeing that their custodian can advise the authorities of the country of residence of the beneficiary of each and every payment, and confirm that the relevant double taxation treaty is applicable to each particular beneficiary. Investors will be expected to inform their custodian of any changes in their circumstances.
"This information can be provided prior to the payment date, ensuring the correct rate is applied to the payment," says the SEB spokesman. "Or after the payment date, but during the month of payment, to enable the custodian to make a quick refund. Or, lastly, at any time up to five years, during which a tax reclaim procedure can be initiated."