The Finnish Tax Administration revealed identification of malicious companies set up for tax evasion “as a service”

On 8 June 2022, the Finnish Tax Administration published a bulleting stating that the Finnish Tax Administration’s recent control action has revealed many operators that operate a malicious activity to enable investors evade Finnish taxes. The Tax Administration estimates that the tax evasion by such companies has resulted in a tax loss of 80 million euros in Finland in 2018 to 2021 every year because taxes have not been withheld at source.

According to the bulletin, deals have been uncovered where some 700 million units of corporate shares are suspected to have changed hands repeatedly between investors in back-andforth trades and the deals have clearly no other purpose than evasion of taxes at source.

The bulletin states that schemes for avoiding source taxes, and cum/ex transactions and cum/cum transactions have caused major tax losses in other European countries as well. The Tax Administration has been able to identify such transaction by their close cooperation with other countries and exchange of fiscal information between other countries. According to the Tax Administration, there are several pending audits at the Finnish Tax Administration and new cases may surface in the future.

The Tax Administration will next concentrate on controlling refunds of tax withheld at source.

Pursuant to the Finnish legislation, if the payer of dividends has withheld too much tax at source, the beneficiary is entitled to request for refund from the Tax Administration. In the bulletin, the Tax Administration states that they will be starting to watch the operations connected to refunds of tax at source. The aim is to control possible fraudulent activities related to tax refunds in more detail.

The Tax Administration states that in the control activities, they can benefit from the OECD initiative TRACE (Treaty Relief and Compliance Enhancement). The TRACE model enables the Tax Administration to have better access to information regarding corporate stockholding under nominee registration, the custodial chains and the identities of dividend beneficiaries. The new reporting rules require that the authorised intermediary must pay the tax in situations where no tax at all has been withheld at source or where not enough tax has been withheld due to the authorised intermediary’s neglect.

Read the WTS Global Financial Services Newsletter here.