Understand the Tax Regime on Dividend Distribution in Finland

FINLAND — Economic Context and Entrepreneurial Activity

Finland is one of Northern Europe’s most advanced economies, with Helsinki as its financial hub. The city’s business life concentrates around Esplanadi, Aleksanterinkatu, and Mannerheimintie, where major banks, law firms, and corporate headquarters are located. Finland’s GDP is driven by technology, clean energy, gaming, logistics, and manufacturing sectors. Entrepreneurs in these industries frequently generate profits that are later distributed to shareholders as dividends. Understanding how Finland taxes these dividends is essential to protect returns and ensure strategic growth.

FINLAND — Common Dividend-Distributing Structures

Most Finnish businesses operate as Osakeyhtiö (Oy, limited liability company). There are two main types:

• Private limited company (Oy): minimum share capital requirement is €2,500.
• Public limited company (Oyj): requires a minimum share capital of €80,000.

Dividends can only be distributed from distributable equity after approval by the general meeting. Capital maintenance rules protect creditors and ensure that shareholder returns are balanced with company stability.

FINLAND — Dividend Taxation Framework

The taxation of dividends in Finland is regulated by the Income Tax Act (Tuloverolaki 1535/1992) and the Business Income Tax Act. The framework is nuanced, distinguishing between distributions to individuals and corporations.

• Corporate level: Finnish companies pay a corporate income tax of 20% before distributing dividends (Business Income Tax Act).
• Individual shareholders: Under the Income Tax Act, dividends are split into taxable capital income and earned income, depending on whether they derive from listed or non-listed companies. For non-listed companies, part of the dividend is exempt, part is taxed as capital income at 30–34%, and the remainder as earned income at progressive rates.
• Corporate shareholders: Dividends received by Finnish resident companies are often exempt from corporate taxation under Section 6a of the Business Income Tax Act, provided certain conditions are met (participation exemption).

These rules aim to prevent double taxation but can result in heavy burdens for individual entrepreneurs seeking to extract profits directly.

FINLAND — Withholding Tax on Cross-Border Dividends

When Finnish companies pay dividends to foreign shareholders, a 30% withholding tax applies under the Act on Tax at Source on Income (Lähdeverolaki 627/1978). This rate can be reduced by:

• Tax treaties Finland has concluded, typically reducing WHT to 0–15%.
• The EU Parent-Subsidiary Directive, which allows exemption when conditions are met.

Despite these reductions, entrepreneurs often explore cross-border structures that provide even greater flexibility — such as the Luxembourg SOPARFI.

LUXEMBOURG — Why Consider This Jurisdiction?

Luxembourg is one of Europe’s premier holding company hubs, thanks to its stable regulatory framework, EU membership, and deep treaty network. A Luxembourg SOPARFI is a standard holding vehicle that provides an attractive environment for dividend planning. While Finland taxes dividends heavily for individuals, Luxembourg’s regime allows exemptions on inbound dividends and often 0% withholding on outbound distributions.

LUXEMBOURG — SOPARFI Structures

A SOPARFI (Société de Participations Financières) can be established as:

• Société Anonyme (SA): minimum capital €30,000.
• Société à Responsabilité Limitée (SARL): minimum capital €12,000.

Both are governed by the Law of 10 August 1915 on Commercial Companies, and both can distribute dividends from approved accounts while respecting solvency requirements.

LUXEMBOURG — Dividend Taxation Framework

The Luxembourg tax system is anchored in the Income Tax Law of 1967 (LIR). Article 166 LIR provides a participation exemption, which ensures that dividends received by a SOPARFI are exempt from corporate taxation if:

• The SOPARFI holds at least 10% of the subsidiary, or acquisition value of at least €1.2 million.
• The shares are held for at least 12 months (or a commitment to hold is made).
• The distributing entity is fully subject to tax.

Outbound dividends are normally subject to 15% withholding tax (Article 146 LIR), but this can fall to 0% under the EU Parent-Subsidiary Directive or under the Finland–Luxembourg double tax treaty, provided conditions are met.

FINLAND vs. LUXEMBOURG — Comparative Insights

In Finland, individuals can face combined rates exceeding 34% when dividends are extracted. In Luxembourg, a SOPARFI can receive dividends fully exempt and distribute them onward with reduced or nil withholding, depending on treaty/EU provisions. This creates significant planning opportunities for Finnish entrepreneurs expanding abroad.

Damalion — How We Help

Damalion specializes in assisting Nordic clients with cross-border structuring. Our services include:

• Formation of SOPARFI (SA or SARL) in Luxembourg.
• Directors, domiciliation, and substance solutions.
• Full compliance support: accounting, tax filings, and legal governance.
• Treaty and EU directive analysis tailored to Finnish businesses.
• Bank introductions in Luxembourg and Switzerland.

By working with Damalion, Finnish entrepreneurs ensure that dividend flows are managed efficiently, lawfully, and strategically. Please contact your Damalion expert now.