On Jan. 15, FIN Courts issued ruling related to investment funds, tax.
Fin Courts issued judgment KHO:2025:5 on taxation of business income, foreign intermediary, exemption from economic activity, settlement in country of residence.
Overview
Entity A was entitled to at least 25% of profit of foreign fund B, which was an open-ended and variable-capital trust-type investment fund aimed at an unlimited circle.
Actual investment activity by fund largely corresponded to activities of domestic fund.
Issue in case was whether Fund B should be considered conduit company of Fund A.
Assessed if Fund B should be considered to be actually performing economic activities in the state of residence in a way required by the Intermediate Bodies Act.
Act rules had to be interpreted in way that they met minimum requirements in ATAD.
For Fund B not to be considered intermediate body of Fund A, it had to engage in significant economic activity, involving personnel, equipment, assets and premises, all that, according to ATAD Finnish language version.
However, when expressions used in different language versions of ATAD were taken into account, even interpretation of Intermediate Bodies Act that required the pursuit of actual economic activity had to be considered in accordance with ATAD.
Activities of Fund B had to be considered economic activity within meaning of S3(1) of Intermediate Bodies Act, for reasons stated in Supreme Administrative Court decision.
Judgment
A's appealed against Central Tax Board 51/2023 of Dec. 18, 2023 (it was accepted).
Decision of Central Tax Board overturned re issue of less 30 shareholders of B fund.
As new preliminary ruling, it is stated fund is not considered intermediate company in context of S2 of Act on Taxation of Shareholders of Foreign Intermediate Companies of A, if conditions laid down in Section 3, subsection 2, paras 1 and 2 of said Act are met.
