The Double Taxation Relief (Taxes on Income)(Finland) Order 1996

Explanatory Note

(This note is not part of the Order)

The Protocol set out in the Schedule to this Order makes certain alterations to the Convention set out in the Schedule to the Double Taxation Relief (Taxes on Income) (Finland) Order 1970 as amended by four subsequent Protocols.

The Protocol updates the list of taxes covered by the Convention (Article I).

The limitation of relief article is amended to provide that relief from Finnish tax in respect of income or capital gains is limited to so much of the income or gain as is remitted to, or received in, the United Kingdom (Article II).

The associated enterprises article is amended to provide for the Contracting States to make appropriate adjustments to existing assessments on an enterprise where the other State adjusts the profits of a related enterprise; and to consult under the mutual agreement procedure of the Convention where necessary (Article III).

The dividends article is amended with the result that tax credits are no longer available to investors in one State who receive dividends from an enterprise of the other State (Article IV).

The pensions article is amended to give the State paying pensions and social welfare payments the right to tax them (Article VIII).

Amendments are also made to the articles of the Convention dealing with interest, capital gains and employments. In the interest article the paragraphs providing a defence to the thin capitalisation of companies are deleted following changes to domestic legislation (Article V). The capital gains article is amended to provide for shared taxing rights on gains from the disposal of shares in companies whose assets consist mainly of land or any category of immovable property as defined in the article dealing with immovable property (Articles VI and IX). In the employments article, the period which determines which State has the right to tax is clarified (Article VII).

The elimination of double taxation article is updated in line with changes elsewhere in the Protocol (Article X).

Article 26 of the Convention is deleted as its provisions for residents of either country to receive personal allowances, reliefs and reductions from tax in the other country simply repeated what is already available by virtue of Article 27(1) and its interaction with domestic legislation. (Article XI).

The Protocol will enter into force fifteen days after the date of the later of the notifications by each country of the completion of its legislative procedures. It will take effect in the United Kingdom for corporation tax on or after 1st April and for income tax and capital gains tax on or after 6th April in the calendar year following that in which it enters into force. The date of entry into force will in due course be published in the London, Edinburgh and Belfast Gazettes.