Hannes Snellman Advised in a Dispute Securing a Finnish Multinational Group Tax Credit for Foreign Withholding Taxes Levied on Intra-Group Concept Fees

Hannes Snellman defended a global group headquartered in Finland in a dispute concerning denied credit of foreign withholding tax.

In the case, our client, the Finnish HQ of a global group, had invoiced a concept fee from a non-Finnish group company. Local withholding tax had been levied on the concept fee payment, and the Finnish HQ consequently sought credit for the foreign tax in their Finnish taxation.

The Finnish Tax Administration (“FTA”) denied the credit of the withholding tax. The applicable double tax treaty restricted the source country’s taxation right to e.g. franchising related royalty payments, and the FTA claimed that the concept fee agreement was not a franchising agreement. Thus, according to the FTA, the foreign tax had been levied against the double tax treaty, and it could not be refunded in Finnish taxation. The Adjustment Board upheld the view of the FTA and found that the foreign withholding tax levied on the concept fee could not be credited.

Hannes Snellman’s tax litigation team led the appeal process to the Administrative Court, defending the client’s view that the concept fee agreement encompassed franchising of a business concept, thus making the agreement a franchising agreement, as intended in the applicable double tax treaty. Taking into account the terms and conditions of the concept fee agreement, the Administrative Court ruled in favour of our client and ordered for the withholding tax to be credited against Finnish corporate tax. The state settled for the positive outcome and did not seek for a leave to appeal the case to the Supreme Administrative Court. The Administrative Court ruling confirming the concept fee agreement to qualify for withholding tax credit under the double tax treaty is thus now final and legally binding.

Hannes Snellman’s tax litigation team included Jenni Parviainen, Lisanne Laumets, and Heikki Vesikansa.