Tax residency self-certification

Finland is committed to the OECD countries’ Common Reporting Standard (CRS) and has signed the FATCA agreement with the United States.

CRS

The Common Reporting Standard obliges banks and other financial institutions to identify the countries where their customers are liable to pay tax and, if needed, to report the income and assets of these customers to the Finnish Tax Administration.

The reporting standard applies to all private customers, businesses and entities whose country of tax residence is not the United States or the country where the bank or financial institution is located.

FATCA

In accordance with the FATCA (Foreign Account Tax Compliance Act) agreement, banks and other financial institutions must identify the accounts and investment assets owned by Americans and report them to the local tax authorities who, in turn, will share the information with the United States Inland Revenue Service (IRS).

“American” refers to:

• people living in the United States
• US citizens or dual nationals
• holders of a permanent residence card (Green Card)
• businesses incorporated in the United States
• beneficial owners of investment companies who are Americans.

Read more:

Finance Finland: International Exchange of Tax Information – What Does the Exchange of Information Mean for the Customers of the Financial Sector? (in Finnish) >

Finnish Tax Administration: FATCA, CRS and DAC2 >

The natural persons who benefit from the operations of businesses or entities are called their beneficial owners. A beneficial owner is a natural person who

• owns more than 25 per cent of the company,
• holds over 25 per cent of the company’s voting rights or
• otherwise exercises control in the company, based on a contract.

If beneficial ownership is not established through ownership or contract, the managing director and members of the board of directors, for example, are considered beneficial owners in accordance with the Act on Preventing Money Laundering and Terrorist Financing.

A country of tax residence is a country in which the customer is liable to pay tax under said country’s legislation. The customer may have multiple countries of tax residence. For example, a business or an entity may be liable to pay taxes based on the location of its headquarters or its registration and a natural person based on the location of their actual home.

If you are unsure about your countries of tax residence, please contact a tax advisor or the local tax authorities.

The tax residency self-certification is a certificate provided by the customer for the purpose of determining their countries of tax residence and is based on the obligation to exchange information. 

Banks and other financial institutions may have different policies for obtaining information from their customers, and the forms used may also vary between institutions.

A tax identification number (TIN) or a comparable identifier is an identifying combination of letters or digits issued by a local authority. It is used for identification related to tax procedures. If your tax residency does not issue TINs, you must report it in the tax residency self-certification.

A financial institution’s obligation to obtain information is based on legislation and the international tax treaties signed by Finland. This obligation is, therefore, mandatory and applies to all financial institutions operating in Finland. If the customer does not provide the information requested by the financial institution, the customer relationship cannot be established and new services cannot be provided.

The nature of a company’s business operations affects the information that needs to be reported to the Finnish Tax Administration. For example, for businesses or entities engaging in investment activities (the so-called passive non-financial entities), we need to determine the tax residencies and possible US citizenships of the beneficial owners.

These are the possible natures of a company’s business operations:

1. businesses or entities engaging in activities other than investment (i.e. active non-financial entities)
2. businesses or entities engaging in investment activities (i.e. passive non-financial entities)
3. financial institutions (e.g. depository institutions or payment service providers).

The information needs to be updated if it changes. The customer is obliged to inform the bank about changes to their situation, for example, if their country of tax residence or the nature of business operations changes. The updated information must be submitted to the bank without delay by, for instance, signed tax residency self-certification.