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May 31, 2006
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United States and Finland Sign Protocol to Income Tax Treaty
WASHINGTON, DC - The Treasury Department today announced that U.S. Ambassador Marilyn Ware and Finland Coordinate Minister of Finance Ulla-Maj Wideroos signed a new Protocol to amend the existing bilateral income tax treaty, concluded in 1989, between the two countries. The Protocol was signed Wednesday in Helsinki.
The agreement significantly reduces tax-related barriers to trade and investment flows between the United States and Finland. It also modernizes the treaty to take account of changes in the laws and policies of both countries since the current treaty was signed. The Protocol brings the tax treaty relationship with Finland into closer conformity with U.S. treaty policy.
The most important aspect of the Protocol deals with the taxation of cross-border dividend payments. The Protocol is one of a few recent U.S. tax agreements to provide for the elimination of the source-country withholding tax on dividends arising from certain direct investments and on dividends paid to pension funds. In addition, the Protocol eliminates the withholding tax on cross-border royalty payments. The Protocol also strengthens the treaty's provisions preventing so-called treaty shopping, which is the inappropriate use of a tax treaty by third-country residents.
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