Double Taxation on Foreign Dividends and Interest Income
In Finland, residents who invest typically pay withholding tax on dividend and interest income in the country where the income originates. However, the same income may also be taxed in Finland, leading to double taxation. Tax treaties that Finland has signed with many countries aim to reduce this problem.
The source country often withholds more tax than the treaty between Finland and that country allows. In that case, the investor can apply directly to that country for a refund of the excess tax. The refund process varies by country, but it usually requires completing several forms, attaching supporting documents, and, if necessary, submitting certificates issued by the Finnish Tax Administration.
If the payer knows the investor's country of residence, it can withhold tax at the treaty rate from the outset. No separate refund application is required, as the tax was withheld in accordance with the treaty terms.
In this article, we share what we learned about reclaiming taxes paid abroad based on our own experience.
Residence Certificates for Refund Claims
To claim a tax refund, the taxpayer must prove Finnish residency. For that reason, before sending our own applications, we requested certificates of residence in OmaVero for all the tax years for which we planned to seek refunds. We ordered the certificates electronically for each country and, separately, as paper copies.
In our experience, ordering certificates of residence from OmaVero was mostly straightforward. The challenge was that the Tax Administration asked for unnecessary additional information on the application form that the certificate itself did not require. For example, they asked us to report foreign capital income even though we were only applying for a certificate of residence. The certificates arrived quickly—electronically within a few days and by post soon after.
Getting the residence certificates was the easiest step — the real challenges began once we started dealing with foreign tax authorities.
Statements for Foreign Dividends and Interest
We also needed calculations and statements for foreign investment income. Nordea had not sent these by post, but we found end-of-year summaries in online banking, where dividends and the tax withheld on them were itemised. We printed them on paper and saved them as PDFs. Unfortunately, the documents lacked an official signature.
The limitation with the documents Nordea provided was that dividends and the tax withheld were shown only in euros, even though the dividends were often paid in another currency. Because foreign tax authorities require amounts in the local currency, we had to recalculate all dividends denominated in euros.
We could not convert the euro amounts back to the original currency with simple multiplications because we did not know which exchange rates had been used. It helped that the account statement transactions showed the per-share dividend in the local currency, which allowed us to compute the totals.
Our calculations and the application forms were also complicated by the fact that some companies paid dividends several times during the same year. This required a detailed breakdown of payments and their conversion into local currencies. Our only evidence, however, consisted of Nordea's summaries, which showed all amounts in euros. We do not yet know whether all foreign tax authorities will accept these euro-only attachments as is.
Using Multi-Currency Accounts for Tax Refunds
We quickly realised that refunds would be paid in each country's own currency. Fortunately, we used Wise, which let us open accounts in different currencies and obtain local account details for each. This made it easy to receive, for example, Swiss francs and Swedish kronor.
We recommend Wise because it lets you receive refunds in the local currency and convert them to euros at competitive exchange rates.
Wise is handy for travellers, too.
Curve Pay makes paying abroad cheaper.
Foreign Withholding Tax Refunds – Country-By-Country Experience and Forms
Switzerland - Form 88
Switzerland withholds a 35% tax on dividends, which is clearly higher than in many other countries. Under the tax treaty between Finland and Switzerland, however, Switzerland may withhold up to 15% on dividends, so the remaining 20% can be reclaimed from the Swiss tax authorities.
In Finland, dividends are generally taxed as capital income, but the tax paid in Switzerland can be credited to avoid double taxation. In practice, after submitting a correct application with the required documents, you can get back 20% of the dividend amount paid from Switzerland.
We applied for a refund of Swiss withholding tax using form 88 (Claim for Refund), which we downloaded from the Swiss tax authority's website. The form could be completed electronically, but due to its unusual format, we needed the free Snapform software.
We followed the form's instructions, and completing it was fairly painless. When printing, the form generated several slightly different copies, and the first three versions required a signature from the Finnish Tax Administration. We first mailed these to the Finnish Tax Administration for signature, and then sent two signed forms to the Swiss Tax Administration in Bern. We included certificates of residence for the relevant tax years, as well as the dividend and withholding summaries printed from Nordea's online banking.
The refund decision arrived within a few weeks, and the money was transferred to our account shortly thereafter. We used Wise currency accounts to receive the francs.
Germany - BOP and ELSTER
Germany's taxation of investment income differs somewhat from Finland's system, but the bilateral tax treaty is designed to prevent double taxation. Germany usually withholds 25% on dividends. Under the treaty, however, Germany may tax the dividend income of a Finnish resident at no more than 15%, so it is possible to reclaim the excess from the German tax authorities.
To apply for a refund, we first registered in the BOP portal (Bescheinigungsportal), the German tax administration's electronic system. As part of the registration, we received a confirmation letter by post from Germany to verify our address.
Only after the letter arrived could we continue the registration process, and next we created an account for Germany's ELSTER portal, the broader electronic tax system. Creating an ELSTER account required receiving a second confirmation code sent by post.
After several weeks and two letters, we finally had a working ELSTER account that allowed us to submit the refund application.
Although the ELSTER system worked, it was not as user-friendly as Finland's OmaVero. The application required extensive detail, making it laborious to complete. We completed the application and attached the PAF as evidence of dividends, along with the certificates of residence. We applied, but we have not yet received a response.
Sweden - Form 3740
Sweden's taxation of investment income differs from Finland's system, but the tax treaty helps prevent double taxation. Sweden typically withholds 30% on dividends. Under the treaty, Sweden may withhold no more than 15% from a Finnish investor so that the excess can be reclaimed from the Swedish tax authorities via a separate application.
We sought a refund from Sweden using PDF form 3740, which we downloaded from the Swedish Tax Agency's website. The first challenge was opening the form; we had to update Adobe Reader to ensure it worked properly. After the update, we could open and complete the form on a computer.
Compared with our other applications, the Swedish form was surprisingly straightforward, and completing it was quick because it did not ask for extra information. We printed the forms and mailed them to Solna, Sweden. We included certificates of residence and Nordea's dividend calculations. So far, we have not received a decision or a request for additional information.
Norway - RF-1534
Norway's taxation of investment income differs from Finland's system, but the Finland–Norway tax treaty prevents double taxation. Norway typically withholds 25% on dividends. Under the treaty, however, Norway may tax dividends paid to a Finnish resident at no more than 15%. You can therefore reclaim the excess from the Norwegian tax authorities.
Applying for a Norwegian refund went quite smoothly through the Altinn electronic system. The biggest challenge, again, was finding the right page to start the process.
We recommend starting from the Norwegian tax authority's dividend tax refund page, from which you can easily move to Altinn by following the instructions. You can create an Altinn account even without a Norwegian national ID number.
Although the form was electronic, completing it was not entirely trouble-free. The service was not as smooth as OmaVero, but automatic validation helped catch the clearest errors. Because the form was complex, we were not entirely sure we had filled it out correctly. Still, we submitted it anyway, trusting it would be processed or that any additional information would be requested by email.
Denmark - eForm
Denmark's dividend taxation differs in parts from Finland's system, but the tax treaty between Finland and Denmark also prevents double taxation. Denmark usually withholds 27% on dividends. Under the treaty, Denmark may tax a Finnish resident's dividend income at no more than 15%. The excess 12% can be reclaimed from the Danish tax authorities via a separate application.
We quickly found information on the Danish tax authority's website about withholding tax refunds, but the link to the refund form was broken. After a brief search, we also found a working guide page for refund applications. To our pleasant surprise, we could apply via an electronic form without authentication.
The form was straightforward and user-friendly, so completing it was quick. We attached the required PDFs. The only drawback was the lack of a confirmation message or receipt after submission. We have not yet received a decision.
Canada - NR7-R
Canada's dividend taxation differs somewhat from Finland's model, but the tax treaty reduces the risk of double taxation. Canada typically withholds 25% on dividends. Under the treaty, however, Canada may withhold no more than 15% from a Finnish resident recipient. You can therefore reclaim the extra 10% from the Canada Revenue Agency through a separate application process.
We also applied to Canada for a refund of excess withholding tax, which took a fair bit of work. For each individual withholding you wanted a refund for, you had to complete a separate PDF form. These forms and the certificates of residence had to be mailed to Canada on paper. The stack of documents was large, which increased postage costs. We also attached a separate form to provide payment details, listing our Wise account information.
To our surprise, about a month later, we received a letter from the Canadian tax authorities stating that the forms were missing signatures in the sections where the dividend payer or intermediary was supposed to confirm the accuracy of the information. In practice, getting a signature from a foreign company proved nearly impossible, and Nordea also refused to sign the forms. We sent the documents back to Canada without the required signatures. Still, we included Nordea's dividend summary and a cover letter requesting that the application be processed based on the attachments. We have not yet received a final decision.
Challenges in Reclaiming Foreign Dividend Withholding Tax – A Tip for Success
Recovering excess foreign withholding on dividends is difficult. Most countries' refund processes are complex, and some are particularly challenging. Processing times also often stretch long.
Forms use many different terms for the same things, so finding the correct answers can be difficult. In some countries, signatures are required from the bank, the dividend payer, and the Finnish Tax Administration. Getting those signatures is surprisingly complex.
The most advanced countries use electronic systems that make communication and requests for additional information more efficient. Others are still quite old-fashioned, and Canada is a good example. The Canadian tax authority still conducts traditional correspondence across the Atlantic, which significantly slows the process. Refund applications have likely been deliberately made difficult to discourage as few refunds as possible.
Our tip for success: be patient!
Is It Worth Reclaiming Withholding Tax?
Not if you value your time. For a small investor, learning the process and carrying it out takes several hours, and the refunds are usually modest. Office expenses, postage, and printing add costs, and approval is not guaranteed. Resolving issues is also labour-intensive.
For more professional investors, the paperwork becomes so burdensome that handling it yourself is not worthwhile. Outsourcing, in turn, is so expensive that it is not financially sensible. For these reasons, seeking refunds often is not even profitable.
It would be great if governments automated these tax processes with each other. Alternatively, it would be excellent if brokers handled refund applications on behalf of their clients and liaised with source countries to ensure that no more than the treaty amount is withheld.
Getting Started with Foreign Withholding Tax Reclaim Applications
Here are links if you plan to submit a claim to any of the countries mentioned above. You will need dividend statements from your broker and certificates of residence.
- Switzerland: Forms for the refund of Anticipatory Tax
- Germany: Electronic data submission (BOP)
- Sweden: Swedish withholding tax on dividends
- Norway: Application for refund of withholding tax
- Denmark: Claiming refund of Danish dividend tax
- Canada: NR7-R Application for Refund Part XIII Tax Withheld
Bottom Line
Taxation of foreign dividends and interest easily leads to double taxation, but with careful documentation and well-prepared refund applications, you can usually recover the excess tax. Tax treaties provide the foundation, but practical execution takes time and effort.
Our experience showed that different countries have different processes. Obtaining certificates of residence from Finland was relatively straightforward, but the actual refund process required significant effort and patience.
Although preparing the applications was laborious, the process taught us a lot about international taxation and also produced results. We encourage other investors to give it a try. Careful work pays off, and refunds can ultimately be worth the effort.