Several PLCs to pay dividends in kind

The Finnish Tax Administration on Tuesday said several publicly listed companies are going to pay dividends in kind this year.

Regardless of whether the dividends are paid in cash or, for example, as shares in another company, the income is treated as taxable dividend income for the beneficiary in accordance with the Finnish Income Tax Act sec. 33 a, said the Tax Administration in a press release.

Payment of in-kind dividends might be related to open questions regarding tax payment, transfer tax or valuation, which are not dealt with in the current guidance by the Tax Administration. The Finnish Tax Administration will update its guidance on these questions.

If dividends are paid as shares of a limited liability company, the amount of dividend is the market value of the shares on the day when the dividend was first available for payment (dividend payment date or the date of the dividend distribution decision, if the decision does not include any separate payment date). The market value of the share of a publicly listed company is the weighted average quote of the day in question.

The payer must send an annual information return on the dividends to the Finnish Tax Administration in order to ensure that information is transferred to the pre-completed tax returns of individual taxpayers. If dividends in kind don't include cash dividends at all, and no tax has been withheld, the tax on the dividend payment has to be paid as back tax. If cash dividend is also paid, for example, cash payment for fractions of shares, the payer will withhold tax at maximum of the amount of cash dividend.

A Finnish tax resident can avoid back taxes by requesting income tax prepayments or supplementary prepayment.