Donate to Remove ads

Got a credit card? use our Credit Card & Finance Calculators

Thanks to johnstevens77,Bhoddhisatva,scotia,Anonymous,Cornytiv34, for Donating to support the site

Finnish Shares

Financial discussion for any financial queries for Expats
ADrunkenMarcus
Lemon Quarter
Posts: 1584
Joined: November 5th, 2016, 11:16 am
Has thanked: 672 times
Been thanked: 479 times

Finnish Shares

#42888

Postby ADrunkenMarcus » April 1st, 2017, 1:02 pm

I am considering initiating a position in Kone, listed on the Helsinki Stock Exchange. It has a high dividend payout ratio and a reasonable dividend yield, equating to 3.76 percent if we take the 1.55 Euro dividend per class B share for 2016 and divide it by the closing share price on Friday of 41.19 Euros (share trading code: KNEBV). Therefore, a significant proportion of any total return will come from dividends received. I am trying to clarify any taxation taken off the dividends by Finland.

According to
https://www.vero.fi/en-US/Precise_infor ... individual :

Receipts of dividend by a nonresident individual
Judgment KHO 2008:23 includes the conclusion that a Finnish tax nonresident living in the United Kingdom cannot be liable to more tax on his dividend income than what a Finnish resident would have to pay in a similar situation.


Wikipedia makes it sound somewhat confusing (poor 'source', I know!)

The income from dividends, rents, and capital gains are taxed with investment income tax. The investment income is taxed at fixed rate of 30% or 32% for income that exceeds 50 000 euro.
Whether listed or unlisted limited company, at least 30% of dividends received are categorized as tax free income. Rest of the dividends received is categorized as capital income from listed limited companies and as capital income and/or earned income from unlisted limited companies.


And
https://www.vero.fi/download/Suomesta_u ... D%7D/13083 states:
See below for tax to be withheld at source, by countries of residence (of recipient).


The UK is listed under Great Britain and the table has 0%, which seems to imply no tax will be withheld on the dividend at source. This seems to be borne out by http://www.pkf.com/media/1954368/finlan ... 202013.pdf which has a table on page 6 (of the printed page numbers; page 14/15 on the pdf. file numbering).

Are there any experts who can advise? Thanks.

Best wishes

Mark.

PinkDalek
Lemon Half
Posts: 6139
Joined: November 4th, 2016, 1:12 pm
Has thanked: 1589 times
Been thanked: 1801 times

Re: Finnish Shares

#42902

Postby PinkDalek » April 1st, 2017, 2:30 pm

ADrunkenMarcus wrote: ...

The UK is listed under Great Britain and the table has 0%, which seems to imply no tax will be withheld on the dividend at source. This seems to be borne out by http://www.pkf.com/media/1954368/finlan ... 202013.pdf which has a table on page 6 (of the printed page numbers; page 14/15 on the pdf. file numbering).



Not much help but PWC's summary also suggests 0% withholding http://taxsummaries.pwc.com/ID/Finland- ... ding-taxes (also strangely shown under GB rather than the UK) with the caveat at note 5 of The tax rate for an individual is 30% if income is tax-exempt in the country of residence..

Deloitte, at page 20, say 30% withheld if paid to a non resident individual unless the rate is eliminated or reduced under an applicable tax treaty. See also page 15 which talks about the payer needing to confirm the non resident status of the recipient.

https://www2.deloitte.com/content/dam/D ... e-2016.pdf

The, amended by later protocols, Double Tax Convention would appear to be here https://www.gov.uk/government/uploads/s ... _force.pdf for ease of reference for those who are able to comprehend such matters.

ADrunkenMarcus
Lemon Quarter
Posts: 1584
Joined: November 5th, 2016, 11:16 am
Has thanked: 672 times
Been thanked: 479 times

Re: Finnish Shares

#42949

Postby ADrunkenMarcus » April 1st, 2017, 6:28 pm

Many thanks PinkDalek.

It's complicated, isn't it?

It looks like it's either 0% or 30%:

The tax rate for an individual is 30% if income is tax-exempt in the country of residence


I am a UK resident, but I am not 'tax exempt'. On the other hand, the *income* (dividends) would be being paid in an ISA so they *are* exempt from UK dividend tax in that sense. I am not sure how Finland would know the shares were in an ISA. I have a W8-BEN for US and Canadian shares but I didn't understand it as an issue for European ones.

The Finland-UK agreement, at least, pre-dates the EU!

Best wishes


Mark.

PinkDalek
Lemon Half
Posts: 6139
Joined: November 4th, 2016, 1:12 pm
Has thanked: 1589 times
Been thanked: 1801 times

Re: Finnish Shares

#42972

Postby PinkDalek » April 1st, 2017, 8:42 pm

ADrunkenMarcus wrote:It's complicated, isn't it?

It looks like it's either 0% or 30%:

The tax rate for an individual is 30% if income is tax-exempt in the country of residence


I am a UK resident, but I am not 'tax exempt'. On the other hand, the *income* (dividends) would be being paid in an ISA so they *are* exempt from UK dividend tax in that sense. I am not sure how Finland would know the shares were in an ISA. I have a W8-BEN for US and Canadian shares but I didn't understand it as an issue for European ones.


Yes it does appear complicated, to me at least, and I mentioned the note 5 having ISAs in mind but I can't say I understand it in context.

http://taxsummaries.pwc.com/ID/Finland- ... ding-taxes

The column I took the note 5 from was headed Dividend (portfolio) ... whereas the next column is headed Dividend (direct investment) and shows 0%. I'm not sure I understand the difference and I've no idea if an investment via an ISA is considered direct or not. If they don't recognise ISAs, no reason they should, then can that be classed a direct investment? [Edit: The * footnote suggests that relates to where The recipient is a company but I'll leave this paragraph in, merely for the record].

I've seen no mention of Finland having a W-8BEN equivalent and you may need a broker that supports them even if they do.

I go through a convoluted annual performance, to reclaim part of the tax withheld, with a nominee held Swiss shareholding and that isn't held in an ISA! If you search (I can't find a direct link) for VEROH 6164 E (INDIVIDUALS) you should find a reference to a pdf entitled APPLICATION FOR REFUND OF FINNISH WITHHOLDING TAX ON DIVIDENDS (Individual applicant) which is similar to the form/performance I go through.

The Finland-UK agreement, at least, pre-dates the EU!


Yes but it does state Amended by Protocols with the most recent signed on 31 July 1996.


I really haven't taken you any further, sorry, but there are those at Taxes who do understand Double Tax Treaties etc. At least there were in the old place. Perhaps a cross-post over there, back to here, might be an idea.

Failing that perhaps one should file under the too hard category or take any withholding tax on the chin, albeit reducing the yield, (I did this with an overseas holding where I couldn't be faffed to reclaim and it was primarily the capital gain I was after but managed to achieve a loss, as I got nervous!) or try a relatively small tranche and see what happens (perhaps from outside an ISA).

By the way, I didn't spot anything in their Annual Report http://www.kone.com/en/Images/KONE_Annu ... -37391.pdf but didn't expect anything. I don't suppose Investor Relations can help http://www.kone.com/en/investors/invest ... fault.aspx.

Good luck with it.

PD

JMN2
Lemon Quarter
Posts: 2156
Joined: November 4th, 2016, 11:21 am
Has thanked: 288 times
Been thanked: 282 times

Re: Finnish Shares

#42995

Postby JMN2 » April 2nd, 2017, 7:59 am

I am 99% sure it is 0% but am checking it closer to the source and will report back.

ADrunkenMarcus
Lemon Quarter
Posts: 1584
Joined: November 5th, 2016, 11:16 am
Has thanked: 672 times
Been thanked: 479 times

Re: Finnish Shares

#43056

Postby ADrunkenMarcus » April 2nd, 2017, 12:11 pm

I really appreciate the responses - thanks for taking the time to help.

PinkDalek, thanks for those other references and I'll keep trying. JMN2, I would be pleased if it did turn out to be 0%! Thanks for assisting with this and I look forward to hearing from you with your conclusion.

I would like clarity on the tax situation, but it is somewhat of a secondary consideration when it comes to investment. Tax is important, for sure, and I would much prefer a 0% to a 30%. However, if there is a great company listed on a foreign exchange then it's the company and the investment case in the company that are at the forefront of my mind. I am very attracted to the company's business model, high return on capital and long term approach.

Best wishes


Mark.

JMN2
Lemon Quarter
Posts: 2156
Joined: November 4th, 2016, 11:21 am
Has thanked: 288 times
Been thanked: 282 times

Re: Finnish Shares

#43089

Postby JMN2 » April 2nd, 2017, 2:17 pm

JMN2 wrote:I am 99% sure it is 0% but am checking it closer to the source and will report back.


This seems to be the case, the correct pdf-file document was already referenced, 2nd page, 2nd column without the footnote 5). First column is for co-operative companies and 2nd column is for publicly quoted limited companies at the stock exchange, 0%, no footnotes.

ADrunkenMarcus
Lemon Quarter
Posts: 1584
Joined: November 5th, 2016, 11:16 am
Has thanked: 672 times
Been thanked: 479 times

Re: Finnish Shares

#43201

Postby ADrunkenMarcus » April 3rd, 2017, 6:57 am

Thanks JMN2.

Another reason for interest was that Kone has paid a number of special dividends in recent years, so the 0% is even better news if they decide to do any repetition of that.

Best wishes


Mark.

JMN2
Lemon Quarter
Posts: 2156
Joined: November 4th, 2016, 11:21 am
Has thanked: 288 times
Been thanked: 282 times

Re: Finnish Shares

#43203

Postby JMN2 » April 3rd, 2017, 7:32 am

As a general rule, on the whole, with Finnish shares you'll find that the dividend policy is short-sighted and not HYP-like with long term plan inflation +X% each year etc, dividends are paid often once a year and get a lot of media attention. Dividends seem to go up and down on a whim based loosely on financial results. There are no tax wrappers like ISA nor personal allowances, dividend tax and CGT are very high, there is an irrational fear of nominee accounts due to absurd fear of tax evasion and avoidance, nominee accounts of domestic shareholdings are illegal for residents. I can't see why they bother investing in shares at all, small investors are despised due to social democracy and envy.

Kone is an exception to all this that so far has proven the rule.

ADrunkenMarcus
Lemon Quarter
Posts: 1584
Joined: November 5th, 2016, 11:16 am
Has thanked: 672 times
Been thanked: 479 times

Re: Finnish Shares

#43271

Postby ADrunkenMarcus » April 3rd, 2017, 12:39 pm

JMN2 wrote:As a general rule, on the whole, with Finnish shares you'll find that the dividend policy is short-sighted and not HYP-like with long term plan inflation +X% each year etc, dividends are paid often once a year and get a lot of media attention. Dividends seem to go up and down on a whim based loosely on financial results...

Kone is an exception to all this that so far has proven the rule.


Looking back to 1980, the dividend per share was frozen at a set level for quite a few periods and then they suddenly developed a more progressive approach around the turn of the millennium. The CAGR in dividends is over 15% from 1980 to 2016, but while the dividend has always been maintained or supplemented with specials it has not been raised every year as per many American dividend growth champions. Since 2006, it's grown at 20% CAGR, with the dividend raised in 2006 and then yearly from 2010.

The proposal of 1.55 Euros per Class B share is welcome but I am aware it represents 78% of EPS or 81% of cash flow 'after investing activities'. It's been argued they have a 'over-capitalised balance sheet'.

I quite like many of the management comments in the recent results presentation.

Now again results like this if we look at the environment that we have would not be possible without motivated, engaged people who are all working towards a common goal and as we can see the KONE people have done again and again very pleased, my heartfelt thanks to all KONE employees for a really great job done during 2016.


Finland is an interesting county. The economy is frequently ranked very highly for competitiveness and so forth, but on the other hand it does seem to have suffered and been a poor-performing economy even by Eurozone standards in recent years.

Best wishes

Mark.

dspp
Lemon Half
Posts: 5884
Joined: November 4th, 2016, 10:53 am
Has thanked: 5825 times
Been thanked: 2127 times

Re: Finnish Shares

#43288

Postby dspp » April 3rd, 2017, 2:00 pm

I do a bit of business in Finland.

The economy over there is quite small. As a result it is very exposed to the actions and outcomes for the few large companies and industries that they do have. The Nokia meltdown hurt. That means the state is quite cooperative in facilitating the position of the large businesses that exist. Just something to bear in mind.

My 'partners' are very proud to point out Kone cranes and lifts as we are out and about on our travels.

regards, dspp

ADrunkenMarcus
Lemon Quarter
Posts: 1584
Joined: November 5th, 2016, 11:16 am
Has thanked: 672 times
Been thanked: 479 times

Re: Finnish Shares

#43389

Postby ADrunkenMarcus » April 3rd, 2017, 8:20 pm

I appreciate your input, dspp - thanks. Kone seems to have something of a national champion about it.

Best wishes


Mark.

ADrunkenMarcus
Lemon Quarter
Posts: 1584
Joined: November 5th, 2016, 11:16 am
Has thanked: 672 times
Been thanked: 479 times

Re: Finnish Shares

#45020

Postby ADrunkenMarcus » April 10th, 2017, 1:52 pm

Leaving aside any tax issue, dealing foreign shares was so easy. I was able to get an online quote in precisely the usual way and deal instantly. I've initiated my Kone holding and look forward to holding it for a considerable time to come.

Best wishes

Mark.

ModernMicawber
Posts: 49
Joined: December 22nd, 2016, 12:21 pm
Has thanked: 1 time
Been thanked: 5 times

Re: Finnish Shares

#46299

Postby ModernMicawber » April 17th, 2017, 7:04 am

Maybe late to the party, but what I did in a similar situation (switching from VWRL to US-listed VT. in the SIPP) was buy an "experimental" amount, then wait to see what happened on the first dividend date before committing the rest of the money.

Obviously this means incurring 2x dealing fees, but depending on size of investment/intended holding period this may or may not matter.

Maybe you could assist future LFers by posting back here after you receive the first dividend!

ADrunkenMarcus
Lemon Quarter
Posts: 1584
Joined: November 5th, 2016, 11:16 am
Has thanked: 672 times
Been thanked: 479 times

Re: Finnish Shares

#46320

Postby ADrunkenMarcus » April 17th, 2017, 9:41 am

I'll try and remember to do just that, although it pays once a year and I don't think the next one is due until February 2018!

Best wishes

Mark.

TwmSionCati
Lemon Pip
Posts: 54
Joined: November 9th, 2016, 12:11 pm
Has thanked: 2 times
Been thanked: 8 times

Re: Finnish Shares

#50492

Postby TwmSionCati » May 1st, 2017, 11:06 pm

I am trying to clarify any taxation taken off the dividends by Finland. ... the table has 0%, which seems to imply no tax will be withheld on the dividend at source.


No: what it implies is that the tax (30% on each dividend) that is withheld at source is fully refundable. There’s no difficulty about it: just fill in form 6164 (the application for a refund) and get HMRC to fill in form 6161 (the certificate that the dividends are taxable as income — so not in an ISA, NB!) and send them off to the Helsinki Area Tax Office: they’re a bit slow, but you’ll get your refund without further hassle.

I’m a great fan of the Finns: 5 years ago Orion and UPM Kymmene cost me £15 & £8 respectively; since then they’ve paid dividends of £4.50 & £1.80, and today stand at £42 and £19.

Thanks to you, I’ll now have a look at Kone.

TSC

ADrunkenMarcus
Lemon Quarter
Posts: 1584
Joined: November 5th, 2016, 11:16 am
Has thanked: 672 times
Been thanked: 479 times

Re: Finnish Shares

#51680

Postby ADrunkenMarcus » May 6th, 2017, 4:12 pm

Unfortunately, my Kone shares are inside an ISA. However, even if 30% is deducted then my dividend yield on cost for the first year should be over 3 percent. :)

What attracted you to Orion and UPM Kymmene?

If you like Kone and join the shareholders, let's hope it's successful for both of us.

Best wishes

Mark.

PinkDalek
Lemon Half
Posts: 6139
Joined: November 4th, 2016, 1:12 pm
Has thanked: 1589 times
Been thanked: 1801 times

Re: Finnish Shares

#51684

Postby PinkDalek » May 6th, 2017, 4:35 pm

ADrunkenMarcus wrote:Unfortunately, my Kone shares are inside an ISA. However, even if 30% is deducted then my dividend yield on cost for the first year should be over 3 percent. :) ...


The dividend appears to be paid annually in March (subject to the specials you mention). Depending on the dealing costs and the spread etc and being out of the shares for a little while, perhaps you could consider selling before they go ex div and repurchasing later on. That is if 30% is withheld and if it is either a hassle getting a refund or a refund is not possible.

Merely a thought but if you do that we won't find out if withholding tax is deducted!

TwmSionCati
Lemon Pip
Posts: 54
Joined: November 9th, 2016, 12:11 pm
Has thanked: 2 times
Been thanked: 8 times

Re: Finnish Shares

#51793

Postby TwmSionCati » May 7th, 2017, 10:40 am

Mark:

“What attracted you to Orion and UPM Kymmene?”

At the time, both were cheap by P/E and had their dividends decently covered but had massive yields (8.0% and 6.7% respectively), far greater than their sectoral rivals.

Finnish (and European) share-prices then were very depressed: the OMX Helsinki 25 (and the DJ EuroSTOXX 50) have both since increased by 100%, the FTSE 100 by only 30%.

Orion’s yield is now too low for my taste, but UPM still appeals. So does Kone now I’ve looked (thanks to your tip), but less so: UPM’s a third cheaper by P/E, yields a little more, and its dividend cover is a third greater.


“Unfortunately, my Kone shares are inside an ISA. However, even if 30% is deducted ...”

Of course, if you only pay tax at the basic rate you could reduce that to 7.5% (or perhaps 0%?) by selling them, and using the proceeds to buy Kone (or UPM) in a dealing account.


“I am not sure how Finland would know the shares were in an ISA. ... I didn't understand it as an issue for European ones.”

Most foreign tax-authorities content themselves with HMRC’s assurance that the ISA-holder pays tax on his income, without enquiring whether he pays tax on his ISA-income. So an ISA-holder can have foreign tax withheld on his ISA-income refunded, but only dishonestly: for such tax is only honestly refundable in accordance with a double-taxation agreement, which requires that the income be doubly taxed, which it isn’t. Finland’s wise to the wheeze.

Good luck, whatever you do.


TSC

ADrunkenMarcus
Lemon Quarter
Posts: 1584
Joined: November 5th, 2016, 11:16 am
Has thanked: 672 times
Been thanked: 479 times

Re: Finnish Shares

#51816

Postby ADrunkenMarcus » May 7th, 2017, 12:11 pm

PinkDalek wrote:The dividend appears to be paid annually in March (subject to the specials you mention). Depending on the dealing costs and the spread etc and being out of the shares for a little while, perhaps you could consider selling before they go ex div and repurchasing later on. That is if 30% is withheld and if it is either a hassle getting a refund or a refund is not possible.

Merely a thought but if you do that we won't find out if withholding tax is deducted!


Ha! Well, I am not going to go to that hassle. Leaving aside that there is a spread and an additional charge for foreign shares, the exchange rate will fluctuate as well and I think I would be worse off if I tried to do that. It's a good company and my starting yield will still be above 3 percent, so I will do far better buying and holding Kone than investing in many inferior companies...and keeping my dealing costs low. (Portfolio running costs for the last year came to 0.26% - and I've got a fair chunk of collectives).

Thanks TSC - interesting companies to learn about. I'm very keen not to limit myself to UK-listed firms, as you've seen.

TwmSionCati wrote:“Unfortunately, my Kone shares are inside an ISA. However, even if 30% is deducted ...”

Of course, if you only pay tax at the basic rate you could reduce that to 7.5% (or perhaps 0%?) by selling them, and using the proceeds to buy Kone (or UPM) in a dealing account.


I think keeping it within an ISA is less complicated in most ways. There is a lot of discussion as to the differences between how capital gains are taxed compared to income (at present), but there are so many unknowables in the future as to how this balance might shift. There would be an ongoing, recurring benefit from reclaiming the tax on the income if the shares were outside an ISA, but then capital gains would be payable were there to be a big nominal gain on the purchase price if the shares were sold. As it happens, I bought them and intend to keep them for the very long term, but there doesn't seem to be a clear benefit for me either way so I will keep them as they are.

Best wishes

Mark.


Return to “International & Expat Investors”

Who is online

Users browsing this forum: No registered users and 2 guests