Nokia 2006 Annual Report Download - page 121

taxes or the availability of qualified dividend treatment could be affected by future actions that may
be taken by the US Treasury with respect to ADSs.
Finnish Withholding Taxes on Nominee Registered Shares
For US Holders, the reduced 15% withholding tax rate of the Treaty (instead of 28%) is applicable to
dividends paid to nominee registered shares only when the conditions of the new provisions applied
to dividends that are paid on January 1, 2006 or after are met (Section 10b of the Finnish Act on
Taxation of Nonresidents’ Income and Wealth).
According to the new provisions, the Finnish account operator and a foreign custodian are required
to have a custody agreement, according to which the custodian undertakes to a) declare the country
of residence of the beneficial owner of the dividend, b) confirm the applicability of the Treaty to the
dividend, c) inform the account operator of any changes to the country of residence or the
applicability of the Treaty, and d) provide the legal identification and address of the beneficial owner
of the dividend and a certificate of residence issued by the local tax authorities upon request. It is
further required that the foreign custodian is domiciled in a country with which Finland has entered
into a treaty for the avoidance of double taxation and that the custodian is entered into the register
of foreign custodians maintained by the Finnish tax authorities.
In general, if based on an applicable treaty for the avoidance of double taxation the withholding tax
rate for dividends is 15% or higher, the treaty rate may be applied when the abovedescribed
conditions of the new provisions are met (Section 10b of the Finnish Act on Taxation of Non
residents’ Income and Wealth). A lower rate than 15% may be applied based on the applicable
treaty for the avoidance of double taxation only when the following information on the beneficial
owner of the dividend is provided to the payer prior to the dividend payment: name, date of birth
or business ID (if applicable) and address in the country of residence.
US and Finnish Tax on Sale or Other Disposition
A US Holder generally will recognize taxable capital gain or loss on the sale or other disposition of
ADSs in an amount equal to the difference between the US dollar value of the amount realized and
the adjusted tax basis (determined in US dollars) in the ADSs. If the ADSs are held as a capital asset,
this gain or loss generally will be longterm capital gain or loss if, at the time of the sale, the ADSs
have been held for more than one year. Any capital gain or loss, for foreign tax credit purposes,
generally will constitute US source gain or loss. In the case of a US Holder that is an individual, any
capital gain generally will be subject to US federal income tax at preferential rates if specified
minimum holding periods are met. The deductibility of capital losses is subject to significant
limitations.
The deposit or withdrawal by a US Holder of shares in exchange for ADSs or of ADSs for shares under
the deposit agreement generally will not be subject to US federal income tax or Finnish income tax.
The sale by a US Holder of the ADSs or the underlying shares, other than an individual that, by
reason of his residence in Finland for a period exceeding six months, is or becomes liable for Finnish
income tax according to the relevant provisions of Finnish tax law, generally will not be subject to
income tax in Finland, in accordance with Finnish tax law and the Treaty.
Finnish Capital Taxes
The Finnish capital tax regime was abolished in the beginning of 2006.
Finnish Transfer Tax
Transfers of shares will be, and transfers of ADSs may be, subject to the Finnish transfer tax only
when one of the parties to the transfer is subject to Finnish taxation under the Finnish Income Tax
Act by virtue of being a resident of Finland or a Finnish branch of a nonFinnish credit institution. In
case the Finnish Transfer Tax Act is applicable, transfer tax, however, would not be payable on stock
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