Nokia 2008 Annual Report Download - page 132

US law, and estates or trusts (to the extent their income is subject to US tax either directly or in the
hands of beneficiaries) generally will be considered to be residents of the United States under the
Treaty. Special rules apply to US Holders that are also residents of Finland and to citizens or residents
of the United States that do not maintain a substantial presence, permanent home or habitual abode
in the United States. For purposes of this discussion, it is assumed that the Depositary and its
custodian will perform all actions as required by the deposit agreement with the Depositary and
other related agreements between the Depositary and Nokia.
If a partnership holds ADSs (including for this purpose any entity treated as a partnership for US
federal income tax purposes), the tax treatment of a partner will depend upon the status of the
partner and activities of the partnership. If a US holder is a partner in a partnership that holds ADSs,
the holder is urged to consult its own tax advisor regarding the specific tax consequences of owning
and disposing of its ADSs.
Because this summary is not exhaustive of all possible tax considerations—such as situations
involving financial institutions, banks, taxexempt entities, pension funds, US expatriates, real estate
investment trusts, persons that are dealers in securities, persons who own (directly, indirectly or by
attribution) 10% or more of the share capital or voting stock of Nokia, persons who acquired their
ADSs pursuant to the exercise of employee stock options or otherwise as compensation, or whose
functional currency is not the US dollar, who may be subject to special rules that are not discussed
herein—holders of shares or ADSs that are US Holders are advised to satisfy themselves as to the
overall US federal, state and local tax consequences, as well as to the overall Finnish and other
applicable nonUS tax consequences, of their ownership of ADSs and the underlying shares by
consulting their own tax advisors. This summary does not discuss the treatment of ADSs that are held
in connection with a permanent establishment or fixed base in Finland.
For the purposes of both the Treaty and the US Internal Revenue Code of 1986, as amended, referred
to as the Code, US Holders of ADSs will be treated as the owners of the underlying shares that are
represented by those ADSs. Accordingly, the following discussion, except where otherwise expressly
noted, applies equally to US Holders of ADSs, on the one hand, and of shares on the other.
The holders of ADSs will, for Finnish tax purposes, be treated as the owners of the shares that are
represented by the ADSs. The Finnish tax consequences to the holders of shares, as discussed below,
also apply to the holders of ADSs.
US and Finnish Taxation of Cash Dividends
For US federal income tax purposes, the gross amount of dividends paid to US Holders of shares or
ADSs, including any related Finnish withholding tax, generally will be included in gross income as
foreign source dividend income. Dividends will not be eligible for the dividends received deduction
allowed to corporations under Section 243 of the Code. The amount includible in income (including
any Finnish withholding tax) will equal the US dollar value of the payment, determined at the time
such payment is received by the Depositary (in the case of ADSs) or by the US Holder (in the case of
shares), regardless of whether the payment is in fact converted into US dollars. Generally, any gain or
loss resulting from currency exchange rate fluctuations during the period between the time such
payment is received and the date the dividend payment is converted into US dollars will be treated as
ordinary income or loss to a US Holder.
Special rules govern and specific elections are available to accrual method taxpayers to determine the
US dollar amount includible in income in the case of a dividend paid (and taxes withheld) in foreign
currency. Accrual basis taxpayers are urged to consult their own tax advisors regarding the
requirements and elections applicable in this regard.
Under the Finnish Income Tax Act and Act on Taxation of Nonresidents’ Income, nonresidents of
Finland are generally subject to a withholding tax at a rate of 28% payable on dividends paid by a
Finnish resident company. However, pursuant to the Treaty, dividends paid to US Holders generally
will be subject to Finnish withholding tax at a reduced rate of 15% of the gross amount of the
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