Nokia 2012 Annual Report Download - page 190

The US Treasury has expressed concern that parties to whom ADSs are released may be taking
actions inconsistent with the claiming of foreign tax credits or reduced rates in respect of qualified
dividends by US Holders of ADSs. Accordingly, the analysis of the creditability of Finnish withholding
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
Generally, for US Holders, the reduced 15% withholding tax rate of the Treaty (instead of 30%) is
applicable to dividends paid to nominee-registered shares only when the conditions of the provisions
applied to dividends are met (Section 10b of the Finnish Act on Taxation of Non-residents’ Income).
According to the 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). 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, long-term capital
gain generally is subject to US federal income tax at preferential rates. 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.
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