Finland and France signed new tax treaty

The new tax treaty includes a permanent establishment article based on the latest OECD Model Tax Convention. This is the first time that this form of permanent establishment article has been included in a tax treaty concluded by Finland. The article in question is one off the products of the framework on base erosion and profit shifting (BEPS) launched by the OECD and G20. 

The updated definition of a permanent establishment means above all that a permanent establishment can in the future be formed in such business models based on decentralization of functions, which have previously been able to avoid the creation of a permanent establishment for an individual company.

Furthermore, the company’s tax liability to Finland may arise in the future on lighter grounds than before in all kinds of agency activities.

It is good to evaluate local operations from the point of view of the creation of a permanent establishment before the new tax agreement enters into force, because the creation of a permanent establishment causes various local compliance obligations.

In addition to a permanent establishment, the change in the tax treaty also affects the taxation of pensions and dividends.

The new tax treaty will enter into force after approval by the parliament.

Read more (Ministry of Finance)