EU mutual pension insurer deducts Finnish dividends for liabilities

A mutual occupational pension insurer resident in another EU state may deduct statutory liability transfers from Finnish-source dividends where the dividends are allocated to pension liabilitiesVero. The treatment follows from the free movement of capital, because a comparable Finnish mutual pension insurer effectively pays no tax on the same incomeVero.

The applicant offered collective-agreement pensions of a kind Finnish pension insurers — which may also take the mutual form — provide, plus related collective-agreement insurance products. Measured by assets, 97 percent of its activity was pension insurance. Assets were invested as a whole and Finnish income was not allocated directly to any product. Comparability did not turn on product identity: the applicant shared the Finnish insurers' aim and mission, acted under its home-state law, and differences in how pensions were calculated were irrelevant. Its activity was mainly comparable to a Finnish mutual statutory-pension insurer and to a minor extent to another mutual insurer.

Finnish mutual pension insurers are taxable but deduct expenses of acquiring and maintaining income, including statutory transfers to claims and premium liabilities under Business Income Tax Act section 8(1)(10) and the section 48a reserve matching the non-allocated additional insurance liability. Under Article 63 TFEU and the judgments in C-342/10 Commission v Finland and C-641/17 College Pension Plan, no objective difference justified taxing the applicant's Finnish income where domestic insurers effectively paid no tax on theirs, so far as the Finnish dividends covered pension liabilitiesVero.

The deductible amount followed the accounts. Liability was booked only for the guaranteed part of future pensions; the profit-based part of defined-contribution cover came from an own-equity fund whose surplus could fund index increases and discounts, be returned as surplus refunds, and buffer risk, with no ordinary profit distribution. Fund transfers had the same purpose as Finnish liability transfers except where distributed as surplus refunds, so dividends allocated to pension business were reduced by the matching section 8(1)(10) amount, with qualifying fund postings equated to the liability.

Other insurance lines received the same deduction in principle but through a turnover key. The applicant was taxable at home on those products, which no Finnish mutual occupational pension insurer offered, while a comparable Finnish insurer was taxable without the section 48a right. Section 8(1)(10) also covers non-pension insurers, and the dividends funded future claims, so the provision applied purposively despite the source-tax act pointing only at a foreign entity matching a domestic pension institution. With no direct allocation in the accounts, the deductible liability share was set by turnover: from dividends matching those products' share of all investment income, the transfer share matching the Finnish dividend's share of their turnover. Consistent with C-156/17 Köln-Aktienfonds Deka, the Tax Administration may require proof of the amount and its bases.

The advance ruling covers tax years 2026 and 2027, is not yet final and is published only as a summary. Non-resident EU and EEA mutual pension and life insurers with Finnish equitiesVero document the liability allocation and turnover key, and withholding agents align refund positions.

Legal basis: Laki rajoitetusti verovelvollisen tulon verottamisesta 3 § 1 and 7 momentit and 7 § 1 momentti 3 kohta b alakohta, laki elinkeinotulon verottamisesta 7 § 1 momentti, 8 § 1 momentti 10 kohta and 48 a § 1 momentti, and Sopimus Euroopan unionin toiminnasta 63 and 65 artikla.