A Finnish civil service pension fund is not a sovereign state, and the dividends it receives are subject to withholding tax

A Finnish entity responsible for the pension system for civil servants and local government employees received dividends that were subject to a 30% withholding tax.

She filed a claim to request a refund.

First, it sought the application of the exemption granted to a sovereign foreign state within the meaning of Article 131 sexies(I).

The Administrative Court of Appeals, however, ruled that the entity could not be classified as a state, holding that:

• it has legal personality

• Given the supervision exercised by the Finnish Minister of Finance, it cannot be considered a sovereign state

• Whether the other conditions set forth in Article 131-6 are met has no bearing on the classification as a sovereign state

The entity also considered that the failure to grant withholding tax exemption to public entities other than those covered by Article 131 sexies would be contrary to the free movement of capital. 

The Administrative Court of Appeal will, however, rule that all foreign investors—with the exception of sovereign foreign states, their central banks, and international organizations—are, as a matter of principle, subject to a tax on dividends of French origin.

It further considers that the Finnish entity is no less favorably treated than a comparable entity in France, given that:

• it is not comparable to the French government or one of its political subdivisions, which would be exempt from tax

• "Public institutions, state agencies with financial autonomy, as well as departmental and municipal agencies and any other legal entities engaged in profit-making activities or operations" are subject to corporate income tax

• the financial reports and statements produced by the organization do not demonstrate that its activities are not for-profit

In light of the Franco-Finnish tax treaty, the Court finds that the company has not demonstrated that it is subject to taxation and therefore cannot claim the benefits of the treaty. Nor, according to the Court, can it be considered a political subdivision of the Finnish State or of one of its local authorities for the purpose of claiming residency in that State within the meaning of the treaty.

Finally, the Court finds that the entity has not provided sufficient evidence to demonstrate that it is managed on a not-for-profit basis and that it is comparable to a French nonprofit organization eligible for a reduced corporate tax rate of 15%.

CAA Paris, Dec. 1, 2025, No. 24PA01836

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