Nokia 2010 Annual Report Download - page 177

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
dividend. Qualifying pension funds are, however, pursuant to the Treaty exempt from Finnish
withholding tax. See also “—Finnish Withholding Taxes on Nominee Registered Shares” below.
Subject to conditions and limitations, Finnish withholding taxes will be treated as foreign taxes
eligible for credit against a US Holder’s US federal income tax liability. Dividends received generally
will constitute foreign source “passive category income” for foreign tax credit purposes. In lieu of a
credit, a US Holder may elect to deduct all of its foreign taxes provided the deduction is claimed for
all of the foreign taxes paid by the US Holder in a particular year. A deduction does not reduce US tax
on a dollarfordollar basis like a tax credit. The deduction, however, is not subject to the limitations
applicable to foreign tax credits.
Certain US Holders (including individuals and some trusts and estates) are eligible for reduced rates of
US federal income tax at a maximum rate of 15% in respect of “qualified dividend income” received
in taxable years beginning before January 1, 2013, provided that certain holding period and other
requirements are met. Dividends that Nokia pays with respect to its shares and ADSs generally will be
qualified dividend income if Nokia was not, in the year prior to the year in which the dividend was
paid, and is not, in the year in which the dividend is paid, a passive foreign investment company (a
“PFIC”). Nokia currently believes that dividends paid with respect to its shares and ADSs will
constitute qualified dividend income for US federal income tax purposes, however, this is a factual
matter and is subject to change. Nokia anticipates that its dividends will be reported as qualified
dividends on Forms 1099DIV delivered to US Holders. US Holders of shares or ADSs are urged to
consult their own tax advisors regarding the availability to them of the reduced dividend tax rate in
light of their own particular situation and the computations of their foreign tax credit limitation with
respect to any qualified dividends paid to them, as applicable.
We believe that we should not be classified as a PFIC for U.S. federal income tax purposes for the
taxable year ended December 31, 2010 and we do not expect to become a PFIC in the foreseeable
future. US holders are advised, however, that this conclusion is a factual determination that must be
made annually and thus may be subject to change. If we were to be classified as a PFIC, the tax on
distributions on our shares or ADSs and on any gains realized upon the disposition of our shares or
ADSs may be less favorable than as described herein. Dividends paid by a PFIC are not “qualified
dividend income” and are not eligible for reduced rates of taxation. In addition, as a result of a
change in law effective in 2010, US persons that are shareholders in a PFIC generally will be required
to file an annual report disclosing the ownership of such shares and certain other information as yet
to be determined. US holders should consult their own tax advisors regarding the application of the
PFIC rules (including the new reporting requirements) to their ownership of our shares or ADSs.
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 28%) 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).
176