lähdeverotus

Lähdeverotus, often translated as withholding tax, is a system where a portion of income is paid directly to the tax authorities by the payer of the income, rather than being paid by the recipient. This is common for payments to non-residents, such as dividends, interest, royalties, and certain service fees. The purpose of withholding tax is to ensure that taxes on these income streams are collected at the source, preventing tax evasion and simplifying tax collection for the authorities.

The withholding tax rate is typically determined by domestic tax laws and, importantly, by international tax treaties between countries. These treaties aim to prevent double taxation, meaning income is not taxed in both the country of the source and the country of the recipient's residence. Treaties often reduce or eliminate withholding tax rates compared to domestic rates, provided the recipient can demonstrate their residency in the treaty country and that they are the beneficial owner of the income.

In practice, the payer of the income is responsible for calculating, withholding, and remitting the correct amount of tax to the relevant tax authority. Failure to do so can result in penalties for the payer. Recipients of income subject to withholding tax may be able to claim a credit for the withheld tax against their overall income tax liability in their country of residence. The specific rules and rates for withholding tax vary significantly by jurisdiction and the type of income.