Please note that the website might not function correctly using an outdated browser. We recommend updating your browser or using another one.
On 7 August 2019, Sampo’s Board of Directors resolved on the distribution of an extra dividend in the form of Nordea shares.
Each shareholder received 1 Nordea share listed in Nasdaq Helsinki for each 10 Sampo shares held. Fractional entitlements to Nordea shares resulting from the distribution ratio were not distributed in the form of shares, but an equivalent amount was compensated to shareholders in cash.
The ex-dividend date was 8 August 2019 and the record date was 9 August 2019. The payment date was 12 August 2019 for the share dividend and 16 August 2019 for the cash compensation.
The background for the plan relates purely on Sampo’s solvency, which is decreased due to the increased capital requirement for Sampo’s Nordea ownership. Since the end of 2018, the capital requirement has increased for over EUR 800 billion.
The Group’s solvency is currently calculated under two different frameworks, the conglomerate rules (FICO) and Solvency II -directive. By distributing Nordea shares as dividend, Sampo’s ownership in Nordea will decrease below 20 per cent, which would lead to withdrawing from the conglomerate rules calculation. This is still subject to the formal approval of the Finnish Financial Supervisory Authority (FSA). Sampo expects to receive the approval before the Q3 results release date.
After the approval of the FSA, the Group’s solvency would be calculated only by the Solvency II rules and Nordea would be treated as normal equity investment instead of a subsidiary.
The changes in solvency rules would significantly improve Sampo’s solvency. At the end of June 2019, Sampo’s Solvency II ratio was 137 per cent. If Nordea would have been treated as an equity investment at the end of June, Sampo’s pro forma Solvency II ratio would have been 170 per cent. Sampo wants to maintain strong solvency in order to act more freely in the investment markets. Strong solvency also supports Sampo’s ability to pay dividend.
The consolidation of Nordea as an associate in Sampo’s Financial Statement (IFRS) will remain unchanged. Thus, Sampo’s share of Nordea’s net result will be included in the Group’s results.
In total, Sampo distributed 55,517,639 Nordea shares as dividend. Sampo will report a capital loss calculated from the difference between the value of the Nordea share on the dividend payment date (EUR 5.661) and the book value of Nordea share (EUR 8.24 at the end of June 2019) in Sampo’s balance sheet.
The Finnish Tax Administration has published a general guide regarding the taxation of dividends in kind.
In Finland, a share dividend is taxed similarly as cash dividend. However, in principle, shareholders must take care of the tax payment by themselves because a withholding tax cannot be collected from a share dividend. The value of the share dividend was EUR 5.661 based on the volume weighted average price of the Nordea share on the payment date 12 August 2019, which is also the base of taxation.
Sampo will pay the Finnish transfer tax of 1.6 per cent resulting from the distribution of the share dividend on behalf of shareholders. However, transfer tax does not have to be paid if the payable transfer tax is less than 10 euros per beneficiary. Thus, there will be no transfer tax payable if the amount of share dividends received did not exceed 110 Nordea shares, which required ownership of 1,100 Sampo shares.
The decision to pay the transfer tax payable on behalf the shareholders is part of the Board’s dividend distribution decision. Thus, according to the Tax Administration’s guides, the transfer tax is taxable dividend income for both resident and non-resident beneficiary. The transfer tax will be included in the acquisition cost of the shares when those are being sold.
Since tax practices vary depending on the domicile and the legal status of the shareholder, we kindly recommend our non-resident shareholders to turn to their own tax advisors and, if necessary, the Finnish Tax Administration for questions related to Finnish taxation.