Illustration of Finnish and US tax applicable to dividends received by a US citizen 

The following examples do not address all of the tax consequences that may be relevant to a particular US taxpayer in light of his or her personal circumstances. You are, therefore, urged to consult a tax advisor with respect to the specific tax consequences of the ownership of Stora Enso ADRs. These are only illustrations and Stora Enso is not responsible for each taxpayer’s personal tax consequences.

If a US citizen filing an individual income tax return receives an ADR dividend from Stora Enso of USD 100, a Finnish tax of 15% will be withheld from the distribution. Although the net cash received will be USD 85, the entire USD 100 gross amount of the dividend will be includable in the taxable income of the US citizen.

The withholding rate of 15% may only be applied when the fiscal residence of the ADR holder is known to be in the US at the moment of the dividend payment. If the fiscal residence of the ADR holder is not known at the time of the dividend payment, Finnish tax of 28% will be withheld from the distribution. In the event that Finnish tax of 28% is withheld, two options are available. First, substitute 28% in the examples below; however, in Example A, the amount of foreign tax credit may be limited.  Alternatively, a claim may be filed with the Finnish tax authorities for the excess withholding of 13% (28% minus 15%) and then the non-refunded withholding of 15% is treated as shown in the examples below.

Finnish Taxation
Gross Dividend 100.00
Finnish Withholding tax at 15% 15.00
Net Dividend Received 85.00

Example A
Assuming there are no other foreign source transactions applicable, the ADR shareholder will be entitled to credit the 15% Finnish withholding tax against the amount of U.S. federal income tax otherwise payable on the dividend. Assuming that the US citizen meets certain holding requirements and is eligible for the reduced US dividend tax liability provided for in the Jobs and Growth Tax Relief Act of 2003, the likely tax consequences of receipt of a USD 100 ADR dividend would be as follows:

US Taxation
Tax Credit
Gross Dividend 100.00
less: foreign tax deduction 0.00
US Taxable income 100.00
US Tax @ 15% 15.00
less: foreign tax credit 15.00
Net US tax 0
Total Finnish and US tax cost 15.00

Example B
US Taxation
If the ADR shareholder has other foreign source income or losses which affect the availability of the credit, the shareholder may only be able to deduct the 15% Finnish tax amount from the gross dividend amount in calculating the US tax liability for the year in which the dividend is received. Assuming that the US citizen meets certain holding requirements and is eligible for the reduced US dividend tax liability provided for in the Jobs and Growth Tax Relief Act of 2003, the likely tax consequences of receipt of a USD 100 dividend would be as follows:

Tax Credit
Gross Dividend 100.00
less: foreign tax deduction 15.00
US Taxable income 85.00
US Tax @ 15% 12.75
less: foreign tax credit 0.00
Net US tax 12.75
Total Finnish and US tax cost 27.75

At year-end, you will receive a statement from the paying agent detailing the gross dividend and foreign tax withheld. You will use this information to prepare your personal income tax return. The availability of a foreign tax credit or deduction will depend on each shareholder’s personal tax situation.