EC Questions Finnish Tax On Non-Resident Artists and Sportspeople

by Ulrika Lomas, Tax-News.com, Brussels

24 February 2009

The European Commission has sent Finland a formal request to amend its legislation to remove discriminatory taxation applied to non-resident artists and sportsmen.

According to the Finnish legislation, non-resident artists and sportsmen pay a final tax of 15% on their revenues from Finland, after certain limited deductions for lodging, transport and daily allowances. Resident artists and sportsmen are subject to a progressive tax rate and may deduct the actual expenses linked to their income.

The Commission's request takes the form of a ‘reasoned opinion’ (second step of the infringement procedure of Article 226 of the EC Treaty). If Finland does not reply satisfactorily to the reasoned opinion within two months the Commission may refer the matter to the European Court of Justice.

Finland offers various forms of deductions to persons with unlimited tax liability, who are usually residents, while persons with limited tax liability, who are usually non-residents, are not entitled to such deductions. The fact that non-resident artists and sportsmen are subject to a different set of rules, may in some cases lead them to be taxed more heavily than their resident counterparts.

The difference in treatment between resident and non-resident artists and sportsmen amounts to an obstacle to the freedom to provide services within the meaning of Articles 49 and 50 of the EC Treaty. The effect of the legislation is to make the provision of services less attractive by deterring non-resident artists and sportsmen from offering their services in Finland.

In the Commission's view, the situations of resident and non-resident taxpayers are objectively comparable when it comes to business expenses linked to the artistic or sports activity which generated the taxable income. A difference in treatment therefore constitutes arbitrary discrimination.

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