FINLAND: Advance Ruling on taxation of best performance reward

The Finnish Supreme Administrative Court ruled on 1 June 2005 on the taxation of the best performance reward, which a non-resident athlete may earn through the participation in the 2005 Athletics World Championships that are held in August 2005 in Helsinki. The rewards (totalling an amount of USD 7 million) are awarded and paid out by the worldwide Association that is based in Monaco. The payments will be made in the beginning of 2006. Under the contract between the worldwide Association and the organiser of the Finnish World Championship, the latter was made responsible for the withholding and payment of any taxes due.

The Finnish Central Tax Board had also given an advance ruling, and had held that the rewards would not be coming from Finnish sources. Apparently the tax authorities went into appeal, and the Supreme Administrative Court has now held that any income derived by non-resident athletes from personal activities in Finland is derived from Finnish sources and subject to a 15% withholding tax. It was pointed out that the actual withholding obligation might be restricted by an applicable tax treaty between Finland and the country of residence of the athlete.

The Finnish organiser and the worldwide Association now have the task to find a proper mechanism for implementing this withholding obligation.