CJEU - Recent Developments in Direct Taxation 2021

S. 2021. Legal background

The two Finnish cases discussed in this chapter relate to the same legal and economic phenomenon, namely the compliance of taxation of foreign investment funds and their unit holders in Finland with the free movement of capital, which has been at stake on the legal arena since 2007.

The first Finnish case E (C-480/19) concerns the taxation of revenue received by a Finnish individual from a Luxembourg-based SICAV fund. The Supreme Administrative Court of Finland made a reference to the CJEU. Revenue received from a Luxembourg SICAV is taxed at a higher rate than from a Finnish investment fund, notwithstanding that both fund types meet the requirements of Directive 2009/65/EC of the European Parliament and of the Council of 13 July 2009 on the coordination of laws, regulations and administrative provisions relating to undertakings for collective investment in transferable securities (“UCITS”).

Under Section 20 of the Finnish Income Tax Act (“ITA”) investment funds are exempt from income tax. The purpose of the tax exemption is to eliminate double taxation and make collective investment activity more attractive. The appreciations in value of the investments made by i...