Opinion of the Advocate General — ECLI:EU:C:2020:942
Date: 2020-11-19
Language of the case: Finnish
Subject matter: Right of establishment;Free movement of capital
Procedure: Reference for a preliminary ruling
Origin: Finland

Summary of the essential arguments of the parties 
22. With his appeal to the Korkein hallinto-oikeus, E requested that the preliminary 
decision issued by the Keskusverolautakunta be annulled and that it be established 
as a new preliminary decision that, with regard to taxation in Finland, the 
distribution of the earnings of the SICAV fund be taxed as capital income of E 
within the meaning of Paragraph 32 of the Income Tax Act and not as income 
from employment pursuant to Paragraph 33c(3) of the Income Tax Act. 
23. As grounds, E argued that, insofar as the similarity between a foreign fund and a 
Finnish investment fund was to be examined with regard to taxation, compliance 
with the UCITS Directive was undisputed and an [objective] expression of the 
similarity of the funds (notwithstanding [Or. 6] that the UCITS Directive did not 
harmonise taxation). The Directive made restrictions with regard to the activity 
performed and the capital structure of the funds, which meant that UCITS funds 
could only be treated in the same way as the forms of activity performing an 
activity under the UCITS Directive with regard to taxation. The published national 
case-law on funds in the form of a company did not concern UCITS funds. 
24. E expressed the opinion that, with regard to taxation, the distribution of the 
earnings of a SICAV fund could not be regarded as dividends within the meaning 
of Paragraph 33c(3) of the Income Tax Law, but was to be regarded as 
distribution of the earnings (as a profit share) of an investment fund, because the 
characteristics typical of a distribution of earnings from investment funds were 
linked therewith and it was the same as the distribution of earnings of a Finnish 
investment fund. 
25. E is also of the opinion that taxation of the distribution of the earnings of the 
SICAV fund in the full amount as income of E from employment on the basis of 
Paragraph 33c(3) of the Income Tax Law would constitute more stringent taxation 
than the taxation of the distribution of the earnings of a Finnish investment fund as 
capital income pursuant to Paragraph 32 of the Income Tax Law. Taxation under 
Paragraph 33c(3) of the Income Tax Law was therefore in breach of the free 
movement of capital under Article 63 TFEU. 
26. The Veronsaajien oikeudenvalvontayksikkö claimed before the Korkein hallinto-
oikeus that, on account of the functional characteristics, the Luxembourg SICAV 
fund had traits of a Finnish investment fund. The activity of the SICAV fund 
involved collective investments and there were also corresponding functional 
common traits for example in the case of collective investments in the form of 
share companies or limited partnerships. Despite some of its characteristics being 
typical of investment funds, the SICAV fund considered overall was most closely 
to be treated in the same way as a Finnish share company performing investment 
activity. 
27. The Veronsaajien oikeudenvalvontayksikkö expressed the opinion that, in the 
situation described in the application for a preliminary decision, the dividend 
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income distributed by a Luxembourg SICAV fund in compliance with the 
Investment Fund Directive was also to be regarded as dividends in the case of 
taxation in Finland and the dividends received constituted fully taxable income 
from employment pursuant to Paragraph 33c(3) of the Income Tax Law. 
National legislation 
28. Pursuant to Paragraph 2(1)(1) in Chapter 1 of the Sijoitusrahastolaki (48/1999, 
Investment Fund Law No 48/1999, repealed by the new Sijoitusrahastolaki 
213/2019, Investment Fund Law No 213/2019), investment fund activity within 
the meaning of this law is the procurement by the public of funds for collective 
investment and the investment of those funds mainly in financing instruments or 
real estate and real estate securities or other investment projects and the 
management of investment funds and specialised funds and the marketing of fund 
units. [Or. 7] 
29. Pursuant to Paragraph 2(1)(2) in Chapter 1 of Investment Fund Law No 48/1999, 
repealed by the new Investment Fund Law No 213/2019, investment funds within 
the meaning of this law are the funds procured in the investment fund activity and 
invested according to the rules established in Finland and according to Chapter 11 
and the obligations resulting therefrom. 
30. Pursuant to Paragraph 3(4) of the Tuloverolaki (1736/2009, Income Tax Law in 
the version of Amending Law No 1736/2009), corporations within the meaning of 
this law are share companies, cooperative associations, savings banks, investment 
funds, universities, mutual insurance companies, grain storage warehouses, non-
profit associations or profit-making associations, foundations and institutions. 
31. Pursuant to Paragraph 32 of the Income Tax Law in the version of Amending Law 
No 716/2004, taxable capital income, in accordance with the more detailed 
provisions below, is earnings from assets, profit from the transfer of assets and 
other such income which may be assumed to have been accrued from assets. 
Capital income includes interest income, dividend income in accordance with the 
provisions in Paragraphs 33a to 33d, rental income, profit shares, earnings from 
life insurance, capital income from forestry, income from mineral substances and 
capital gains. Capital income is also the capital income share in distributed 
business income, in the income share of the partner in a consortium and in the 
income from reindeer husbandry. 
32. Pursuant to Paragraph 33c(1) of the Income Tax Law in the version of Amending 
Law No 530/2016, dividends received from a foreign corporation constitute 
taxable income in accordance with Paragraphs 33a and 33b of this law, if the 
corporation is a company within the meaning of Article 2 of Council Directive 
2011/96/EU on the common system of taxation applicable in the case of parent 
companies and subsidiaries of different Member States in the version of Council 
Directive 2013/13/EU and Council Directive 2014/86/EU. 
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33. Pursuant to Paragraph 33c(2) of the Income Tax Law in the version of Amending 
Law No 1237/2013, dividends received from foreign corporations other than those 
mentioned in sub-paragraph 1 constitute taxable income in accordance with the 
provisions of Paragraphs 33a and 33b, if the corporation is obliged, without 
options or exemption, to pay at least ten per cent tax on its income from which the 
dividends were distributed and: 
1) according to the tax legislation of a State belonging to the European 
Economic Area, the corporation has its registered office in that State and, 
according to a convention preventing double taxation, the corporation does not 
have its registered office in a State outside the European Economic Area; or 
2) a convention preventing double taxation, which applies to the dividends 
distributed by the corporation, is in force between the corporation’s State of 
residence and Finland in the tax year. [Or. 8] 
34. Pursuant to Paragraph 33c(3) of the Income Tax Law in the version of Amending 
Law No 1237/2013, dividends received from foreign corporations other than those 
mentioned in sub-paragraphs 1 and 2 constitute fully taxable income from 
employment. 
Relevant legislation and case-law of EU law 
Treaty on the Functioning of the European Union 
35. Pursuant to Article 63(1) TFEU, within the framework of the provisions set out in 
that Chapter, all restrictions on the movement of capital between Member States 
and between Member States and third countries are to be prohibited. 
36. Pursuant to the wording of Article 65(1)(a) TFEU, the provisions of Article 63 
[TFEU] are to be without prejudice to the right of Member States ... to apply the 
relevant provisions of their tax law which distinguish between taxpayers who are 
not in the same situation with regard to their place of residence or with regard to 
the place where their capital is invested. 
37. Article 65(3) TFEU specifies that the national provisions referred to in 
paragraph 1 of that article are not to constitute a means of arbitrary discrimination 
or a disguised restriction on the free movement of capital and payments as defined 
in Article 63. 
Case-law of the Court of Justice 
38. The judgment delivered by the Court of Justice in Case C-632/13, Hirvonen, 
involved the free movement of Union citizens on the basis of Article 21 
TFEU. With its question, the referring court wanted to clarify whether Article 45 
TFEU precludes provisions in a Member State’s legislation which mean that a 
person resident in another Member State — who receives all or almost all his 
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income in the first Member State — can choose between two entirely different 
regimes of taxation, that is to say, either to be taxed at source at a lower tax rate 
but without the right to such tax relief as is applicable under the ordinary income 
tax regime, or to be taxed on his income under the latter regime and thus be able 
to benefit from the tax relief in question. 
39. In paragraph 28 of that judgment, the Court of Justice found that, in that regard, it 
should be noted that, although direct taxation fell within their competence, the 
Member States had to none the less exercise that competence consistently with EU 
law (see, inter alia, judgment in Gielen, C-440/08, ECLI:EU:2010:148, 
paragraph 36 and the case-law cited). [Or. 9] 
40. In paragraph 29 of the judgment, the Court of Justice found that it should also be 
noted that the rules regarding equal treatment forbade not only overt 
discrimination by reason of nationality but also all covert forms of discrimination 
which, by the application of other criteria of differentiation, led in fact to the same 
result (see, inter alia, judgment in Gielen, C-440/08, ECLI:EU:2010:148, 
paragraph 37 and the case-law cited). 
41. In paragraph 30 of the judgment, the Court of Justice found that, in accordance 
with the settled case-law of the Court, discrimination could arise only through the 
application of different rules to comparable situations or the application of the 
same rule to different situations (see, inter alia, judgments in Schumacker, 
C-279/93, ECLI:EU:C:1995:31, paragraph 30, and Gschwind, C-391/97, 
ECLI:EU:C:1999:409, paragraph 21). 
42. The judgment delivered by the Court of Justice in Case C-303/07, Aberdeen 
Property Fininvest Alpha, involved freedom of establishment on the basis of 
Article 43 EC (now Article 4[9 TFEU]). With its question, the referring court 
sought to clarify whether Articles 43 and 48 EC and Articles 56 and 58 EC are to 
be interpreted as meaning that, in order to safeguard the fundamental freedoms set 
out therein, a share company or investment fund constituted under Finnish law 
and a SICAV constituted under Luxembourg law must be regarded as comparable, 
despite the fact that a form of company entirely comparable to the SICAV is not 
recognised in Finnish law, having regard, first, to the fact that the SICAV, which 
is a company under Luxembourg law, is not mentioned in the list of companies 
referred to in Article 2(a) of Directive 90/435, with which the Finnish withholding 
tax applicable in the present case is consistent, and, second, to the fact that the 
SICAV is exempt from income tax under the domestic tax legislation of the Grand 
Duchy of Luxembourg. In these circumstances, is it contrary to the above articles 
of the EC Treaty for the Luxembourg-based SICAV as the recipient of dividends 
in Finland not to be exempt from the withholding tax to be paid on the dividends? 
43. In paragraph 50 of the judgment mentioned above, the Court of Justice found that, 
in the first place, the circumstance that in Finnish law there was no type of 
company with a legal form identical to that of a SICAV governed by Luxembourg 
law could not in itself justify a difference in treatment, since, as the company law 
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of the Member States had not been fully harmonised, that would deprive the 
freedom of establishment of all effectiveness. [Or. 10] 
44. In paragraph 55 of the judgment, the Court of Justice found that, in those 
circumstances, the differences between a SICAV governed by Luxembourg law 
and a share company governed by Finnish law, relied on by the Finnish and Italian 
Governments, were not sufficient to create an objective distinction with respect to 
exemption from withholding tax on dividends received. Consequently, there was 
no further need to examine to what extent the differences between a SICAV 
governed by Luxembourg law and an investment fund governed by Finnish law, 
said to exist by those governments, were relevant for establishing such an 
objective difference in situation. 
45. In paragraph 56 of the judgment, the Court of Justice also found that it followed 
that the difference in treatment between non-resident SICAVs and resident share 
companies with respect to the exemption from withholding tax on dividends 
distributed to them by resident companies constituted a restriction of freedom of 
establishment, prohibited in principle by Articles 43 and 48 EC. 
46.  … 
Requirement for the request for a preliminary ruling 
47. The Korkein hallinto-oikeus has to give a ruling on the question of whether the 
earnings distributed to E by a SICAV fund, active under the UCITS Directive, 
constitute income from employment or capital income under the Income Tax Law. 
48. The Investment Fund Directive has been implemented in Finland through 
Investment Fund Law No 48/1999 (which was repealed by the new Investment 
Fund Law No 213/2019). In Finland, the contract form within the meaning of 
Article 1(3) of the Directive was chosen as the form of activity of an investment 
fund, whereas the SICAV fund has the statute form within the meaning of the 
same paragraph of that article. 
49. The ruling by the Keskusverolautakunta means that income received by a natural 
person residing in Finland from an undertaking for collective investment in 
transferable securities based in another Member State of the Union and constituted 
in accordance with statute within the meaning of Investment Fund Directive 
2009/65/EC is entirely taxed as income from employment under the Income Tax 
Law. The income tax for income from employment may be over 50 per cent. 
50. Income received by a natural person residing in Finland from a Finnish investment 
fund constituted on the basis of provisions under contract law is entirely taxed as 
capital income under the Income Tax Law. The income tax for capital income is 
30 per cent. If the amount of the taxable capital income of a taxable person 
exceeds EUR 30 000, the income tax paid on the capital income is 34 per cent. 
[Or. 11] 
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51. In order to be able to determine the income tax for the present income for the 
taxation of E to be carried out in Finland, the first issue to be resolved in this case 
is which Finnish corporation that distributes earnings is a SICAV fund to be 
treated in the same way as. In this respect, the Korkein hallinto-oikeus is 
confronted with the question of whether a national interpretation which leads to 
the result described because the legal form of an undertaking for collective 
investment in transferable securities based in another Member State does not 
correspond to the legal structure of the national investment fund is contrary to 
Articles 63 and 65 TFEU. 
52. The case also requires interpretation of whether undertakings for collective 
investment in transferable securities, which have been constituted in compliance 
with the Investment Fund Directive and have a different form, must be treated the 
same in relation to the taxation of the investments of their investors. Pursuant to 
Recital 83 of the Investment Fund Directive, that Directive is not to affect national 
rules on taxation, including arrangements that may be imposed by Member States 
to ensure compliance with those rules in their territory. In the opinion of the 
Korkein hallinto-oikeus, the Court of Justice has not expressly taken a position in 
its case-law on the effect of the Investment Fund Directive on taxation. 
53. The Korkein hallinto-oikeus is not aware of any preliminary ruling of the Court of 
Justice on the interpretation of Articles 63 and 65 TFEU on the matter described 
above. In addition, a provision — which does not apply in the present case — will 
come into effect in Finland on 1 January 2020, on the basis of which solely open-
end foreign investment funds constituted in accordance with contract law shall be 
treated in the same way as a Finnish investment fund with regard to income 
taxation. As the delivery of a ruling in the main proceedings requires an 
interpretation of the provisions of EU law cited above, it is necessary to obtain a 
preliminary ruling of the Court of Justice in the present case. 
54. …  
Interlocutory order of the Korkein hallinto-oikeus on requesting a 
preliminary ruling from the Court of Justice of the European Union 
55. …  [Or. 12] 
Question referred 
1. Are Articles 63 and 65 TFEU to be interpreted as meaning that they 
preclude a national interpretation according to which income received by a natural 
person residing in Finland from an undertaking for collective investment in 
transferable securities based in another Member State of the Union and constituted 
in accordance with statute within the meaning of the Investment Fund Directive 
2009/65/EC (UCITS fund in the form of an investment company) is not, for the 
purposes of income tax, treated in the same way as income received from a 
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Finnish investment fund constituted in accordance with contract law within the 
meaning of the same Directive (UCITS fund in contract form), because the legal 
form of the UCITS located in the other Member State does not correspond to the 
legal structure of the national investment fund? 
…  [Or. 13] …