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  • The Acatiimi tax supplement 2009

    All taxpayers have received a pre-completed tax return form on their taxation for the year 2009. If you have nothing to add to it, the tax return form need not be submitted. An adjusted tax return form must be submitted to the tax authorities by the due date. Check your pre-completed tax return form to find out the due date; it is either the 11th or the 18th of May 2010.

    The online version of Acatiimi magazine explains the key questions to be considered by members of the publisher associations when filling their tax return forms. The special taxation-related issues that concern researchers and university lecturers in particular form the point of departure.

    This is the first time that we have translated a part of the tax supplement into English. The subjects covered include, inter alia, the taxation of grants and the deductions that can be made for professional expenses. We intend to increase our provision of this service in the future.

    Before you study and fill the tax return form, you should examine the Tax Administration's instruction booklet on how to fill out corrections and additions to the pre-completed tax return form. The Tax Administration also issues harmonisation guidelines on several issues to the local tax offices. English-language instructions can also be found on the Tax Administration's website www.vero.fi.

    Several court cases dealing with taxation are referred to in the following. Two different types of notations are used in reference to decisions made by the Supreme Administrative Court. For example, SAC 1975 II-540 (replace II with B in more recent cases) means that the case has been published under number 540 in the taxation-related part of the Court's 1975 Yearbook. (A case like this is one that the SAC has itself considered as being of precedent value). On the other hand, a notation of the type SAC 4.5.1984 no 1989 is also used. This means that the case was decided by the Supreme Administrative Court on 4 May 1984 and it was entered into the record under register number 1989. The articles also refer to taxation-related decisions made by the Central Tax Commission (CTC) and the provincial administrative courts.

    6. Taxation of grants and other disbursements

    6.1 Grants and recognition awards

    A scholarship, grant or other similar disbursement received from a public entity or the Nordic Council for the purposes of study, scientific research or artistic activity as well as awards received in recognition of scientific or artistic achievement or for promoting the public good is exempt from taxation in its entirety. In 2009, the State, the universities and other institutions of higher education, municipalities, Evangelical Lutheran and Orthodox congregations, and the Academy of Finland were considered public entities. Foreign public bodies are not considered public entities as provided for in the applicable statutes

    On application, the Ministry of Finance can decree that an award received for scientific or artistic achievement is tax exempt. This applies to foreign awards as well.

    Grants or recognition awards received from private organisations for the abovementioned reasons are tax exempt to the extent that the net combined amount or grants received from public entities and private organisations does not exceed the annual amount of the State grant to artists. The net amount is determined by deducting from the grants the expenses that are associated with them. In 2009, the amount of the State artist grant was about €18,300.

    Grants received for any other purpose than study, scientific research or artistic activity are considered taxable income irrespective of whom they are awarded by. For example, the compensation (pay) received for the performance of a specific task under the name of a scholarship is considered taxable income. When a scholarship serves as a substitute for pay, it will be considered taxable income.

    If a scholarship is considered taxable, it will in most cases be remuneration for work performed. In such cases, the employer is obligated to pay the social expenses of the employee. On application, the Ministry of Finance can decree that an award received as recognition for scientific or artistic activity or for promoting the public good is tax-exempt income in full.

    A consequence of the combination rule is that when a researcher receives a grant from, for example, a university (tax exempt), the grants he or she receives from private entities during the same tax year often become taxable. For this reason, it is wise whenever possible to steer private grants in such a way that they are not counted during a single tax year.

    Grants must be reported in the tax return form. Always remember to clarify the nature of each grant in question as well as whether or not it is considered taxable.

    The following matters, among other things, are considered by the tax authorities:

    • if the grant is open to general application,
    • is the grant is remuneration for work performed,
    • if the grant was awarded without application,
    • what clarifications the grant applicant has had to present,
    • if special terms have been attached to the awarding of the grant,
    • the personal circumstances of the recipient of the grant,
    • if the grant has been awarded by an association for the public good.

    A grant is considered taxable income for the tax year in which it can be drawn. Organisations are required to report all of the grants they award to the tax authorities.

    6.2 Deduction of expenses associated with a grant

    If the taxpayer has incurred expenses in association with the activity for which he or she has been awarded a grant or scholarship, these expenses can be deducted. If the taxpayer has been awarded a grant for a specific study, the expenses associated with it can also be deducted. By contrast, a recognition award granted retrospectively for scientific or artistic achievement need not be used to cover the expenses caused by the scientific or artistic work.

    When calculating the taxable portion of a grant, the expenses associated with the grant are first deducted; these include study materials, the pay of assistants, travel costs, transcription expenses and the other costs caused by research activities. When no clarification is presented, expenses are divided in proportion to the size of the grants received. It is important to deduct the expenses because this gives the appropriate taxable amount.

    Example of how to calculate the taxable portion of a grant:

    State grant awarded for scientific work:
     €10 445
    grant received from private entity:
     €16 800
    €27 245
    -Total expenses
    €8 255
    - When no clarification is presented, expenses are divided in proportion to the size of the grants received
     €10 445 : €27 245 x €8 255 = €31 64,75
    €16 800 : €27 245 x 8 255 = €5 090,25
    - Net amount of grants:
    - State
    €10 445 - €3 164,75 = €7 280,25
    - Private
    €16 800 - €5 090,25 = €11 709,75
    - Total
    €18 990
    Net amount of grants: €18 990 - Artist grant
    €18 300 = about €690
    The taxable portion of the grant received from a private entity is thus about €690. The State grant is tax exempt in its entirety.

    The Finnish Cultural Foundation's Central Finland Regional Fund and the art committee of province X awarded a FIM15,000 and a FIM10,000 grant to librarian A for the purpose of compiling a bibliography. A had been granted an unpaid leave of absence by her primary employer for the purpose of performing the work in question. A was not in a paid relationship with the advisory board that had been established for the project, nor did she receive any other compensation for the work she was performing. These grants should be considered tax-exempt grants awarded for the conducting of scientific work (SAC 9.4.1991 no 1168).

    A had in 1976 drawn a grant, which a foundation had awarded for the purpose of covering the expenses caused by A’s studies abroad in 1976 and 1977. It was appropriate to consider the grant in its entirety as A’s taxable income for 1976, but A was entitled to deduct also the future travel and other expenses that were associated with the grant as professional expenses in 1976 before the amount of the taxable income for the year was confirmed (SAC 14.1.1980 no 183).

    Professor A had demanded that he be allowed to deduct as professional expenses the FIM1,200 in travel expenses he incurred in the period 1.7-31.12.1984, while on a leave of absence from his established post and the recipient of a senior scientist’s grant. The Provincial Administrative Court held that A had not presented a report of how the travel expenses he was claiming as deductions could not have been covered by the tax-exempt grant he had been awarded (Häme Provincial Administrative Court decision 25.3.1987 no 316). The SAC rejected A’s application for an appeal because having the matter resolved by the SAC was not of importance with regard to the application of the law in other similar cases nor from the point of view of the harmonisation of legal practice (SAC 21.3.1988 no 1129).

    The travel and accommodation costs, totalling FIM13,600, associated with a senior scientist’s study trip to the USA during the grant period were considered deductible professional expenses (Turku and Pori Provincial Administrative Court decision 27.11.1986 no 1062, cf. also SAC 15.5. 1987 no 1828).

    A, who was born in 1935, received a pension income of €44,573 in 2002 and €45,343 in 2003. A also received an insignificant amount in other earned income. The foundation of K had awarded A a researcher’s grant of €13,000 as well as €2,000 to cover research expenses for the purpose of conducting dissertation research. €10,000 of the grant was paid in two instalments in 2002 and the third instalment of €5,000 was paid in 2003 after permission to print the dissertation had been received. A claimed a deduction from his earned income for 2002 for the portion of research expenses that had not been covered by the €2,000 research expense imbursement, i.e. for €6,945 and for €5,000 in 2003. These amounts had not been deducted in taxation primarily because it was held that they had been covered by the grant.

    In spite of this, the Supreme Administrative Court held that although A had received a pension income, the grant awarded by the foundation was, with regard to the €13,000, intended to serve as a so-called working grant, thus making it inappropriate to consider A’s research expenses to have been covered by the received grant in this respect. A was thus entitled to deduct from his income the expenses caused by his scientific work. As the work resulted in the publishing of a dissertation, it could be considered scientific work as meant by Moment 4 of Section 31.1 of the Income Tax Act, and the deduction of these expenses was thus not prevented by the fact that A’s earned income had in the pertinent tax years been made up almost entirely of pension income (SAC 25.1.2010 no 106).

    7. Deduction of expenses caused by the obtaining of an earned income

    7.1 General principle

    Under Section 29 of the Income Tax Act, a taxpayer is entitled to deduct from his or her income the expenses caused by the obtaining or retaining of this income, i.e. to make so-called natural deductions.

    Section 31 of the Income Tax Act contains an example list of cost items that can be considered professional expenses. The Act separately mentions that such expenses do not include family living expenses, which are considered to include also the rent of a home and the expenses caused by home maintenance. The provisions concerning natural deductions are loosely defined and their interpretation does vary in different localities. For this reason, it is important to enclose a detailed itemisation of expenses to support deduction claims made in the tax return form. This avoids the filing of unnecessary tax appeals.

    Some deductions will have been entered into the pre-completed tax return form. When necessary, they should be adjusted.

    Expenses caused by the obtaining of an income include

    • commute expenses
    • membership dues in labour market organisations and scientific societies
    • the expenses of professional literature and journals
    • the expenses caused by the performance of scientific and artistic work
    • the acquisition and maintenance cost of your work equipment
    • the expenses caused by courses, study trips or conferences considered necessary for professional reasons or for the upkeep of your competence
    • the procurement expenses of professional attire or a uniform
    • workroom expenses
    • work-related entertainment expenses under certain conditions.

    By contrast, study expenses caused by the pursuit of basic education as well as further education expenses that are not considered necessary from the point of view of the taxpayer’s office or function or for the retention of an already-secured competence are not deductible.

    7.2 Expenses caused by basic and further education

    Expenses caused by basic education are not deductible because they are deemed so-called living expenses.

    Expenses caused by further education are deductible only if this training is required for the taxpayer’s paid employment or for the retention of an already-secured competence. This principle applies to all costs caused by further education; whether the case involves travel, study material procurement, book purchase, text processing or publishing expenses.

    However, the tax authorities view scientific further education differently than they do supplemental training type studies. On the basis of a decision made by the SAC, the tax authorities have not allowed deductions for the expenses caused by the completion of a licentiate thesis.

    Thus there is no need to unnecessarily emphasise in the tax return form that a proposed deduction for an expense would have been incurred because of scientific further studies. By contrast, there is every reason to underline that the expenses were necessary specifically with regard to the performance of one’s professional duties, for example for the purposes of retaining or keeping up-to-date one’s professional qualifications or competence in a teaching post.

    Once further studies have been completed and the right to don a doctoral hat is earned, the tax authorities take a different stance on the deductibility of the mentioned expenses. These then become deductible as expenses caused by the conduct of scientific work. The tax authorities allow publication, travel, research and other like expenses to be deducted already in the tax year during which the dissertation takes place, even if this occurs on the last day of December. The equivalency of a foreign doctoral degree with the Finnish doctoral degree is ascertained through, for example, the securing of an opinion from a university in Finland.

    The expenses caused by a doctoral thesis are deductible only for the year in which the dissertation is approved. The taxpayer must make a separate claim to the tax authorities in order for expenses associated with the preparation of a doctoral thesis and which have not been approved for deduction in earlier years to be taken into account. (This makes it important to save copies of earlier tax return forms.)

    If incurred expenses are considered professional expenses and thus deductible, it is permissible to deduct, for example, course participation fees, travel expenses, separate fees charged for course materials, accommodation expenses as well as the extra living expenses caused by a stay away from the taxpayer’s home locality to the extent that they exceed the living expenses incurred by the taxpayer in question at his or her home locality. If an approved itemisation is not presented, the Tax Administration’s harmonisation guidelines state that about half of the domestic per diem allowance may be deducted for the part of such extra living expenses.

    7.3 Basic deduction from earned income

    The amount of the basic deduction from earned income is €620, but it is at most equal to the amount of the earned income. When the euro amount of actual expenses and the euro amount of the basic deduction from earned income are not the same, the deduction is made on the basis of the larger of these two amounts. In other words, the basic deduction is granted to all salary earners irrespective of whether or not they incur expenses in association with the obtaining of an earned income.

    7.4 Membership dues

    A taxpayer is permitted to deduct from his or her income

    • membership dues to a labour market organisation (amount unlimited)
    • unemployment fund fees and
    • the fees of scientific societies and associations.

    Membership dues collected directly from the employer are usually noted on the pre-completed tax return form. If this entry is lacking or the membership fee is paid personally, you should add this information to the form.

    A’s earnings during the tax year had consisted solely of a pension income. Membership dues paid to a trade union cannot be considered an expense caused by the obtaining or retention of an income that could be deducted from the pension income (SAC 1987 II 577).

    If a pensioner has other earned income on top of his or her pension, the membership dues paid to a trade union can be deducted from this income.

    7.5 Travel expenses

    Each year, the greatest number of appeals deals with the deduction of travel expenses. Business trips and their expenses should be itemised carefully in each year’s tax return form.

    7.5.1 Commute from home to work

    Under Section 93 of the Income Tax Act, the expense of commuting from home to the place of employment and back (determined according to the cheapest mode of transport available) is also considered a professional expense. However, the maximum deduction for such expenses is €7,000 and they can only be deducted to the extent that they exceed €600 during each tax year.

    Travel expenses from a summer home to the place of employment are not deductible, but the normal commute expenses may be deducted even when the taxpayer is staying at his or her summer home.

    The travel expenses from home to the place of employment are deductible according to the cost of using the cheapest mode of transport. This is usually determined according to the cheapest form of public transport available, i.e. the train, bus or tram. Travel expense deductions are accepted according to the cheapest category of travel, which is usually determined by the price of a monthly ticket, a serial ticket or some other form of discount ticket when it is available.

    Use of your own car can be considered the cheapest mode of transport if public transportation is either lacking or the taxpayer cannot because of, for example, a disability use public transport or if the commute to work or back home takes place late at night. In the abovementioned cases, the cost of using your own car is compensated for on the part of the entire journey to work. Use of your own car is also acceptable in the following cases:

    the taxpayer may only partly use public transportation on the commute between work and home, and would be required to walk at least three kilometres during one leg of the commute or if the expected total time it takes to commute to and from work would be at least two hours if public transportation were used.

    In the abovementioned cases, it is necessary to clarify if it is possible to cover the commute using public transportation on one part and some other mode of transportation for the rest. The deduction is approved according to the expense of the cheapest available alternative.

    If the travel expenses for the commute between your home and place of employment are approved for deduction under a non-public form of transportation, the size of the deduction will be determined under criteria specified in more detail by the Tax Administration.

    Use of your own car is deductible using the rate €0.24/km in the taxation for 2009.

    If the pre-completed tax form only needs to be corrected with respect to the expense of commuting between your home and place of employment, the tax return form can be filled in electronically as well.

    7.5.2 Secondary place of employment

    Compensation received from the employer for the expense of travelling to a secondary place of employment is not considered taxable income. If the employer has not paid a compensation for such expenses, they can be deducted.

    7.5.3 Weekend commutes

    If a taxpayer works at one locality during the week and lives there while his or her family resides at another locality, the taxpayer is allowed to deduct the expense of travelling home, usually on a once-a-week basis and with the expense determined by the cost of using the cheapest mode of transportation. Your own car can be considered the cheapest mode of transportation on such weekend trips if no public transportation is available or if the journey would take too long using public transportation. If the distance between the work locality and the taxpayer’s domicile is short, the deduction can be granted for more than one trip per week (SAC 1983 II 561).

    The €600 threshold and €7,000 maximum for commute expenses also applies to these weekend trips.

    If an individual person temporarily works at a locality that is not where his or her home or permanent place of employment is located, the cost of visiting home using the cheapest available means of transportation can be deducted as a commute expense (SAC 15.12.1988 no 4999).

    The unavoidable expenses caused by the use of the taxpayer’s own car could be deducted for the daily travel between different places of employment, even though the commute expense between the home and the permanent place of employment was to be deducted according to the price of a monthly bus ticket (SAC 1982 II 547).

    A physician was serving as an associate professor in the city of A, where she also operated a practice. On the weekends, she travelled to her domicile, the city of B, where she and her family shared a home. In conjunction with these visits she also operated a weekend practice in the city of B. The primary purpose of these weekend trips was considered to be visits to her home in the city of B, which is why their cost was deemed a commute expense for the purposes of taxation. (SAC 4.9.1997 no 2101).

    7.5.4 Business trips without a per diem allowance

    The employer usually pays a per diem allowance in association with business trips. This is not always the case in practice, however. If you have been on a business trip or a work-related trip, it is worthwhile to try to deduct the extra living expenses this trip has caused.

    The harmonisation guidelines of the Tax Administration stipulate that when an employer has not paid the employee a tax-exempt allowance to cover the additional living expenses caused by a temporary working trip to a specific place of employment, the employee can claim a deduction from earned income in his or her personal taxation. A statute (Section 72.a) has been included in the Income Tax Act that stipulates the maximum duration of temporary working, which is usually 2 years. A minimum duration has not been similarly determined in a legal statute. An itemisation of increased living expenses must be presented in order to secure the deduction. The deduction must be based on actual expenses. If the actual expenses cannot be verified, the amount of the deduction will be based on an estimate. The harmonisation guidelines state that, lacking an approved itemisation, the additional daily living costs on a domestic trip will be €11 if the trip lasts more than six hours and €20 when the trip lasts ten hours or more. Deductions for a business trip abroad that lasts at least ten hours can be made using the bases and sums that apply to the normal per diem allowances of employees. The harmonisation guidelines state that, if the taxpayer stays in home-like surroundings while overseas (such as may sometimes be the case in, for example, teacher exchanges), the additional living expenses can, lacking an approved itemisation, be estimated at half of the amount of the per diem allowance applicable to the country in question.

    7.6 Expenses caused by professional literature and the performance of scientific work

    The procurement of research equipment and professional and scientific literature as well as any expenses caused by the performance of scientific work are deductible in full to the extent that they have not been covered by a scholarship or grant. Examples of other expenses caused by the performance of scientific work can involve subscriptions to scientific journals, the hiring of assistants, the use of laboratories and test animals as well as the costs of IT, transcriptions, printing, the preparation of a doctoral thesis and other such items.

    The rule of thumb with respect to professional literature is that the taxpayer may deduct the cost of procuring such literature that is necessary for the upkeep of his or her professional competence. If, on the other hand, a book is acquired primarily with general education in mind, its procurement cost is usually considered non-deductible. The cost of procuring, for example, dictionaries, encyclopaedias and works of literary fiction has usually not been considered deductible.

    Furthermore, the tax authorities do not usually considered the cost of procuring works that are used as textbooks on university courses as a deductible professional-literature expense. In the case of a younger scientist, however, post-first-year course books may also be accepted (cf. section 7.1).

    For professional literature, you must disclose on the tax return form

    • the price of the book
    • the name of the author
    • the title of the book – you should also mention the Finnish title of foreign books
    • if necessary, you can explain how the work in question relates to your profession.

    The cost of completing a doctoral thesis is considered a deductible expense of conducting scientific work (SAC 1.6.1983 no 2017).

    These expenses are deductible for the year in which the doctoral thesis is approved. A separate claim must be made to the tax authorities in order for expenses associated with the preparation of the thesis that have not been approved for deduction in earlier years to be taken into account.

    Irrespective of during which month of the tax year in question the dissertation took place, the tax authorities will approve publication, travel, research and other such expenses as deductibles. The expenses caused by, for example, the completion of a licentiate degree are interpreted as non-deductible living expenses caused by further studies (cf. section 7.2).

    Membership dues for scientific societies and associations are considered deductible professional expenses if the organisation in question is closely connected to the promotion of the taxpayer’s professional activities by, for example, publishing a magazine which can be considered a professional or scientific journal or by organising supplementary training that can be deemed necessary for the upkeep or retention of the taxpayer’s professional competence. A professor of medicine, for example, has been allowed to deduct the membership fees of scientific societies such as Finnish and foreign surgical and gynaecological associations as well as the Finnish Medical Society Duodecim (SAC 1958 II 329).

    An MA holder who taught Finnish in a Swedish-language school was entitled to deduct the acquisition cost of the Swedish-language encyclopaedia Bonniers Lexikon I-XV from her income (SAC 19.9.1972 no 3398).

    An English teacher was allowed to deduct the procurement cost for the dictionary Nykysuomen Sanakirja as a professional expense (SAC 1966 II 585).

    A professor whose mother tongue was Finnish and who had been appointed to a Swedish-language professorship was entitled to deduct the FIM400 procurement cost of the Swedish-Finnish dictionary Iso ruotsalais-suomalainen sanakirja (Uusimaa Provincial Administrative Court 20.1.1988 no 69).

    A comprehensive school geography and biology teacher was not allowed to deduct from his income the procurement cost of the general encyclopaedia Fakta (SAC 5.7.1979 no 3058).

    The printing costs for a doctoral thesis by a taxpayer serving as an acting assistant professor at a university were considered such expenses of scientific work that could be deducted to their full amount (SAC 1.6.1983 no 2017).

    7.7 Study trips

    Study trips here refer to travel made for the purpose of studying, conference, training and course participation, visiting colleagues as well as for participating in trade fairs and exhibitions.

    Expenses caused by study trips that are necessary from the point of view of obtaining a professional income are considered deductible. A study trip can be considered to have taken place with the ability to obtain or retain a professional income in mind only when the trip has been necessary with respect to the performance of a job or task that the taxpayer was already responsible for. The trip must be suitable for retaining or supplementing a professional competence, which the taxpayer has already acquired. A detailed report of the purpose of the trip, the significance of the scientific programme, the time spent on the journey and all of the expenses caused by the trip must be submitted.

    The Tax Administration usually considers a study trip necessary from a professional perspective at least in cases where the employee has been granted paid leave for it.

    With respect to conference trips, it is considered significant that the taxpayer is an expert in his or her field or will deliver a presentation at the conference. The cost of participating in a scientific conference is usually considered deductible in full, providing that the special nature of its programme and the utilisation of the participant’s notably high competence in the content of the conference support this decision. It should be borne in mind that the cost of participation in training of a supplementary nature is the only type of training and course trip expense that is considered deductible.

    Unavoidable travel and residence expenses are considered deductible. The travel itinerary, an itemisation of expenses and other necessary clarifications of the nature of the trip must be submitted as the basis for an expense deduction claim. Deductions that are usually permitted include

    • participation and course fees as well as the costs of course materials,
    • travel expenses using the most appropriate means of travel,
    • accommodation expenses and,
    • if the trip has caused special expenses with regard to, for example, food, a per diem allowance should be approved (cf. 7.5.4 Business trips without a per diem allowance). If the trip was in part recreational in nature and partially a study trip, only the portion of the travel expenses that corresponds with the share of time spent on studying will be accepted as a deduction. If the trip was made solely because of scientific work, the deductibility of travel expenses cannot be limited because of the legislative amendment.

    When claiming a deduction, the following information must be presented:

    • date and duration of trip and the name of the event organiser
    • the purpose of the trip
    • how the trip is connected to the taxpayer’s profession
    • detailed travel itinerary and course programme (prepare to present on demand)
    • the names of the participants
    • detailed itemisation of expenses
    • participation fees, etc.
    • travel expenses
    • accommodation expenses
    • extra living expenses. If these are difficult to ascertain, you can claim the amount of the pertinent per diem allowance.

    According to the present harmonisation guidelines of the Tax Administration, an amount equal to the full tax-exempt per diem allowance should be deductible for overseas trips and a sum roughly equal to half of the tax-exempt per diem allowance should be deductible for domestic trips. If the price of the trip included full board, a deduction for increased living expenses cannot usually be permitted unless receipt-based evidence is provided (the receipts are not enclosed with the adjusted tax return form, but are only submitted if the tax authorities request them).

    A lecturer in geography took part in a trip to the Far East. The duration of the trip was three weeks and the expenses came to FIM14,000. The purpose of the trip was to examine the geography, nature, cultures and economic life of the Far East. The travel destinations were studied in greater detail than usual, as was evidenced by, inter alia, the numerous lectures held by local experts during the duration of the trip. The SAC held that the trip could not be considered solely recreational in nature (SAC 24.11.1988 no 4759).

    A professor of the Finnish Forest Research Institute took part in the 17th World Forest Conference in Japan with the intention of delivering a presentation at the event. The employer reimbursed part of the expenses. The portion of the unavoidable travel and residence expenses caused by the conference that the employer had not reimbursed was deductible in taxation (CTC 5.2.1981 no 100).

    A history professor had travelled to Turkey and Iraq as well as to Italy for the purpose of conducting research in preparation for some works he was writing. He also served as an instructor to a group of students while in Italy. Half of the expenses of these trips were deemed reasonable deductions for the cost of performing scientific work, after a grant the taxpayer had received for these trips and a reimbursement made by the employer had first been taken into account (SAC 29.12.1983 no 5803).

    7.8 Work equipment

    The procurement and maintenance expenses of machines, equipment and other tools needed for professional activities can be deducted to the extent that they have not been reimbursed by the employer. The cost of procuring recorders, transparencies, typewriters and PCs are examples of expenses that can be considered deductible.

    If the probable useful economic life of a tool exceeds three years, the procurement cost is deducted on an amortisation basis. The amortisation is carried out item-specifically. The amount of the amortisation is at most 25% of the residue of initial outlay according to the Tax Administration’s harmonisation guidelines. If the acquisition cost of a tool is at most €1,000, its probable useful economic life can usually be considered to be at most three years, in which case the deduction is made in one instalment. However, if the taxpayer demonstrates that the useful economic life of the tool exceeds three years, the expense will be deducted using the amortisation method.


    The cost of procuring a computer and its peripherals (e.g. a printer) is deductible when the equipment is acquired for the purpose of obtaining or retaining an income. In addition to the acquisition cost, you should remember to claim deductions for unavoidable operating expenses such as printer ink cassettes, tapes, memory disks and their protective casings as well as for any user training expenses.

    In order to get approval for a deduction, the taxpayer must clarify the following factors:

    1. Is the equipment needed for the earning of a primary or secondary income, in other words the taxpayer’s professional tasks must be explained.
    2. Is the system suitable for the stated use purpose with regard to its properties and make-up.
    3. Is the machine used solely for professional tasks or is it also used for private purposes, in which case the tax authorities will consider part of the procurement cost a non-deductible living expense.

    With respect to the question regarding professional tasks, university lecturers and researchers can, for example, note that the computer is used for word processing as well as the performance of various mathematical and statistical tasks. In addition to their main occupation, taxpayers often use computers for writing and other tasks required for their secondary occupations.

    If the computer is used in the earning of a main income, the amount of secondary income is irrelevant. Using equipment occasionally to earn an income or the possibility of using it for such as purpose does not entitle the taxpayer to deduct its procurement cost in taxation.

    As PCs can no longer be clearly divided into ones intended for office use and those meant for personal use, the taxpayer must in some other way justify a claim that a system has been acquired for and that it is specifically used for the purpose of performing his or her professional duties.

    If the machine is considered acquired for private purposes as well, the acquisition cost is in this respect a non-deductible living expense. The tax authorities can then consider a number of different factors, for example if the computer is generally suitable for anything else than professional use, where the taxpayer keeps the computer (at home or at work), the taxpayer’s hobbies, whether the taxpayer has family members who can use the computer for their studies, hobbies or other pursuits and if the family possibly has another computer that has been acquired for non-professional use.

    If the taxpayer’s spouse uses the computer, the share of the acquisition cost proportionate to this use cannot be considered a deductible expense for the taxpayer. The undeducted amount can be deducted from the taxation of the spouse, if his or her computer use is associated with the obtaining of an income. The fact that only one spouse has been presented as the buyer of a computer should not prevent the deduction from being distributed among the spouses proportionate to their use amounts.

    Several cases were being decided by the Supreme Administrative Court at around the same time that dealt with the entitlement of people serving as teachers to make an amortisation deduction from their income for the acquisition cost of a computer (SAC 31.12.1991 no 5009).

    During the tax year, A served as an English lecturer at a university. In this capacity, she participated in an overseas conference dealing with, among other things, computer linguistics. She acquired a Huyndai 16XT brand computer system for FIM9,073 during the tax year. A used the system to perform her duties as a lecturer. A had also worked as a sworn translator and used the system for her translation work. A was entitled to deduct from her taxation the amortisation of the system’s acquisition cost in its entirety.

    B had worked as a senior lecturer in mathematics and physics. He also taught computer science at secondary school and at an open college’s study circle in which the aim was for students to complete a university course in computer science. He was the person in charge of the abovementioned project and his duties included the maintenance of hardware and software systems as well as the development of IT teaching through, inter alia, keeping track of the sector’s development. B was entitled to deduct the amortisation of the system’s acquisition cost in its entirety.

    C had worked as a senior lecturer in mathematics, physics and chemistry, in addition to which she had taught computer science. C had reported that she used the system to prepare her classes and familiarise herself with teaching programs as well as in her personal studying of computer science. The Provincial Administrative Court held that C was entitled to deduct two-thirds of the amortisation of the system’s acquisition cost. The SAC did not revise the Provincial Administrative Court’s decision.

    The above decisions by the SAC should demonstrate how the tax authorities try to deal with the deductibility of the acquisition cost of a computer. It should, however, be noted that the five cases mentioned in the foregoing involved teachers (or a rector/principal in one case). These cases did not involve a computer used for scientific research. There is no known recent precedent of such a question. But, on the basis of the above cases, it is obviously worthwhile to include in the reasons stated for the acquisition of a computer its connection to any research activity (cf. section 7.6. above).

    According to the Tax Administration’s harmonisation guidelines on the acquisition cost of computers and telecommunications connections, the following percentage share of the acquisition cost can be seen as the proper deductible amount for computers:

    • 0% - no evidence of professional utilisation of equipment
    • 50% - evidence of professional utilisation of equipment
    • 100% - evidence of primary professional utilisation. The computer has, for example, been used to obtain a considerable secondary income.

    When claiming a deduction, the applicant must clarify his or her profession as well as how much and for what purpose the machine is used while working. Private use by the taxpayer’s family must also be considered. Factors considered when determining how use is distributed can include whether the family owns several computers. Insignificant private usage for normal purposes (such as for Internet banking services) is not a reason for rejecting a deduction.

    Similar principles are applied to telecommunications connections.

    7.9 Workroom and telephone expenses

    University teaching and research staff members who have an office at the university, but also perform lots of preparatory work for teaching or conduct research at their homes are entitled to a workroom deduction.

    Workroom expenses are considered to include the rent of the room as well as its heating, lighting and cleaning costs.

    The total amount of these expenses is usually worked out on the basis of an estimate. In principle, the primary grounds for a deduction are provided by a report submitted by the taxpayer. If such a report has not been submitted or it cannot be used as grounds for taxation, the deduction is determined according to the harmonisation guidelines approved annually by the tax authorities.

    The harmonisation guidelines are as follow:

    • €700/year for taxpayers to whom the employer has not organised an office or workroom, e.g. freelance reporters
    • €350/year for taxpayers who use the room on a part-time basis to secure their primary income or to secure a permanent or substantial secondary income, for example teachers at educational institutions, part-time building managers or committee secretaries
    • €175/year for taxpayers who use their homes to secure an occasional secondary income; if both marriage partners use a workroom on a part-time basis to secure their primary income or to secure a permanent secondary income, the total amount of the deduction is €525/year.

    Telephone expenses (mobiles also) can be deducted in proportion to the relation between private and professional use. It’s a good idea to maintain a separate call log.

    Lacking a separate itemisation, teachers are allowed to deduct €70 (2003) for telephone expenses according to the harmonisation guidelines. A corresponding principle should apply to university lecturers as well.

    A doctor of philosophy and his wife jointly owned a 22-m2 apartment that was separate from their family home; the flat was used solely for his history writing and other work. The expense of maintaining the flat (FIM2,200 in 1976) was deductible in its entirety (SAC 11.3.1981 no 1394).

    7.10 Tailcoat and doctoral hat

    A tailcoat is commonly used in academic festive and professional functions (e.g. inaugurations, dissertations, semester launches) and it is an indispensable component of the professional attire of many university teachers. Very few people have use for a tailcoat in their private lives. This is why a tailcoat should be considered a deductible professional expense. The same applies to the maintenance of the tailcoat and its accessories (e.g. dry cleaning of the dress shirt). The same applies to the doctoral hat.

    R, who serves as an associate professor and the dean of his faculty, has in 1985 acquired a tailcoat, which he has only worn at functions that are connected to his official position. The acquisition cost of the tailcoat and its accessories, FIM1,804, are professional expenses for R and he is entitled to deduct them from his income (SAC 1988 B 551).

    A person who has worked as an associate professor was conferred a doctorate in 1989. She acquired a doctoral hat for the conferral. She was entitled to deduct the acquisition cost of FIM2,225 from her income because the acquisition was primarily associated with her position.

    7.11 Inauguration and dissertation expenses

    There are at least three Supreme Administrative Court decisions concerning inauguration expenses.

    In the view of the SAC, inauguration-related entertainment expenses are not deductible. In a couple of decisions touching on a similar matter, the Court has held that there is no reason for the matter to be investigated further by the SAC.

    Even though inauguration-related entertainment expenses are not considered deductible, other deductible expenses may well be associated with inauguration ceremonies. These include at least the cost of sending out invitations. Established taxation practice supports their deductibility.

    It appears evident that the expenses caused by a post-doctoral karonkka party are not accepted as deductibles in taxation practice. However, there does not seem to be any unambiguous case law on the matter, at least no SAC decision has dealt with such a question. (The printing costs and other expenses caused by a doctoral thesis are deductible. Cf. sections 7.2. and 7.6.) The deductibility of other expenses that may be associated with the dissertation event itself is likewise unclear.

    Observing the university’s established practice, a professor had entertained guests at an inauguration dinner, which cost her FIM5,593. It was held that this was not deductible as an expense caused by the obtaining or retaining of an earned income (SAC 7.12.1988 no 4918).

    7.12 Entertainment expenses

    Entertainment expenses refer to costs caused by typical hospitality or considerations offered to clients, business acquaintances or other persons that have the aim of promoting the creation of fresh business relationships, retaining or improving existing ones or of supporting professional activities in some other way.

    Salary earners do not usually have entertainment expenses that could be considered professional expenses and deducted in taxation. However, these may be incurred in some special circumstances, as is demonstrated by the following cases:

    An associate professor had housed in his home foreign scientists, who were visiting the university to conduct scientific research at the physics department as part of cooperation projects the department and foreign research laboratories were engaged in. The university was unable to organise accommodation to the guests, which it had invited, in any other way. The Court held that the associate professor was allowed to deduct the cost of offering accommodation and hospitality to the guests as a professional expense (SAC 3.9.1985 no 3753).

    A professor of the faculty of law was entitled to deduct from her income the costs caused by a dinner she arranged for foreign lecturers who had been invited by her faculty (SAC 1964 II 642).

    7.13 Additional living expenses caused by working at another locality

    Additional living expenses caused by a scientific or teaching assignment to another locality have been deemed deductible up to a reasonable amount when the person in question is assigned several tasks to be performed at different localities within the same period, or if the person’s work at the other locality is temporary in such a way that he or she is standing in for a colleague or is holding some other corresponding non-permanent position while simultaneously being on a leave of absence from his or her permanent job and the family continues to reside in the area where his or her permanent job is located or if the case involves a temporary stay overseas.

    A taxpayer, whose permanent residence was in the municipality of A, had been on an eight-month work assignment to the Federal Republic of Germany. His spouse had remained in Finland, so the family’s accommodation expenses had not changed. The extra accommodation expenses caused by the overseas stay were deemed deductible professional expenses (SAC 1.2.1984 no 450).