Waselius & Wist successfully represented a private individual in the Court of Appeal of Helsinki in a matter where the public prosecutor brought charges for aggravated tax fraud. According to the charges, the defendant, a Finnish citizen domiciled (and tax resident) in Finland, had failed to timely declare in her annual tax return income received from non-Finnish investment funds, which were paid to her Swiss bank account. Since the tax payable on the income from the investment funds were substantial, the prosecutor brought charges for aggravated tax fraud. The defendant denied the charges on the basis that her intent had not been to avoid taxes. The incomplete tax returns for previous tax periods were solely due to her inexperience of international tax issues. The defendant had inherited the investments funds when living abroad. She knew that source tax was paid in Switzerland but did not understand that the income also needed to be declared in Finland after she had moved back to Finland. The defendant submitted that she had on her own initiative complemented and rectified the earlier tax returns and paid the outstanding taxes when having been informed by her Swiss bank that tax may be payable in Finland in addition to the source tax in Switzerland.
According to the judgment of the District Court of Helsinki in February 2020, the defendant was held guilty of (ordinary) tax fraud and sentenced to three months imprisonment, probationary. While the District Court considered that there was a sufficient degree of intent on the side of the defendant, the District Court dismissed the charges for the crime being aggravated. Both the public prosecutor and the defendant appealed the judgment of the District Court to the Court of Appeal.
In December 2021 the Court of Appeal removed the judgment of the District Court and acquitted the defendant of all charges. The Court of Appeal considered that the defendant had no intent to defraud, since the defendant had, when becoming aware that earlier tax returns were incomplete, turned to a Finnish tax consultant and with his help complemented the earlier tax returns and paid the outstanding taxes. The complementation of earlier tax returns was done purely on the defendant’s own initiative. The Court of Appeal also took into account that the defendant had no previous experience of international tax issues, and there was also no other reasons to doubt that the defendant had no intent to avoid taxes.
In Finland there is no amnesty laws that provides for amnesty by paying outstanding taxes and a penalty charge in exchange for forgiveness of a tax liability (including interest and penalties) relating to a previous tax period or periods and without fear of criminal prosecution. Accordingly, all afterward corrections of previous tax returns – also those made purely on the taxpayer’s own initiative – are scrutinized by the tax authorities and, as a rule, charges are brought for tax fraud or aggravated tax fraud if the amount of unpaid taxes are substantial. There was a proposal for a tax amnesty law in 2015, but it did not get sufficient support in the Finnish parliament. The Finnish courts have to date scrutinized the issue of intent on a very strict basis, and hence, there are a number of similar cases where the defendants have been convicted for tax fraud or aggravated tax fraud. The above decision of the Court of Appeal gives at least some degree of hope that an uncomplete tax return may under certain circumstances be corrected and the outstanding taxes paid without severe criminal sanctions.