Finland - MBA course: PE in Finland, but no VAT
Central Tax Board: MBA course organized by EEA University - PE in Finland; but not subject to VAT.
The Central Tax Board (Keskusverolautakunta, KVL) gave its decision on 2 May 2011 in the case of KVL N:20/2011. Details of the decision are summarized below.
(a) Facts. A university resident in an EEA state (the EEA University) was planning to organize education leading to a Master of Business and Administration (MBA) degree (the MBA Course) in Finland. The EEA University applied for a preliminary ruling from KVL whether its premises in Finland would create a permanent establishment (PE) for it in Finland. The EEA University had premises in Finland and would employ a manager and a program coordinator and a marketing coordinator. The staff of the PE would advertise for the MBA Course and take care of organizing it. (Note. KVL's summary of the facts does not reveal from which EEA state the EEA University was located.)
(b) Issues. The issues were whether the MBA Course provided by a university established in another EEA state but organized in Finland:
- creates a PE for its organizer and consequently grants Finland the power to tax the PE's profits;
- qualifies for a tax exemption under the domestic law; and
- is subject to VAT.
(c) Decision. KVL ruled that the EEA University has a PE in Finland both under the domestic law and the applicable tax treaty (the relevant treaty is not mentioned in the ruling) while:
- it had registered its branch in Finland; and
- its activities, as described in its application for the ruling, went beyond being merely of a preparatory or auxiliary character.
Universities are under the Finnish law tax exempt for fulfilling their basic task (i.e. organizing tuition which leads to a degree acknowledged by a government decree) but subject to tax on their business income. KVL emphasized that a MBA degree is not a degree granted by the Finnish university system and its content is not defined by law or by a state authority. Consequently, the MBA Course is regarded as voluntary additional education and is subject to tax in Finland even when organized by a university.
The MBA Course is, however, an educational service organized by a university and as such exempt from VAT.
