Taxation of eSports in Finland should be clarified

While eSports is classified as sports in Finnish taxation, it involves several interpretative factors within the field of tax law. One issue that gamers face, is the versatile stream of income which cause uncertainty under the current tax regime. For many, the most important source of income are tournament prizes, but ad revenue from streaming, rights related to player nicknames, and merchandise sales may also generate income not to mention possible sponsorship deals.

Drawing the line between team and solo sports

From the viewpoint of tax law, a player in a sports team is often employed by their team or other organization. Solo sports, however, allow more latitude in taxation. The Supreme Administrative Court of Finland has previously decided that solo sports (golf) can be practiced through a limited liability company, although the decision was at least in part based on the fact that the company had other business activities in addition to the sport.

In Finnish taxation, the categorical divide between team and solo sports has been problematic for eSports. The Finnish Tax Administration has often established, rather categorically, that eSports is practiced as a team sport. Behind this assumption has been the general concept of a sports team, which cannot really cover all eSports satisfactorily. In these situations, practicing through a company is not viable for the players as their income is treated as salary received from their team.

Tough eSports consists of a wide variety of different sports ie video game genres, eSports should be viewed as an umbrella term similarly to “physical sports.” Like with different physical sports (e.g., golf and soccer), the classification between solo and team sports should be done on a case-by-case basis, which essentially means differentiating between games. In this evaluation, attention should be paid to the details of contracts made between players and the parties who compensate them. Additionally, the degree of financial risk taken by the players plays a factor in the tax treatment.

In need of more detailed guidelines

In eSports, it is common that players team up in “groups of solos” that are more loosely organized as teams than in the traditional sense, when it comes to team sports. These teams may be organized as companies so that the players act as shareholders. In these instances, the team is not managed by a separate organization, but is directly run by the players. Composition of these teams may vary quite flexibly, and each player typically has more individual freedom than in traditional sports teams. In tax law, there is no established definition for these groups, and they should be evaluated on a case-by-case basis.

As of now, there are no precedents set by the Supreme Administrative Court of Finland. The Finnish Tax Administration has occasionally ignored the companies of Finnish eSports players and has instead treated their income as salary received from their team. There are currently pending claims for correction of taxation, which will likely move on to be decided by administrative courts.

The tax treatment of eSports is currently ambiguous, and there is need for precedents by the Supreme Administrative Court. Taxation could also be clarified through legislation. eSports prodigies should not be chased away to practice eSports abroad, due to the unpredictable of the Finnish tax regime.


Text and additional information:
Frans Bergman, Senior Associate, +358 40 772 4200, frans.bergman@lexia.fi
Henri Tuure, Legal Trainee, henri.tuure@lexia.fi