As a rule, all income is taxable income.

As a rule, all income is taxable income. The types of income that are non-taxable are specifically stated in the law. Income earned from sex work has not been specifically exempt from taxation.

According to section 29 of the Income Tax Act (1535/1992), taxable income is income received by the taxpayer in cash or as a monetary benefit. The taxability of income from sex work has been discussed in a decision by the Supreme Administrative Court in 1984 (KHO 1984 II 560). In the decision, the court holds that income from offering sexual relations in return for payment shall be deemed taxable. This decision has been referred to in recent legal literature, and its interpretation is still valid. In the decision, the taxability of income is justified by the fact that no penalty for the act has been prescribed and the obtained financial benefit cannot be confiscated by the state and the said income has not been decreed as tax-exempt.

Under section 29 of the Income Tax Act, the taxpayer has the right to deduct the expenses for the production or retention of income from their income (natural deductions). One-time deductible annual expenses of a person who sells sexual services include the purchase cost of sex accessories, porn magazines and films, dildos, equipment used in bondage and spanking, condoms, protective gloves, lubricants, cleaning agents and towels, in addition to advertising expenses and phone charges as well as membership fees of industry organizations and the purchase cost of professional literature. The income can be declared to the tax authorities as earned income in the pre-completed tax return under the section for other earned income. The expenses for the production of income can also be declared using the same form.

If the selling of sexual services is a continuous activity, the following should be considered when declaring earned income. If you are selling sexual services continuously and exceed certain income limits, you are required to start a business, which leads to you becoming liable to pay value-added tax and obligated to obtain an entrepreneur's pension insurance (YEL insurance). If the income earned from sex work exceeds the limits below (* and **) and this income is declared to the tax authorities, it is very likely that the tax authorities will check to see if the taxpayer has fulfilled the above obligations. If sex work is carried out professionally (continuous activities), the profession can be practised as a private trader, i.e., a sole proprietor. In this case, the income from sex work is taxable as earned income.

What are the possible consequences of failing to declare income earned from sex work? Typically, you could face charges for tax fraud or a tax increase. Any undeclared taxes must also be paid. This situation may arise if the tax authorities assess, based on the information they obtain, that an individual has income or assets whose origin cannot be explained by the tax information provided.

 * Liability to pay value added tax

If the turnover of a company over a 12-month accounting period is less than 15 000 euros, the company does not need to declare itself liable to pay value added tax.

 ** Entrepreneur’s pension insurance

According to the Self-Employed Persons’ Pensions Act (1272/2006), a self-employed person, or an entrepreneur, means a person who engages in gainful employment without being employed or in service or some other employment relationship under public law. However, the Act does not apply to the operations of an entrepreneur which have not been continuous for at least four months, nor an entrepreneur whose earned income from entrepreneurial activities as referred to in this Act is estimated to be less than EUR 5 504.14 per year. The income of the entrepreneur’s pension insurance is adjusted annually by the wage coefficient issued by the Ministry of Social Affairs and Health, and in 2017 it is equal to EUR 7 645.45. A person whose earnings exceed this sum is therefore considered a self-employed person (entrepreneur) under the Self-Employed Persons’ Pensions Act.