Woman forced to pay income tax on prostitution

Any income earned from prostitution in Sweden may be taxable and subject to VAT.

A new ruling from the Administrative Court of Appeal (Kammarrätt) in Stockholm has dashed the hopes of a Stockholm-based prostitute, who was pushing for a previous assessment of her income for 2002 to be overturned.

The appeals court reached the same conclusion as both the National Tax Board (Skatteverket) and Stockholm County Court (Länsrätt): prostitution constitutes a taxable income.

The defendant appealed the case on the grounds that it has been illegal to pay for sexual services in Sweden since 1999. Income from an unlawful source cannot be taxable, she argued. She also noted that it would be difficult for her to keep a list of clients if all of them were breaking the law.

She further contended that prostitutes would now be forced to continue selling their services. Otherwise they could not afford to pay their taxes.

Finally, she pointed out that a business venture needed premises on which to carry out its operations. This was rendered impossible by the fact that the Code of Land Laws does not permit prostitution on Swedish business premises.

But the courts have taken a different view of the matter. While the purchase of sexual services is indeed considered a criminal act, it is not illegal to sell the same services. As such, her business was legitimate and subject to taxation.

The appeals court agreed with both the tax board and the county court that the defendant’s declared income for 2002 was unfeasibly low.

For the 2002 tax year, the defendant had declared a small amount of interest from her bank account as her sole income. Having looked closely at her case however, the County Court estimated her net income from prostitution at 350,000 kronor ($49,000).

After the deduction of various costs, her taxable income was set at 150,000 kronor and she was also ordered to pay 50,000 kronor in VAT.

The Administrative Court of Appeal has found no reason to reassess these figures.