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PR(02)15: Discriminatory taxation of lottery prizes in Norway contrary to the EEA Agreement


On 5 August 2002, the EFTA Surveillance Authority delivered a Reasoned Opinion to Norway concluding that Norway’s legislation concerning taxation of lottery prizes breached the EEA fundamental freedom on provision of services.

According to the Norwegian Tax Act of 26 March 1999 (Lov om Skatt av formue og inntekt) lottery prizes are considered as taxable income. Section 5-50 of the Norwegian Tax Act allows income tax exemption of lottery prizes above 10 000 NKR won in the national lotteries in Norway. This tax exemption does not apply to prizes won in similar lotteries organised in other EEA States by taxpayers in Norway.

Article 36 of the EEA Agreement states that there shall be no restrictions on freedom to provide services within the territory of the EEA States in respect of nationals of EC Member States and EFTA States who are established in an EC Member State or an EFTA State other than that of the person for whom the services are intended. 

In its Reasoned Opinion the Authority maintains that, although direct taxation falls primarily within the competence of the EEA States, this competence shall be exercised consistently with EEA law. In the Authority’s opinion, the exemption from income tax of lottery prizes won in Norwegian lotteries provided for in the Norwegian Tax Act constitutes discrimination based on the place of establishment of the provider of lottery services contrary to Article 36 of the EEA Agreement. Such a discriminatory measure may only be justified by the list of limited non-economic grounds provided by Article 33 of the EEA Agreement, namely public policy, public security or public health aims.  Even if a less rigid interpretation of the obligation placed on an EEA State was to be permitted, the Authority has come to the conclusion that the discriminatory tax regime is neither truly apt nor necessary to promote those aims.

In the Authority’s opinion, Norway has not demonstrated that its national measure is justified.

The purpose of a Reasoned Opinion is to give the State in question a last chance to take corrective measures before the Authority decides whether to bring the matter before the EFTA Court. Norway has been given three months to take the measures necessary to comply with the Reasoned Opinion.

For further information please contact Mrs. Elisabethann Wright (Legal & Executive Affairs Directorate), telephone (32)-02-286-1839.

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