In March 2007 the European Commission formally asked Germany to amend the withholding tax system applied to certain categories of non-resident taxpayers. Under the system, resident taxpayers were able to declare their income annually, net of business expenses, whereas non-residents (in particular artists, sportsmen and journalists) were taxed at source and subsequently had to claim back overpaid tax through a refund procedure. In April 2007 the German Federal Ministry of Finance made the following changes to the system for non-residents: (i) business expenses may be deducted in the withholding tax procedure but only when they exceed 50 per cent of gross receipts; and (ii) the withholding tax rate is increased from 25 per cent to 40 per cent in cases where business expenses are allowed for deduction. In the Commission's view, this new restricted possibility for non-residents is still incompatible with the principle of freedom to provide services in the Internal Market. The Commission has therefore formally asked Germany again to modify the withholding tax system.