Discriminatory dividend taxation

The EU Commission has sent letters of formal notice to Italy and Finland about their rules under which dividends paid to foreign pension funds may be taxed more heavily than dividends paid to domestic pension funds. Italy and Finland are asked to reply within two months. These letters constitute the first step of the infringement procedure of Article 226 of the EC Treaty. Similar letters have been sent to the Czech Republic, Denmark, Spain, Lithuania, the Netherlands, Poland, Portugal, Slovenia and Sweden on 7 May.

Commission addresses differential taxation of investment income

Following complaints by the EFRP, the Commission has initiated Treaty infringement proceedings against a number of member states which do not grant the same preferential tax treatment of investment income (interest, dividends) to pension funds resident abroad as domestic funds receive. Even though there is no direct reference to the Pensions Directive in the text, the relevance of this step to an efficient investment regime of cross-border pension funds is obvious. (FT)

Infringement proceedings

The EU Commission swings into action with some treaty infringement related proceedings. It has decided to take Sweden to the ECJ about the country's practise not to grant tax deductibility for pensions contributions paid to insurers resident abroad (but within the EEA) in line with the EET principle. Strangely, there seems to be no reference to the Pensions Directive.

In other news, the Commission is satisfied with recent modifications of Spanish legislation which also did not allow for tax deductibility of cross-border pensions contributions. The infringement case against Spain is therefore closed - in this case with reference to the Pensions Directive btw. Notably, the new Spanish tax rules explicitly allow deductibility for IORPs resident in the EEA, and specifically Liechtenstein, which removes an important legal uncertainty with Liechtenstein IORPs, at least with regards to their relation to Spain.