EUROPE - The European Commission is to take Denmark to court and open proceedings against the UK and Ireland over foreign pension fund tax discrimination.
The Commission has referred Denmark to the European Court of Justice because pension contributions paid to non-Danish funds are not tax deductible while contributions paid to domestic funds are.
“Danish legislation in this respect is contrary to the principles of freedom to provide services and the free movement of workers and capital,” said the Commission in a statement.
It added: “The Commission considers that this Danish legislation dissuades foreign pension providers from offering their services on the Danish market and it dissuades individuals from taking out voluntary pension insurance with foreign institutions.”
Denmark has not amended its legislation despite a formal request from the Commission to do so in February.
The Commission has also expressed “serious concerns” over the compatibility of current pension tax legislation in the UK and Ireland with EU law. Both countries have been given two months to respond.
In both the UK and Ireland, the exemption from income tax of contributions paid by the employer and the deductibility of the employee's own contributions depends on the form of the pension arrangement and further administrative duties.
According to the Commission, tax discrimination prohibits companies in different member states from centralising their occupational pension arrangements into one single scheme for all their employees throughout the EU.
The Commission is determined to stamp out tax discrimination against foreign pension funds, said Taxation and Internal Market Commissioner, Frits Bolkestein.
We have already warned member states that we regard such discrimination as illegal, and the Court of Justice has endorsed the Commission's position.
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