Cross-border pensions have moved a step nearer following a European Commission communique aimed at removing tax obstacles.
The move will enable workers to contribute to a pension plan in another EU state while qualifying for the same tax relief as contributions to a local plan.
Member states which do not comply by changing their tax rules face being taken to the European Court of Justice.
This is the first time that tax issues have been addressed by the EC having been dropped from the 1998 directive – Safeguarding the Supplementary Pension Rights of Employed and Self-employed Persons Moving within the Community .
A subsequent draft directive – Proposal for a Directive of the European Parliament and of the Council on the Activities of Institutions for Occupational Retirement Provision – published last October paves the way for pan-European pension plans.
The proposals would allow multinational companies to set up a single pension fund for all its employees across all European member states.
PricewaterhouseCoopers senior manager Rosemary Bustin said: “Without this tax initiative, the proposed directive risked being a damp squib. Companies would not have enrolled their employees in a pension plan in another country if it meant that they are their employees faced a higher tax bills.”
Bustin added that the EC communication puts the onus on individual members states to remove discrimination in their national tax rules.
“UK nationals do not generally receive tax relief on pension contributions paid to a plan in another EU member state. The UK government will therefore have to come up with a response to the Commission,” Bustin added.
By James Wallace