EUROPE/UK - Harmonisation of EU cross-border tax relief on pensions has moved a step closer following a test case at the European Court of Justice, legal experts believe.
Harmonisation, they say, would be welcomed by British multinational companies as it would allow employees who relocate to stay within UK-based pension schemes and receive tax benefits from any EU member state.
The ECJ's Advocate General agreed that a German national, named Danner, should have the right to continue making contributions to his German pension plan with German state tax deductions after moving to Finland.
The decision is now awaiting a full ratification by the ECJ.
DLA pension group partner Michael Forkin said: “Today, the benefit design in most plans is around a particular national social security system. The way the benefit integrates with a particular pension plan is designed on the assumption that all its members subscribe to the social security systems of a particular state.”
He said that it is the Advocate General’s opinion that the tax law provisions in question are contrary to EC law and restrict “free movement” in Europe.
But Norton Rose partner Lesley Browning warned a ruling in favour of the Danner case would throw the tax provisions across the EU into uncertainty.
She said: “In theory the Advocate General’s opinion is right – there is discrimination. But the ECJ may be able to decline going down the road the Advocate General has taken.”
She said that this could be done with reference to the 1992 Bachmann case, where it was ruled that discriminatory provisions might be justified if necessary to guarantee the coherence of a member state’s tax regime.
By Simon Meek
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