EUROPE/FRANCE - The European Commission has told France to change tax rules that penalise foreign pension and investment funds.
Under existing French rules, dividends paid to foreign pension and investment funds are taxed more heavily than dividends paid to domestic pension and investment funds.
Dividends paid to pension and investment funds established in France are exempt from withholding tax.
In contrast, a tax of 25% is levied on dividends paid to pension and investment funds in other European Union (EU) member states or European Economic Area (EEA) countries. Bilateral tax treaties may provide for a reduced rate, generally to 15%.
The Commission said such "discriminatory treatment" was an infringement of the free movement of capital as set out in the European Community Treaty and the EEA Agreement.
France has two months to make the relevant changes to its tax system after which time the Commission could refer the matter to the European Court of Justice.
In recent years, Germany, Spain and Portugal have also come under EU pressure to amend taxation laws discriminating against other EU countries' pension funds.
In October last year, Germany was requested to end the unequal treatment that led to higher taxes being levied on dividends paid to foreign pension investors. (Global Pensions, October 30 2009).
In 2008, Spain and Portugal were both referred to the European Court of Justice for breaching EU rules in this way. (Global Pensions, November 28, 2008)
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