Dutch pension fund fights for Austrian tax exemption
EUROPE - One of the Netherlands' largest pension funds is seeking to alter tax treatment of foreign schemes investing in Austria.
Under current regulations Austrian pension funds are not required to pay withholding tax on domestic investments. The same exemption applies to foreign pension funds - but only if they have a structure comparable to that of Austrian Pensionskassen.
The Dutch asset manager GSFS Asset Management has now asked the Austrian branch of the international law firm DLA Piper to look into one of its clients having to pay withholding tax for which it then has to file for refunding.
Dutch pension funds, including this specific client, are comparable to Austrian Pensionskassen, according to Franz Althuber, head of group tax and responsible client partner at DLA Piper in Vienna.
He confirmed to IPE that the client is "the largest non-public pension fund", which is currently PFZW, the €100bn fund for healthcare workers. Its asset management arm is PGGM.
"The problem is that the banks acting as custodians are liable for foreign investors paying this tax," explained Althuber.
Legally the banks would be required to check each foreign pension fund investing in Austria on whether or not the tax exemption applies given the pension fund's structure and legal framework.
"This would mean a lot of work and also risk for the banks," Althuber added, noting a mistake in the assessment could cost the custodian dearly.
The Dutch pension fund was now "thinking about divesting from Austria" as the delay in the refunding of the withholding tax, which can sometimes take over a year, was costing several thousand euros per year in interest, he explained.
"It cannot be in the interest of the Austrian government to have investors pull out of Austria," Althuber noted.
He added that a change in the regulation would also help the finance ministry, as it would have to deal with fewer requests for refunding. DLA Piper is currently preparing a request for clarification to be filed with the finance ministry, but Althuber cautioned that a reply might take up to a year.
He would like the legal framework to include general exemptions for pension vehicles from certain countries with a pension fund structure similar to that of Austrian Pensionskassen.
Althuber said he might consider getting other Pensionskassen involved in the question of tax refund depending on their legal framework.