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ECJ rules against Danish pension taxation

DENMARK - Denmark is in breach of European law on freedom of movement of workers and capital by not granting tax-deduction on contributions to pension contracts with foreign insurers, the European Court of Justice (ECJ) ruled today.

The verdict claimed Denmark had failed in its obligations as an EU member state for permitting tax deductions and exemptions only for payments entered into with local institutions.

"This judgement will assist in opening up the pension and insurance market to cross-border operations and ultimately benefit corporate pensions' plan sponsors and members currently excluded from tax relief when ‘shopping' abroad," said Leonardo Sforza, head of research and EU affairs at Hewitt in Brussels.

He told IPE that this verdict might lead to a change of regulations in other countries which have similar tax arrangements in place. The ECJ is currently examining Sweden's alleged discrimination against contributions to contracts with foreign pension providers.

The court follows the initial opinion of the Advocate-General Christine Stix-Hackl issued in June last year.

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