European courts issues tax verdict against Denmark
The European Court of Justice has made an initial judgement in a case brought by the European Commission’s against Denmark on pensions tax.
The opinion from Advocate General Christine Stix-Hackl found that the situation whereby only domestic insurers are able to supply tax-deductible pensions is breaching the European treaty on several grounds.
The action was originally brought by the Commission against Denmark in March 2004.
The complaint said: “The Danish legislation concerning inter alia deductions for payments into life insurance and pension insurance schemes is contrary to the provisions of the EC Treaty governing the freedom to provide services, the free movement of workers, freedom of establishment and the free movement of capital.”
The system “leads to a situation where policyholders residing in Denmark are precluded from setting up pension insurance schemes with pension institutions established in Member States other than Denmark”.
Foreign pension institutions were “de facto precluded from offering their services on the Danish market”.
The case is the latest in a series at the ECJ – the Bachmann, Danner and Skandia cases – which have sought to open the European pensions market by bringing down taxation barriers.
If the 27-page opinion becomes the final ruling of the ECJ then both Sweden and Denmark will have to open up their markets for foreign competition, market observers said.
Furthermore the tax bases are threatened in both Sweden and Denmark as it now may become increasingly difficult to tax assets and payments paid from European insurers, said industry observer Mikael Nyman.