Danish labour-market pension funds PensionDanmark and Industriens Pension have won a legal victory against the country’s tax authority which is expected to lead to large refunds for investors across the country’s pension sector.

PensionDanmark said it expected to receive more than DKK100m (€13.4m) in refunds from the Danish Customs and Tax Administration (SKAT), related to taxes withheld from foreign investments during the period from 2010 to 2014, as a result of the ruling from the National Tax Tribunal (Landsskatteretten).

The fund said it could not comment further on the amount because it was still processing the relevant data.

The case was led by PensionDanmark and Industriens Pension – which represent more than 1m Danish employees between them – on behalf of a number of occupational pension funds.

Maj-Britt Klemp, head of tax at PensionDanmark, said: “The ruling sets a precedent for the Danish occupational and labour-market pension funds’ ability to credit foreign withholding taxes in the Danish PAL tax going forward.”

The case concerned the interpretation of rules on the offsetting of foreign withholding taxes against the Danish PAL (a tax on pension plan growth) tax liability.

Following a change in the PAL system in 2010, SKAT produced a new interpretation of the offsetting rules for foreign withholding taxes which largely removed PensionDanmark’s right to deduct these foreign levies in accordance with the so-called net principle, the pension fund said.

The tribunal ruling upheld PensionDanmark’s claim that the Danish tax authority did not have the required legal basis to act in this way, the fund said.

Klemp said PensionDanmark was very pleased with the ruling.

“We have a duty to optimise our members’ returns and manage members’ savings at absolutely the lowest level of fees possible,” she said.

Because PensionDanmark was a customer-owned company, the tribunal’s decision would benefit customers, she said.