EUROPE – Taxation as an obstacle to pan-European pension funds is gradually diminishing, according to a senior tax official at the European Commission.

Writing in a magazine article, Peter Schonewille of the EU Directorate-General Tax and Customs Union, acknowledges that the non-deductibility of contributions to foreign pension funds, and the taxation of border-crossing pension capital, are traditionally the main obstacles for the functioning of pan-European schemes.

According to Schonewille - in an article in his own name in Pensioen - the first barrier is on its way to being solved soon. The second obstacle might have disappeared within a couple of years as well.

Tax barriers on contributions for pan-European pension funds have already been abolished in Germany, Ireland, Luxembourg, the Netherlands, Austria, Portugal and Finland, Schonewille indicated. Belgium, Spain, France and the UK are likely to follow soon.

“Italy and Denmark have been summoned before the European court for not yet complying and refusing to comply respectively. The case against Sweden is still running. The situation in Greece is still unclear,” he added.

The problem of taxation of border-crossing pension capital might be solved within a couple of years, due to complaints from the European Federation for Retirement Provision, Schonewille expects.

“The EFRP has found that in some member states capital transfers within the country are tax-exempt, while outbound transfers are not. Other members allow internal transfers, but simply forbid outbound ones,” Schonewille said.

“Some member states however allow tax-free border-crossing of capital. At the same time, other members even tax inbound transfers.”

“We are planning to lodge the complaints on the taxation of border-crossing of pension capital during 2006," EFRP secretary general Chris Verhaegen confirmed.