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Skandia case goes to Swedish supreme court

SWEDEN – The Skandia pensions taxation case has been submitted to the Swedish Supreme Administrative Court – with a decision expected within weeks.

In June 2002 the Skandia and Ramstedt vs the Swedish National Tax Board at the European Court of Justice put pressure on European Union member states and Sweden in particular to stop discriminating against cross-border occupational pension provisions.

This judgement was seen as paving the way for beneficial tax treatment of occupational pension provisions and the new European occupational pensions directive will make it possible to set up one pan-EU pension plan with a single pension provider.

However the Skandia verdict has not yet been upheld by the Swedish court – its ruling will ascertain how foreign pension provisions will be treated in Sweden and whether it will transform the EU pension provision market.

A debate has been raging in Sweden with the Ministry of Finance on one hand and Skandia on the other. A report was submitted in the autumn by the Ministry of Finance on proposed tax legislation, which, according to sources, contravenes the ECJ ruling in the Skandia case.

It has led to a halt in providing foreign pension provisions to Swedish corporations. Electrolux, AstraZeneca, SonyEricsson, Ericsson and SCA recently concluded tenders for pension provisions for Swedish subsidiaries, the largest mandate so far for high-income earners with an annual premium of 65 million euros. No foreign pension providers submitted proposals.

The SAC ruling in the Skandia case will make these issues clear and open up the Swedish market for foreign insurance providers.

Since the ruling only concerns pension insurance contracts it is not clear whether or not other pension provisions, such as foreign pension funds will be allowed.

In my opinion which is upheld by a ruling by the SAC in 2000, the so called “Trust case”, an Anglo Saxon offshore international pension fund was seen as a Swedish pension provision and given beneficial tax treatment. Therefore other EU occupational pension provisions should be allowed. Sweden is one of the first countries to implement the IORP and a newly appointed legislative committee will submit its findings on its implementation by November 2004.

Sweden could be the first EU country to both have legislation covering Institutions for Occupational Pensions Provision in place as well as allowing non-discriminatory tax treatment of such provisions before 2005.

However, the Ministry of Finance will do it outmost to keep the Swedish tax base intact and EU occupational pension providers intending to promote their products in Sweden may do well to be cautious.

A source said that a large EU bank was looking at Sweden but its chief actuary and legal counsel vetoed the project since they could not get assurances that the provisions would strictly adhere to Swedish rules and regulations.

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