SWEDEN/LUXEMBOURG- Insurance company Skandia has submitted papers to the European Court of Justice (ECJ) in a test case challenging Swedish legislation that stipulates employer contributions to insurance-backed pension funds are only tax exempt if made to locally-domiciled insurance companies.
The case has passed through the first few rungs of the Swedish judicial system and is now pending at Sweden’s supreme administrative court in Stockholm, the highest national institute that can hear the trial. The supreme court has asked for a pre-ruling from the ECJ. “How long that will take is not really for us to comment,” says Skandia’s general counsel J-M Bexhed.
At issue is a dispute with legislation governing insurance contributions. When employers pay into insurance-based pensions, the contributions are only tax exempt if they are made to an insurer based in Sweden. Says Bexhed: “if the policy is taken out with an insurer domiciled in another European country then the premium will not be tax deductible for the employer and we are questioning whether these national tax provisions are in accordance with European law.”
“We are very much in favour of open borders and free competition and as we are conducting business in most European countries we believe that taking away these tax barriers would be good for our business. If the case is successful it will certainly have implications for other European countries besides Sweden,” he says adding that similar legislation exists in other European countries.
Skandia has launched the case for two plaintiffs, both itself and an employee known only as Ramstedt. “Obviously it the_case has implications for both company and individual.” Written submissions for the relevant parties have been delivered to the ECJ in Luxembourg who will then deliver a pre ruling. There will then be an oral hearing but Skandia is unable to estimate the duration of each step of the procedure.
Although the case is pending at a Swedish court, it is the ECJ that will in practice have the final say. “According to the treaty of Rome, the Swedish court is bound by the decision by the European Court so the relevant European questions, they are finally dealt with in reality by the European court and the Swedish court has to accept its decision…This is a bit of a test case so the reason we are pushing it is to get European answers to certain tax implications for cross border questions,” says Bexhed.