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Brussels, 17th December 2003

Pension taxation: Commission requests Belgium, Portugal, Spain and France to end discrimination against foreign pension funds

The European Commission has sent formal requests to Belgium, Portugal, Spain and France to amend their tax legislation under which pension contributions paid to foreign funds are not tax deductible while contributions paid to domestic funds are. The Commission considers that preferential treatment for domestic pension funds is incompatible with the EC Treaty, which guarantees the free provision of services and the free movement of workers and capital. This is a follow-up to the action undertaken by the Commission in February 2003 (see IP/03/179), in accordance with the April 2001 Communication on the elimination of tax obstacles to the cross-border provision of occupational pensions (see IP/01/575 and MEMO/01/142).

"The Commission is determined to tackle tax discrimination against occupational pension funds in other Member States" said Taxation and Internal Market Commissioner Frits Bolkestein. "Unless Member States end tax discrimination, the EU will continue to deny future pensioners the full potential benefits of a pan-EU single market for pensions".

The Commission has formally requested Belgium, France, Spain and Portugal to change their tax legislation and give pension contributions paid to pension funds located in other Member States the same tax treatment as contributions to domestic funds. The requests have been sent in the form of so-called 'reasoned opinions', the second stage of the infringement procedure provided for in Article 226 of the EC Treaty. Initial requests for information had already been made to these States in February 2003, in the form of letters of formal notice (see IP/03/179). If these Member States do not provide satisfactory action within two months the Commission may refer the case to the Court of Justice. Previous rulings by the European Court of Justice indicate that the scope for Member States to apply different rules to foreign pensions funds is very narrow (cases of Wielockx (C-80/94), Jessica Safir (C-196/98), Danner (C-136/00) and Skandia (C-422/01)).


In its reply to the letter of formal notice, the Spanish Government has admitted that the current Spanish provisions are not compatible with EU law. Spain has announced that it intends to make the necessary amendments of its legislation before 23 September 2005 (which is the deadline for the implementation of the pension funds Directive 2003/11). The Commission, however, estimates that this timetable is not sufficient.


France has also admitted in its reply to the letter of formal notice that the assessment made by the Commission is correct and that the French tax rules are not compatible with the Treaty freedoms. France has announced that it will change its legislation. However, it has not provided full details or a timetable and some proposed amendments still impose certain conditions which, according the Commission, constitute an obstacle to the Treaty freedoms.


The Belgian Government has not yet provided any definitive reply as to its intentions with regard to the points raised by the Commission. The Commission finds it unacceptable that:

  • the tax deductibility of pension contributions is limited to those paid to Belgian pension funds

  • the transfer of pension capital to a foreign pension fund gives rise to special taxation in Belgium

  • pensions paid to persons who move to other EU States remain taxable in Belgium, even where Belgium, in its bilateral tax conventions, ceded its taxation rights over such pensions to these other States and

  • Belgium requires foreign pension funds to designate a tax representative in Belgium before offering their services on the Belgian territory.


Portugal has argued that its tax legislation is coherent in that there is a link between tax deductibility of contributions and taxation of pensions in case of Portuguese pension funds and between the non-tax deductibility of contributions and the non-taxation of pensions in case of foreign pension funds (similar to the coherence accepted by the Court in the Bachmann judgement (C-204/90 of 28 January 1992). However, the Commission is of the opinion that such cohesion does not exist in the Portuguese legislation.

Commission pensions taxation policy

In its Communication of 19 April 2001, the European Commission identified the elimination of tax obstacles to the cross-border provision of occupational pensions as a priority and presented a broad legal analysis of the problem. It pointed out that not allowing mobile workers tax deduction for pension contributions paid to their original scheme restricts their right of free movement. Equally, the tax discrimination prevents pension funds from making use of their freedom to provide services. Finally, tax discrimination prohibits companies with establishments in different Member States from centralising their occupational pension arrangements into one single scheme for all their employees throughout the Union. Such centralisation, explicitly foreseen by the pension fund Directive 2003/11 (see IP/03/669), would allow companies considerable economies of scale and cut administrative costs significantly.

Situation of other Member States

The Commission decided in July of this year to refer Denmark to the Court of Justice regarding the fact that, according to the Commission, Denmark discriminates against foreign pension providers. Contributions paid to foreign schemes are not tax deductible, whilst those to Danish schemes are. And at the same time proceedings were opened against Ireland and the United Kingdom concerning similar tax legislation (see IP/03/965).

The latest information on infringement procedures concerning all Member States can be found at the following site:

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