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Brussels, 22nd October 2004

Pension taxation: Commission refers Belgium to the Court of Justice and requests Italy to end discrimination

The European Commission has decided to refer Belgium to the Court of Justice because Belgium is too slow in changing its discriminatory pension taxation rules. The main problem is that, under Belgian legislation, pension contributions paid to foreign funds are not tax deductible while contributions paid to domestic funds are. The Commission formally requested Belgium to change its law on 17 December 2003 (see IP/03/1756). Belgium replied that it would do so but not until September 2005. Similarly the Commission has formally requested Italy to change its pension taxation rules. In Italy, also, pension contributions paid to foreign funds are not tax deductible while contributions paid to domestic funds are. These actions demonstrate the Commission's commitment to follow up on its 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 insists that Member States quickly remove any remaining tax discrimination against occupational pension funds of other Member States” said Taxation and Internal Market Commissioner Frits Bolkestein. “The Court of Justice has been very clear in its judgements on pension taxation issues so there is absolutely no reason for Member States to drag their feet in opening up their pension markets."


The Belgian law poses four problems:

  • 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 abroad remain taxable in Belgium, even where Belgium, in its bilateral tax conventions, ceded its taxation rights over such pensions to those other States, and
  • Belgium requires foreign pension funds to designate a tax representative in Belgium before offering their services on the Belgian territory.

The Commission sent Belgium a formal request to change its legislation in the form of a 'reasoned opinion', the second stage of the infringement procedure provided for in Article 226 of the EC Treaty, on 17 December 2003.

Belgium has agreed to make the necessary changes at the latest by September 2005, the implementation date for the Pension Fund Directive (2003/41/EC). The Commission considers that this commitment is too imprecise and that an implementation date of September 2005 is too late. The Commission earlier this year decided to refer Spain to the Court of Justice (see IP/04/873) over its discriminatory pension tax legislation because Spain is similarly not prepared to amend its legislation until September 2005.


The Commission has formally requested Italy to change its 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 request is in the form of a ‘reasoned opinion’. The Commission sent an initial request for information on 5 February 2003, in the form of a letter of formal notice (see IP/03/179). A further request for information sent to Italy in December 2003 has remained unanswered. If Italy does not now provide a satisfactory reply within two months the Commission may refer the case to the Court of Justice.

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 deductions for pension contributions paid to their original (foreign) pension scheme restricts their right of free movement. Equally, tax discrimination prevents pension funds from making use of their freedom to provide services throughout the EU. Finally, tax discrimination prohibits companies with establishments in different Member States from centralising their occupational pension arrangements into pan-European funds for all their employees throughout the Union. Such centralisation, that is explicitly provided for by the EU's Pension Fund Directive 2003/41 (see IP/03/669), would allow companies considerable economies of scale and cut administrative costs significantly.

Situation of other Member States

The Commission has opened infringement cases on pension taxation rules against a total of eight Member States: Belgium, Denmark, Ireland, France, Italy, Portugal, Spain, and the United Kingdom. For a complete overview of the state of play of these procedures see:

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

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