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Brussels, 28 October 2010

Direct taxation: Commission requests Czech Republic and Sweden to end discriminatory treatment for pensions

The European Commission has formally requested the Czech Republic and Sweden to amend discriminatory provisions with regard to the taxation of pensions. The discriminatory regimes in question regard the more favourable tax treatment that domestic pension insurance schemes receive compared to similar foreign schemes in the Czech Republic, and the discrimination against non-resident pension funds compared to domestic funds when it comes to taxing dividends in Sweden. The requests take the form of 'reasoned opinions" (second stage of an infringement proceeding). In the absence of satisfactory responses within two months, the Commission may refer these Member States to the EU's Court of Justice.

Czech Republic: contribution to insurance pension schemes

Czech law provides more favourable tax treatment for domestic pension insurance schemes than for foreign insurance schemes. This limits Czech taxpayers' freedom to choose foreign insurance schemes over domestic ones, regardless of the merit of each pension scheme in question. Under Czech legislation, taxpayers can deduct their pension insurance contributions from their income tax base if contributions are paid to a pension fund established in the Czech Republic. In addition, if an employer, on behalf of its employees, pays into a pension insurance fund established in the Czech Republic, these contributions do not need to be included in the taxpayers' income tax base. In contrast, similar contributions paid to a foreign pension scheme are not deductible if paid by the taxpayer and are considered as taxable income if paid by the employer. The Commission considers that this regime is contrary the free movement of workers (Article 45 TFEU), to the freedom of establishment (Article 49 TFEU) and to the freedom to provide services (Article 56 TFEU).

Sweden: taxation of dividend paid to pension funds

In Sweden, dividends paid to non-resident pension funds are subject to a withholding tax of 15% or 30%, depending whether Sweden has a double tax treaty with the country of establishment of the pension fund. Pension funds established in Sweden, however, are exempt from tax on dividends as well as from corporation tax. They are subject to a 15% tax based on a notional calculation of its profits. As a result of this system, the effective tax rate on Swedish-sourced dividends received by resident pension funds will in most cases be lower than the 15% tax on the gross dividend of non-resident pension funds. The Commission considers this to discriminate against non-resident pension funds and to be contrary to the free movement of capital laid down in Article 63 of the Treaty on the Functioning of the European Union (TFEU).

For the press releases issued on infringement proceedings in the area of taxation or customs see:

For the most up-to-date general information on the infringement proceedings initiated against Member States, see:

For more information on EU infringement procedures, see MEMO/10/530

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