The taxation of foreign pension funds within the European Union has been a focal point of legal scrutiny, particularly concerning the principle of free movement of capital as enshrined in Article 63 of the Treaty on the Functioning of the European Union (TFEU). Recent jurisprudence from the Court of Justice of the European Union (CJEU) has clarified the obligations of Member States in this context.
In the landmark case of Keva and Others v. Skatteverket (C-39/23), the CJEU addressed the issue of Sweden imposing withholding tax on dividends paid to foreign public pension funds, while exempting domestic public pension funds from such taxation. The Court held that this differential treatment constitutes a restriction on the free movement of capital, as it may deter foreign pension funds from investing in Swedish companies. The CJEU emphasized that the only distinguishing criterion was the place of residence, which is insufficient to justify the tax disparity .(Global Tax News, EY, KPMG)
Similarly, in the case involving the College Pension Plan of British Columbia, the CJEU examined Germany's tax treatment of foreign pension funds. The Court concluded that denying foreign pension funds the same tax exemptions granted to domestic funds violates the principle of free movement of capital, especially when both types of funds serve similar purposes and functions .(White & Case)
These decisions underscore the necessity for Member States to ensure that their tax laws do not discriminate against foreign pension funds. The CJEU has consistently ruled that any tax advantages granted to domestic entities must, under comparable circumstances, be extended to foreign entities to comply with EU law.
At Globe Refund, we specialize in assisting institutional investors, including pension funds, in navigating the complexities of cross-border withholding tax reclaims. Our expertise ensures that clients can effectively assert their rights under EU law to obtain rightful tax refunds, thereby promoting equitable treatment across jurisdictions.
Our work focuses on providing outsourced withholding tax recovery services to safeguard your investments from over-taxation and save your time from burdensome processes.
