PensionsEurope calls on Brussels to act on cross-border tax barriers

Countries across the European Union must do more to remove tax barriers hampering the pension industry’s ability to invest cross border, according to PensionsEurope.

Janwillem Bouma, chair of the industry association, said obstacles stemming from withholding tax (WHT) refund procedures were a major barrier to the establishment of the European Commission’s Capital Markets Union (CMU).

“To boost economic growth in the EU, PensionsEurope calls on the EU member states and the European Commission to remove all the WHT barriers to cross-border investments,” said Bouma, who is also managing director of the Dutch pension fund for Shell employees.

“This means the EU member states shall respect the case-law of the Court of Justice of the European Union (ECJ), reciprocally and automatically recognise pension funds and simplify their WHT processes.”

In a position paper, the association recommends that all member states automatically recognise pension funds in an effort to reduce the administrative costs and timescale involved in the WHT refund process, which in some instances has spanned a decade.

The paper states: “If a pension fund, according to the law of its home country, qualifies as a pension fund – or other privileged entity or tax-exempt investor – it shall automatically get recognition as a pension fund, according to statutory terms or categories in the host country.”

It also notes that, in a number of cases, member state practices have been found to be discriminatory by the ECJ.

Matti Leppälä, chief executive at PensionsEurope, argued that the current system was too complex.

Pension funds, he said, avoid requesting refunds to which they are entitled due to bureaucracy and uncertainty surrounding outcomes.

Dutch healthcare fund PFZW has previously called for harmonised tax rules for pension funds across the EU, and the EU itself vowed to review potentially discriminatory tax policies when it published its CMU Action Plan.

PensionsEurope also called for action on “inadequate” double taxation treaties to allow for mutual recognition of pension funds, an area recently examined by the OECD when it proposed a new tax framework.