Towards a Single Market for Occupational Pensions Without Tax - - PowerPoint PPT Presentation

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Towards a Single Market for Occupational Pensions Without Tax - - PowerPoint PPT Presentation

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Towards a Single Market for Occupational Pensions Without Tax Obstacles May 25| 9:00 AM 9:45 AM Peter Schonewille, European Commission, DG TAXUD/E/3 Competence Centre for Pension Research, University of Tilburg Email:

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“Towards a Single Market for Occupational Pensions Without Tax Obstacles”

May 25| 9:00 AM – 9:45 AM

Peter Schonewille, European Commission, DG TAXUD/E/3 Competence Centre for Pension Research, University of Tilburg Email: peter.schonewille@ec.europa.eu, Phone: + 32 2 29 55 919

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AGENDA

  • EUtaxdevelopmentssinceSanDiego2003:

– Crossbordercontributions – Crossbordertransferofcapital – PanEuropeanpensionfunds – Discriminatorytaxationofinvestmentresults(dividends, interest,realestate) – Assetpooling

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FOR NON-EU LAWYERS

  • Harmonisationofpensiontaxationrulesveryunlikely
  • TaxDirectivewouldrequireunanimoussupportof27

MemberStates

  • CreationoflevelplayingfieldinEUwillcomeviaanti

discriminationprovisionsofECTreaty

  • Ifnecessary,viaEuropeanCourtofJustice
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EET, TEE, ETT, TTE

  • DominantsysteminEUisEET:contributionsExempt,

resultsoffundExempt,benefitsTaxed

  • TEE:Luxembourg,Germany(ismovingtoEET),Poland,

Hungary

  • ETT:Sweden,Denmark,Italy,Cyprus
  • TTE:normalsavings,withouttaxsubsidy
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CROSS-BORDER DEDUCTIONS

  • ProblemwasthatmanyEETorETTstatesdidnotgive

taxreliefforpensioncontributionspaidtopensionfunds establishedinotherMemberStates

  • Commissionstartedinfringementcasesagainstnine(of

theold15)EET/ETTMemberStatesfornotallowing crossborderdeduction

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COURT RULINGS

  • ,CaseC150/04of30January

2007and ,CaseC522/04of5 July2007: Taxreliefforcontributionspaidonpensioncontractswith domesticprovidersandnosuchreliefforcontributions paidtoinstitutionsinotherMemberStatesisagainstthe ECTreaty

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DISCRIMINATION ELIMINATED

  • Pensionfundscannowreceivecontributionsfromall

MemberStateswithouttaxdiscrimination,onlysituation inBulgaria(€ 360perannum)remainsunclear

  • Conclusion:Maintaxbarrierforcrossborderlabour

mobilityandpanEuropeanpensionfundshasbeen eliminated

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PENSION CAPITAL TRANSFER

  • Mobileworkersmaywishtotransfertheirpensioncapital

tofundofnewemployer

  • MultinationalswithpanEuropeanfundmaywantto

centralisepensioncapitalinpanEuropeanfund

  • Otherwisetheyneedtocontinuetooperatetheirold

funds+newpanEuropeanfund

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OUTBOUND RESTRICTIONS

  • EuropeanCourtofJusticeinthesame

C522/04:Ifdomestictransfersaretaxfree taxationofoutboundtransfersisforbidden

  • ThiscaseshouldhelptoconvinceotherMemberStates

tochangetheirlawwherenecessary

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LIMITED INFORMATION

  • InthisstageonlyBelgium,Greece,Lithuania,

LuxembourgandtheNetherlandsappeartoallow

  • utboundtransfersandhavenotaxdiscriminations
  • Infringementcaseswillcome
  • PleasesendemailtoCommissionifyouencountertax

discrimination

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PAN-EUROPEAN PENSION FUNDS

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PENSION FUND DIRECTIVE

Officially:“Directive2003/41/ECoftheEuropean ParliamentandoftheCouncilof3June2003onthe activitiesandsupervisionofinstitutionsforoccupational retirementprovision(IORPs)”

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PURPOSES DIRECTIVE

  • HelptocreateaSingleMarketforoccupationalpensions
  • Setminimumstandardsforprudentialsupervision
  • Provideasinglepassportforcrossborderpension

provision

  • Guaranteeahighdegreeofsecurityforworkersand

companies

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REVISION DIRECTIVE

  • Commissionisexaminingwhethersolvencyrulesshould

bechanged

  • CommissionorganisesWednesday27May2009

conferenceinBrussels

  • WillbefornewCommissionerfortheInternalMarketto

decideonwayforward

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THE MARKET

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SEVEN TRILLION

  • LargepotentialpanEuropeanpensionmarket
  • € 7.000.000.000.000capitalwithpensionfundsatstake
  • NotallMemberStatesappearinterested
  • OnlyIreland,Luxembourg,BelgiumandtheNetherlands
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NUMBER OF IORPS

  • 11November2008:CEIOPSreports70IORPSwith

crossborderactivityinEU,31newonessinceentryinto forceofDirective.22newIORPSsinceJanuary2007

  • DirectivealsoapplicableinNorway,Icelandand

Liechtenstein,membersofEuropeanEconomicArea (EEA)Agreement

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WORLD PERSPECTIVE

  • ClientsforpanEuropeansolutionsarebydefinition

multinationals

  • Manymultinationalshavesubsidiariesoutsidethe

EU/EEA

  • PanEuropeansolutionswillbeuniqueintheworld
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LIABILITY POOLING

  • IfandwhentheEUgeneratespensionprovidersthat

candealwiththesocial,labourandtaxlawofuptothirty differentjurisdictionsthesesameprovidersmaybeable todealwiththeoffshorearrangementsforexpatsfrom nonEEAStates

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INTEL EXAMPLE

  • IORPinIreland
  • SectionsforIreland,UK,PolandandHungaryare
  • perational
  • SectionsforRussia,EgyptandTurkeyarebeing

developed

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THIRD STATES

  • Undersomebilateraltaxtreaties,forinstance,Belgium

US,USwillgranttaxreliefforpensioncontributionspaid topanEuropeanpensionfundformobileworkerwho wassentfromBelgiumtoUS

  • Conclusion:PanEuropeanpensionfundsmayalso

providetaxefficientsolutionsforexpatsworkingoutside EU

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OBSERVATION

  • Companiesstartingwithliabilitypoolingwillfollowstep

bystepapproach(seeIntel)

  • Startwheretheneedisgreatest:expats/mobileworkers
  • StartwithoneotherMemberState,andgraduallyextend

numberofMemberStatesfromwhichcontributionsare paidintopanEuropeanfund

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DISCRIMINATORY TAXATION OF INVESTMENT RESULTS OF FOREIGN PENSION FUNDS

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INTEREST & DIVIDENDS

  • InEET/TEEStatesdomesticpensionfundsexemptfrom

taxoninvestmentresults

  • Oftenexemptionatsourceofwithholdingtaxeson

dividendandinterestpayments,ifthereisnoexemption atsourcerefundprocedureforwithholdingtaxes

  • However,noexemptionatsourceorreliefprocedurefor

foreignpensionfunds

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RESTRICTION

  • Result:sourceStatelevieshighertaxonoutbound

dividendandinterestpaidtopensionfundsthenon domesticdividendsandinterest

  • ClearrestrictionoffreemovementofcapitalofArticle56

EC(andpossiblyArticle43EConfreedomof establishment)

  • Nojustificationinsight
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DISRIMINATORY TAXATION OF INVESTMENT RESULTS

  • TheCommissionhasalreadyopenedinfringement

proceduresagainsttheCzechRepublic,Denmark, Spain,Lithuania,theNetherlands,Poland,Portugal, SloveniaandSweden,Italy,Germany,Estonia,Austria, SpainandPortugalfortaxingtheinvestmentresultsof foreignpensionfunds,whereasdomesticfundsare exempt

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ONGOING PROCESS (1)

  • 27November2008:CommissionrefersSpainand

PortugaltoEuropeanCourtofJusticeforlevying withholdingtaxof18%(Spain)or25%(Portugal)on dividendspaidtoforeignpensionfundswhileexempting domesticpensionfundsfromcorporationtax

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ONGOING PROCESS (2)

  • 14May2009:Commissionsendsreasonedopinionto

PolandforexemptingPolishpensionfundsfrom corporationtaxwhilelevyingwithholdingtaxof19%on dividendsand20%oninterestpaidtoforeignpension funds

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FINANCIAL CONSEQUENCES

  • ApparentlytensofbillionsEuroatstake
  • ManyfundsinEuropearefilingclaimswiththesource

States,asfarbackastheycan

  • Theyhavetosafeguardtheirrightsthemselves
  • Commissionworksonlyforthefuture
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THIRD COUNTRIES

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ARTICLE 56 EC

“H allrestrictionsonthemovementofcapitalbetween MemberStates andbetweenMemberStates shallbe prohibited.”

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THIRD COUNTRIES (1)

  • Commission’scasesdonotyetconcernpensionfunds

establishedinthirdcountries

  • Freemovementofcapitalalsoapplicableinrelationwith

thirdcountries

  • ManyUSfundsareclaimingtheirdividendandinterest

withholdingtaxbackfromEUMemberStates

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THIRD COUNTRIES (2)

  • Noreasonwhytheyshouldnotgettheirtaxback
  • Investorsfromthirdcountriesshouldalsogetnational

treatment,ifrelevanttaxtreatyprovidesforexchangeof information,see ,C101/05of 18.12.2007

  • Taxinspectorshouldbeabletocheckwhoisthe

beneficialownerofthedividend

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REAL ESTATE INCOME (1)

  • Pensionfundincomefromrealestate(rent,capital

gains)exemptinEETandTEEStates

  • Bilateraltaxtreatiesalwaysattributetaxingrightonreal

estatetosourceState

  • SourceStatesusuallyusetheirtaxingright
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REAL ESTATE INCOME (2)

  • SourceMemberStatesusuallydonotincludeforeign

fundsinexemption

  • Equallyclearinfringementaswithdividendsandinterest
  • CommissionhandledonecaseagainsttheCzech

Republic,whichchangeditslaw

  • NopensionfundcasesyetatECJ
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REAL ESTATE INCOME (3)

  • OnecasebyCourtofJustice,,C386/04of14

September2006,onrealestateincomeofcharity

  • Courtgrantednationaltreatment
  • OnecaseinFrance,forUnileverPensionFund
  • FrenchCourtgavenationaltreatment
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CONCLUSION

  • AllEETandTEEMemberStateswillneedtogive

nationaltreatmenttopensionfundsestablished elsewhere

  • Appliestotaxationofdividends,interestandrealestate

income,includingcapitalgains

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ASSET POOLING

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ASSET POOLING

  • 10April2008:NorthernTrustgetsagreementofUS

DepartmentofLabourforUSpensioncapitaltobe pooledoutsideUS

  • Thisruling/advisoryopinionallowsUnilevertoputitsUS

pensionassetsinitsLuxembourgpoolingvehicle

  • Unileverhasalreadypooledover3billionofitstotalof

20billionpensioncapital

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TAX TRANSPARENT

  • Onlyifthepensionfundinvestsviaataxtransparent

poolingvehiclecanitclaimthe0%withholdingtaxon dividendandinterestreceivedfromEETandTEE MemberStatesand0%taxationonrealestateincome

  • Itwillbeevenmoreimportantthatassetpoolingvehicles

aretaxtransparent

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CONCLUSIONS

  • EUtaxlawrelevantforbothliabilityandassetsideof

pensionfunds

  • Greatprogressisbeingmadeineliminatingobstaclesto

crossborderactivities

  • LettheCommissionknowifyouencounteranytax

discrimination

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THANK YOU!

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