Press and Information Division
PRESS RELEASE No 55/03
26 June 2003
Judgment of the Court in Case C-422/01
Försäkringsaktiebolaget Skandia and Ola Ramstedt v Riksskatteverket
SWEDISH TAX RULES WHICH FAVOUR OCCUPATIONAL PENSION INSURANCE POLICIES TAKEN OUT WITH A
SWEDISH INSURER OVER THOSE TAKEN OUT WITH AN INSURER IN ANOTHER MEMBER STATE
ARE INCOMPATIBLE WITH COMMUNITY LAW
The Court of Justice rejected the arguments put forward by the Swedish Government
to justify their tax rules
In terms of direct taxation the two types of insurance are subject to
different rules on deduction with effects which may be less favourable for endowment
insurance and thus for occupational pension insurance policies taken out with an insurer
established in another Member State. Premiums paid by the employer under a pension
insurance policy are immediately deductible when calculating his taxable income and the retirement
benefits subsequently paid out are subject to income tax in their entirety in
the hands of the retired employee. On the other hand, premiums paid by
an employer under an endowment insurance policy are not deductible but the employer
has a right to deduct the amounts he has undertaken contractually to pay
to the employee. When received by the employee, the sums received constitute taxable
earned income.
Ola Ramstedt, a Swedish citizen resident in Sweden, is employed by the Swedish
company, Skandia. Mr Ramstedt and Skandia agreed that part of Mr Ramstedt's pension
was to be provided by Skandia taking out an occupational pension insurance policy
with an insurance company established in another Member State. Mr Ramstedt and Skandia
applied for an advance ruling from the Skatterättsnämnden (Council for Advance Tax Rulings)
as to whether the insurance policy would be deemed to be pension insurance.
The Skatterättsnämnden ruled that, in its view, the insurance policy should be considered
as endowment insurance under the Swedish rules.
Mr Ramstedt and Skandia appealed against this advance ruling to the Regeringsrätten (Supreme
Administrative Court). The Regeringsrätten referred a question to the Court of Justice of
the EC on the compatibility of the Swedish legislation with the Community rules.
As a preliminary point the Court stated that the Treaty provisions relating to
freedom to provide services apply to such a situation. The Community rules provide
that services normally provided for remuneration are to be considered to be services.
In fact, the premiums which Skandia pays are the consideration for the pension
which will be paid to Mr Ramstedt when he retires. It is therefore
irrelevant that Mr Ramstedt does not pay the premiums himself.
Moreover, the Court points out that tax rules such as those in force
in Sweden restrict freedom to provide services. Those rules are liable both to
deter Swedish employers from taking out occupational pension insurance with institutions established in
a Member State other than Sweden and to deter those institutions from offering
their services on the Swedish market.
It remains only for the Court to determine whether such rules can be
justified.
The Court considers that the arguments put forward by the Swedish Government are
not convincing.
As regards the need to ensure the fiscal cohesion of the national system,
the Court has held that there must be a direct connection between the
deductibility of contributions and the liability to tax on sums payable by insurers
in order for such a justification to be upheld. There is no such
correlation in the Swedish system, as there is no compensatory measure to offset
the disadvantage suffered by an employer who chooses a foreign insurer compared with
an employer who takes out comparable insurance with a Swedish company.
The Court considers that the effectiveness of fiscal controls can be ensured by
measures which restrict freedom to provide services to a lesser degree for example
by relying on a 1977 Directive which provides for exchange of information on
tax between the competent authorities of the Member States.
As regards the need to preserve the tax base of the Member State,
the Court points out that any tax advantage for providers of services resulting
from the low taxation to which they are subject in the Member State
of establishment cannot be used by another Member State to justify less favourable
treatment in tax matters given to recipients of services established in the latter
State. Moreover, the need to prevent the reduction of tax revenue is not
one of the grounds which would justify a restriction on the freedom to
provide services.
Languages available: Danish, English, Finnish, French, German and Swedish. For the full text of the judgment, consult our Internet page www.curia.eu.int at around 3 pm today. For further information, contact Christopher Fretwell phone: (352) 4303 3355 fax: (352) 4303 2731. |
Council Directive 77/799/EEC of 19 December 1977 concerning mutual assistance by the competent
authorities of the Member States in the field of direct taxation