EU Member States Urged to Improve Tax Treatment of Foreign Pension Fund Contributions

Washington, DC, December 17, 2003 - The Commission of the European Union (EU) has begun taking action against certain member states whose tax legislation discriminates against foreign pension funds.

Background
Since December 2001, the European Parliament has taken steps to eliminate the tax obstacles to the cross-border provision of occupational pensions. The Commission has sent formal requests to Belgium, Portugal, Spain, and France to amend their current tax legislation under which pension contributions paid to domestic pension funds are tax deductible while contributions to non-domestic pension funds are not tax deductible. Each of the four Member states will have two months to take satisfactory action or the Commission may refer them to the European Court of Justice.

Belgium has not yet responded to the Commission's initial request for explanation of its legal provisions while Portugal has argued that its tax legislation does not breach EU law. According to the Commission, both Spain and France have admitted that their systems contravene European law and have committed to making the necessary amendments. The Commission, however, is not satisfied with their timetable for amending legislation (September 2005 for Spain and no set timetable for France). The infringement cases against the United Kingdom and Ireland are in the first stage of the infringement procedure.

ICI Position
The Institute has long supported efforts to remove tax barriers to foreign investing, most recently in Germany and Japan, and has worked with U.S. trade representatives and foreign regulators to ensure that the tax treatment of foreign financial instruments enables investors to meet their long-term savings and investment needs.

Related Links
A section of this website is devoted to the Institute's work with representatives of foreign nations and U.S. government officials to seek legislative and regulatory improvements that enhance both the competitiveness of U.S. investment companies abroad and the level of service to investors in foreign markets.