Belgium And Italy Taken To EU Court Over Discriminatory Pension Tax Rules

by Ulrika Lomas, Tax-News.com, Brussels

25 October 2004

The European Commission announced on Friday that it has filed a legal action in the European Court of Justice against the governments of Belgium and Italy for delays in the overturning of discriminatory pension tax rules.

In the case of Belgium, the dispute is centred on laws that tax the transfer of pension capital to a foreign fund whilst contributions to domestic pension schemes are tax deductible.

"The main problem is that, under Belgian legislation, pension contributions paid to foreign funds are not tax deductible while contributions paid to domestic funds are," the Commission confirmed in a statement.

Whilst the Belgian government has pledged to change the law by September 2005, the Commission is not satisfied that enough is being done to change the legislation, calling the country’s target date as “too imprecise,”

The Commission has also instigated proceedings against Italy for a similar breach of tax law on pensions, whereby foreign funds are taxed at a higher rate than domestic pensions, after failing to receive a response from Rome following a warning in December 2003.

EU Internal Markets Commissioner Frits Bolkestein commented that there is "no reason for member states to drag their feet in opening up their pension markets."

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