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Sweden taken to court over foreign pension fund discrimination

The European Commission has decided to refer Sweden to the European Court of Justice for its pension tax legislation, after the Swedish government failed to follow the Commission's advice and continued to discriminate against foreign pension funds.

Swedish tax legislation dictates that premiums paid by employers for occupational pension insurance taken with insurers based elsewhere in the EU and European Economic Area are taxed as salary in the hands of the employee.

Although non-domestic pension payments are then exempt, in comparison, contributions to domestic schemes pay no tax on contributions and only pension payments are taxed. According to the Commission, this discrimination is unjust, as those using foreign insurers will amass savings at a much lower rate.

In an official statement, the European Commission said: The legislation clearly restricts the possibilities for insurers established elsewhere within the EU or EEA to sell insurance policies in Sweden and dissuades employers from subscribing to foreign insurance policies.

The Commission added that it considers the respective Swedish rules to constitute an obstacle to the free movement of persons, the freedom to provide services and the free movement of capital.

According to IPE.com, this is the third time that Sweden has come under fire from European authorities for obstructing market freedoms in pension provision. It stated that the Safir and Skandia cases previously found Sweden to be discriminating against the purchase of life insurance abroad and the financial advantages of contributions to occupational pension insurance contracts.