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You are here: BAILII >> Databases >> Court of Justice of the European Communities (including Court of First Instance Decisions) >> Commission v Denmark (Free movement of persons) [2007] EUECJ C-150/04 (30 January 2007) URL: https://www.bailii.org/eu/cases/EUECJ/2007/C15004.html Cite as: [2007] ECR I-1163, [2007] EUECJ C-150/04, [2007] EUECJ C-150/4 |
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(Failure of a Member State to fulfil obligations Freedom of movement for workers Freedom to provide services Free movement of capital Freedom of establishment Income tax Pensions Policy taken out with a pension institution in another Member State Tax legislation Limitation on the deductibility or exemption from taxable income of contributions paid into a pension scheme Overriding reasons in the public interest Effectiveness of supervision of taxation Cohesion of the tax system Symmetry of the tax system Double taxation convention)
In Case C-150/04,
ACTION under Article 226 EC for failure to fulfil obligations, brought on 23 March 2004,
Commission of the European Communities, represented initially by S. Tams, and subsequently by R. Lyal and H. Støvlbà...k, acting as Agents, with an address for service in Luxembourg,
applicant,
Kingdom of Denmark, represented by J. Molde, acting as Agent, with an address for service in Luxembourg,
defendant,
supported by
Kingdom of Sweden, represented by A. Kruse, acting as Agent,
intervener,
composed of V. Skouris, President, P. Jann, C.W.A. Timmermans, A. Rosas, K. Lenaerts, P. Kūris (Rapporteur) and E. Juhász, Presidents of Chambers, R. Silva de Lapuerta, K. Schiemann, J. Makarczyk, G. Arestis, A. Borg Barthet and A. à Caoimh, Judges,
Advocate General: C. Stix-Hackl,
Registrar: H. von Holstein, Deputy Registrar,
having regard to the written procedure and further to the hearing on 31 January 2006,
after hearing the Opinion of the Advocate General at the sitting on 1 June 2006,
gives the following
Legal context
Community legislation
'Whereas practices of tax evasion and tax avoidance extending across the frontiers of Member States lead to budget losses and violations of the principle of fair taxation and are liable to bring about distortions of capital movements and of conditions of competition; whereas they therefore affect the operation of the common market'.
'In accordance with the provisions of this Directive the competent authorities of the Member States shall exchange any information that may enable them to effect a correct assessment of taxes on income and on capital ...'
'1. This Directive shall impose no obligation to have enquiries carried out or to provide information if the Member State, which should furnish the information, would be prevented by its laws or administrative practices from carrying out these enquiries or from collecting or using this information for its own purposes.
2. The provision of information may be refused where it would lead to the disclosure of a commercial, industrial or professional secret or of a commercial process, or of information whose disclosure would be contrary to public policy.
3. The competent authority of a Member State may refuse to provide information where the State concerned is unable, for practical or legal reasons, to provide similar information.'
'Without prejudice to the following provisions, Member States shall abolish restrictions on movements of capital taking place between persons resident in Member States. To facilitate application of this Directive, capital movements shall be classified in accordance with the Nomenclature in Annex I.'
'A Contributions and payments in respect of life assurance
...
2. Contracts concluded between foreign life assurance companies and residents.'
National legislation
have their registered office in Denmark
carry on life assurance business through a permanent establishment in Denmark and be authorised by the authorities supervising the financial sector to pursue life assurance business there, or
carry on life assurance business through a branch office in Denmark and hold authorisation issued in another Member State of the European Union.
comply with Codified Law No 148 on the supervision of pension funds (bekendtgørelse af lov om tilsyn med firmapensionskasser) of 7 March 2003 (Lovtidende 2003 A, p. 953), which presupposes that they are established in Denmark, or
comply with Law No 453 on financial activities (lov om finansiel virksomhed) of 10 June 2003 (Lovtidende 2003 A, p. 2822), which applies to certain pension funds with a registered office in Denmark and to foreign pension funds which are authorised in another Member State of the European Community and which pursue their activities through a branch office in Denmark.
be authorised by the financial supervision authorities to operate a financial institution in Denmark, which requires that they have a registered office in that Member State, or
be foreign credit institutions which are authorised in another Member State of the European Community and which pursue their activities through a branch office in Denmark.
'(1) The provisions of subparagraphs 2 to 5 shall apply to
1. life assurance contracts which do not fall within the scope of Chapter 1,
2. life assurance contracts which meet the conditions of Chapter 1 but with respect to which the policyholder, on entering into the insurance contract, opted not to be taxed in accordance with the provisions of Part I,
3. schemes with pension funds which do not fall within the scope of Chapter 1,
4. schemes with pension funds which meet the conditions of Chapter 1 but with respect to which the persons entitled to benefit opted not to be taxed in accordance with the provisions of Part I, and
5. sickness and accident insurance policies where the policyholder is the insured person.
(2) For the purposes of calculating taxable income, it shall not be permitted to deduct premiums or contributions to pension and other insurance schemes listed in subparagraph 1. For the purposes of calculating an employee's taxable income, premiums or contributions paid by his present or a former employer shall be included ...
(3) For the purposes of calculating taxable income, returns from life assurance contracts and pension schemes listed in subparagraph 1 shall be included ...
...
(5) For the purposes of calculating taxable income, benefits payable under pension and other insurance schemes listed in subparagraph 1 shall be disregarded.'
'(1) Without prejudice to the provisions of Paragraph 53A, where in respect of life assurance contracts listed in point 1 of Paragraph 53A(1), schemes with pension funds listed in point 3 of Paragraph 53A(1) and sickness and accident insurance policies listed in point 5 of Paragraph 53A(1) the conditions of subparagraphs 2 and 3 are met the provisions of subparagraphs 4 to 6 shall apply. The same shall apply in respect of foreign pension schemes which have been established with financial institutions.
(2) It shall be a requirement that the pension or other insurance scheme listed in subparagraph 1 was entered into at a time when the policyholder or person entitled under the scheme was not liable to tax under Paragraph 1 of the Law on deduction of tax at source or when, notwithstanding that person's liability to tax under Paragraph 1 of the Law on deduction of tax at source, he was resident abroad, on the Faroe Islands or in Greenland within the meaning of the provisions of a double tax convention.
(3) It shall be a requirement that all contributions to pension or other insurance schemes referred to in subparagraph 1 made during the period in which the policyholder or person entitled under the scheme was neither liable to tax nor resident in Denmark were deducted from his positive taxable income in accordance with the tax law applicable in the State in which the policyholder or person entitled under the scheme was liable to tax or resident at the time when the contributions were made or that the contributions were paid by an employer in such manner that in accordance with the tax law applicable in the State in which the policyholder or person entitled under the scheme was liable to tax or resident at the time the contributions were made they were disregarded for the purpose of calculating that person's taxable income.
(4) Paragraph 53A(2) shall apply in respect of premiums and contributions to pension and other insurance schemes referred to in subparagraph 1.
(5) For the purposes of calculating taxable income, investment returns including interest and profit entitlements derived from pension and other insurance schemes referred to in subparagraph 1 shall be disregarded.
(6) For the purposes of calculating taxable income, benefits from pension and other insurance schemes referred to in subparagraph 1 shall be included ... For the purposes of calculating taxable income, those benefits shall be disregarded where they are derived from contributions made by the policyholder or person entitled under the scheme after he became liable to tax or resident in Denmark and where pursuant to subparagraph 4 and Paragraph 53A(2) deduction of the contributions for income tax purposes was not permitted.'
Double taxation conventions
Taxation of benefits provided by retirement pension schemes pursuant to double taxation conventions entered into by the Kingdom of Denmark
Deductibility of contributions to foreign pension schemes pursuant to the double tax conventions entered into by the Kingdom of Denmark
Pre-litigation procedure
The action
The obstacles to the freedoms
The justifications put forward
With regard to the effectiveness of supervision of the taxation and the prevention of tax avoidance
Arguments of the parties
Findings of the Court
The cohesion of the tax system
Arguments of the parties
Findings of the Court
Costs
On those grounds, the Court (Grand Chamber) hereby:
1. Declares that, by introducing and maintaining in force a system for life assurance and pensions under which tax deductions and tax exemptions for payments are granted only for payments under contracts entered into with pension institutions established in Denmark, whereas no such tax relief is granted for payments made under contracts entered into with pension institutions established in other Member States, the Kingdom of Denmark has failed to fulfil its obligations under Articles 39 EC, 43 EC and 49 EC;
2. Orders the Kingdom of Denmark to pay the costs;
3. Orders the Kingdom of Sweden to bear its own costs.
[Signatures]
* Language of the case: Danish.