ECJ continues to support cross border pensions

In another important ruling, the European Court of Justice rules against surprisingly recent Danish provisions (law of 2003) permitting tax deductibility of pensions contributions only for institutions located in Denmark in the case C-150/04 Commission vs. Denmark (assisted by Sweden).

Continuing its standing practice, the Court relies solely on the Mutual Assistance Directive 77/799 without having direct recourse to double taxation treaties in order to refute the tax avoidance argument: Furthermore, it must be noted that the mere fact that a taxpayer makes contributions to a pension scheme taken out with an institution established outside Denmark cannot form the basis for a general presumption of tax avoidance or justify a fiscal measure which prejudices the enjoyment of a fundamental freedom guaranteed by the Treaty.

With regards to the cohesion of the tax system, the Court shows that a country's tax system is only adversely affected if the future pensioner takes residence outside of said country before taxable benefits fall due. Since he is entitled to do so under the Treaties, the general refusal to grant a tax advantage is not permissible.