Tom O’Shea: Finnish Taxation of Nonresident Pension Funds Breaches EU Law

Tom O’Shea has recently published an article on the ECJ judgment Commission v. Finland (‘‘Pension Funds) (C-342/10). You can find it in Tax Notes International, July 22, 2013.

According to Tom, in this judgment “the European Commission successfully challenged Finnish tax rules that treated dividends paid to nonresident investment funds less favorably than similar dividends paid to pension funds resident in Finland. The Court upheld the commission’s argument that the Finnish tax rules breached article 63 of the Treaty on the Functioning of the European Union (free movement of capital) and article 40 of the European Economic Area Agreement…”.

“…Commission v. Finland (‘‘Pension Funds’’) is the latest in a line of cases concerning pension/investment funds. The free movement of capital also relates to non-EU/ EEA member countries. Accordingly, many decisions of the ECJ in this field will have repercussions beyond the territory of the EU, particularly when an income tax treaty is in operation with nonmember countries containing an exchange of information provision. In such cases, the free movement of capital may also apply to non-EU/EEA pension funds. The free movement of capital in article 63 of the TFEU has been extended to non-EU member countries. It is therefore of the utmost importance that non-EU pension funds should check to ensure that they are receiving their EU law entitlements when they make portfolio investments in the EU internal market, which has this significant international dimension beyond the territories of EU member states. While many direct investments may still be covered under certain grandfathering provisions in article 64 of the TFEU, this provision does not apply to portfolio investments”.

Many thanks for your useful comments, dear Tom!

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