91997E3574

WRITTEN QUESTION P-3574/97 by Joan Colom i Naval (PSE) to the Commission (4 November 1997)

Subject: Taxation of pension and retirement funds

Does the Commission consider it to be compatible with Community law for the tax legislation of a Member State to provide for discriminatory tax treatment of contributions to pension and retirement funds and gains accruing therefrom according to where the fund is based or where the contract was signed, even though the countries concerned are other Member States? In this light, does the Spanish law on private insurance of 1995 comply with Community law?

Answer given by Mr Monti on behalf of the Commission (6 January 1998)

In general, the Commission does not consider it to be compatible with Community law for the tax legislation of a Member State to provide for discriminatory tax treatment of contributions to pension and retirement funds and gains accruing therefrom according to where the fund is based or where the contract was signed. However, there may be an objective justification for such discriminatory treatment, as the Court of justice stated in its Bachmann ruling of 28 January 1992 (Case 204/90). In later rulings the Court has further developed the Bachmann doctrine (Wiclockx, 11 August 1995, Case 080/94 and Svensson, 14 November 1995, Case 484/93). Another case is still pending (Jessica Safir, Case 118/96). The compatibility with Community law of each individual Member State's tax rules on pension and retirement funds will have to be judged in the light of these rulings.

As far as the Spanish system regarding the taxation of life insurance is concerned, the Commission has examined whether the law leads to a discriminatory tax treatment on the basis of the place where the assurance company is located. The Spanish authorities have indicated that Article 78(1) of Law 30/95 of 8 November 1995 on the regulation and supervision of private insurance provides that insurance companies established in Member States of the European Economic Area other than Spain which have obtained authorisation to operate in their Member State of origin can carry on their activities in Spain under the right of establishment or under the freedom to provide services. They have also indicated that life assurance premiums paid by Spanish residents to insurance companies which are not established in Spain but are allowed by law to do business there by way of the freedom to provide services can be deducted from personal income tax under the same conditions as premiums paid to insurance companies established in Spain. The Commission has therefore concluded that no discriminatory tax treatment exists in this particular case.