Försäkringsaktiebolaget Skandia (publ) and Ola Ramstedt v Riksskatteverket

Transcription

1 Opinion of Advocate General Léger, 3 April Case C-422/01 Försäkringsaktiebolaget Skandia (publ) and Ola Ramstedt v Riksskatteverket 1. This reference to the Court for a preliminar y ruling by the Regeringsrätten (Supreme Administrative Court), Sweden concerns the tax regime applying to an occupational pension insurance policy taken out for the benefit of a Swedish employee with insurance companies established in a Member State which is not Sweden. The applicable national law 2. Swedish law on the rules relating to the tax treatment of insurance contracts 2 distinguishes between pension insurance and endowment insurance and applies a different taxation regime to them. 3. It specifies certain conditions which an insurance policy requires to meet in order to be treated as a pension insur ance policy. 3 The policy requires inter alia to be taken out with an insurance company established in Sweden. 4. If these conditions are not met, an insurance policy is treated as an endowment insurance policy. This applies to any policy which is taken out with a foreign insurance company, even if it meets all the other conditions apply ing to a pension insurance policy. Such a policy is treated under Swedish law as an endowment insurance policy and is subject to the rules on direct taxes relating to it. 5. There are special provisions under Swedish law which apply to occupational pension insurance, which is pension insurance linked to employment. Occupational pensions may be guaranteed either by an employer taking out a pension insurance policy and paying the premiums under it, or by transfer to a retirement foundation, or b y the constitution of a special reserve which is included in the employer s balance sheet The main proceedings concern an occupational retirement polic y guaranteed by the employer taking out a pension insurance policy. The employer, as policyholder, is contractually obliged to pay all the premiums, and the insured is the emplo yee. 5 Sums payable under an occupational pension insurance policy are paid directly by the insurance company established in Sweden to the insured, namely the retired employee, as an occupational pension. Where a polic y is taken out with an insurance company established in another Member State, pay - ments are usually made by the insurance company to the employer, who in turn pays the retired emplo yee. 7. Under the tax regime applying to occupational pensions guaranteed by insurance taken out with a Swedish insurance company, premiums paid by the employer under the policy are immediately deductible in calculating his taxable income. Retirement benef its paid out subsequently are subject to tax in their entirety in the hands of the insured beneficiary, namely the retired employee, as earned income. 8. However, the tax regime applying to occupational pensions guaranteed by an insurance policy taken out with an insurance company established in another Member State is dif ferent from that described above. Firstly, an insurance policy taken out with such an insurance company in order to guarantee an occupational pension is termed endow ment insurance. 6 As far as the tax treatment is concerned, premiums paid by an employer are not deductible in calculating his taxable income. P ayments due under the contract are made by the foreign insurance company to the Swedish emplo yer, who pays them on to the retired emplo yee. 7 Deduction in the hands of the employer is permitted only once the occupational pension is paid to the emplo yee. That deduction is limited to the amount actually paid to the retired employee and the right to deduct arises only on the occasion of each payment. The right to deduct costs incurred b y an employer in ensuring the provision of retirement benefits thus arises at a later date than where the same insur ance is taken out with an insurance company 1. Original language: French. 2. The kommunalskattelagen (Municipal Tax Law (1928:370)), replaced from the 2002 tax year onwards by the inkommstskattelagen (Income Tax Law (1999:1229), hereinafter the IL). 3. Chapter 28 of the IL. 4. See the written observations of the Swedish Government (paragraph 9) and of Försäkringsaktiebolaget Skandia (hereinafter Skandia, paragraph 12 et seq.). 5. Chapter 58, Articles 2 to 7 of the IL. Occupational pension insurance comes under what Community law terms Pillar 2. Pillar 1 comprises the regime applicable generally to retirement pensions. Pillar 2 is additional to the general scheme under Pillar 1, and relates to occupational pensions. Lastly, Pillar 3, which is additional to the other two Pillars, relates to private pension plans (or personal pension plans). On these points, see the Green Paper from the Commission of 10 June 1997 on Supplementary Pensions in the Single Market (COM (1997) 283 final) and, more recently, Communication from the Commission to the Council, the European Parliament and the Economic and Social Committee of 19 April 2001 on the elimination of tax obstacles to the cross-border provision of occupational pensions (COM (2001) 214 final). 6. For the sake of clarity, I shall refer only to occupational pension insurance and shall indicate whether it has been taken out w ith an insurance company established in Sweden or in another Member State. I shall therefore not use the term endow ment, but instead occupational pension insurance taken out with an insurance company established in a Member State other than Sweden. 7. A Swedish employer may also instruct the insurance company to pay these sums directly and on his behalf to the insured employee (see Skandia s written observations at paragraph 28).

2 established in Sweden. 8 The pension which is subsequently paid is taxable in whole in the hands of the insured beneficiary, namely the employee, as earned income. 9. The tax regime applying to occupational pension insurance thus differs according to whether the insurance company is established in Sweden or in another Member State. 10. It should lastly be noted that the Kingdom of Sweden has concluded double taxation ag reements with all Member States apart from the Portuguese Republic. These agreements, which have been entered into in the form of the Organisation of Economic Cooperation and Development (OECD) Model Convention, include a clause which provides that retirement pensions are taxable only in the State in which a person is resident, even if premiums have been paid in another State. 9 Facts and procedure in the main proceedings 11. Ola Ramstedt is a Swedish citizen, resident in Sweden and employed by the Swedish company Skandia. The latter undertook to Mr Ramstedt to take out occupational pension insurance for his benefit. That insurance was to be taken out with the Danish undertaking Skandia Link Livforsikring A/S, with the German undertaking Skandia Lebensversicherung AG or w ith the English undertaking Skandia Life Assurance Ltd. 12. Mr Ramstedt and Skandia applied for an advance ruling f rom the Skatterättsnämnden (Council for Advance Tax Rulings), in order to establish the tax implications of taking out occupational pension insurance with foreign insurance companies. Specifically, the application related to the tax implications for Skandia (the right to deduct) and for Mr Ramstedt (whether receipts were taxable in his hands). 13. In its ruling of 1 February 2000, the Skatterättsnämnden found that Skandia was not entitled to deduct premiums paid, but that there was a right to deduct in respect of the pension benefits when they were paid out just as in the case of a direct pension. It also found that Mr Ramstedt should be taxed on sums paid to him under the contr act. The ruling stated that there was a dif ference in treatment between insurance companies established in Sweden and those established in another Member State, but that this did not entail any disc rimination by reason of the judgment in the Bachmann case Mr Ramstedt and Skandia appealed against this advance ruling to the Regeringsrätten. 15. In its order for reference, the Regeringsrätten states that the implication of the contested decision was that Skandia s right to deduct premium payments arises at a later date than when the premiums are paid, in that the deduction does not relate to premiums paid, but to sums actually paid out as pension benef its. 16. The national court confirms that this difference in the applicable taxation regime entails less favourable consequences in certain cases for Skandia as employer when insurance is taken out with an insurance company established in a Member State other than Sweden. It g ives two examples. 17. If payments are made under the insurance policy and the right to deduct cannot be used until long after the premiums ha ve been paid in, and the insurance benefits payable are not significantly higher than the amount of the premiums paid, an occupational pension insurance policy taken out with a company abroad may entail less favourable consequences in terms of income tax than an equivalent policy taken out with an insurance company established in Sweden. In a case in which pay ments are made under the insurance policy and the right to deduct can be invoked after only a short period of time, and the insurance benefits are significantly higher than the amount of premiums paid, the result can be the opposite The national court notes however that as far as Mr Ramstedt is concerned, whether his emplo yer choose an insurance company established in Sweden or one established in a Member State other than Sweden is not a matter which has any tax consequences. In each case, the employee is taxed on benefits received as earned income. 19. In its order for reference, the national court notes that it is possible for the application of the tax regime for endowment insurance to have less favourable consequences than under the reg ime which applies to occupational pension insur ance. This finding led it to consider the requirement under the IL, that an insurance company be established in Sweden in order to benef it from the tax regime applicable to pension insurance policies, in the context of the fundamental freedoms guaranteed by the EC Treaty. The question referred for a preliminary ruling 20. The Regeringsrätten therefore decided to refer the following question to the Court for a preliminar y ruling: 8. As Skandia points out in its written observations (paragraph 28), a period of up to 40 years may elapse in the case of young employees before the employer is entitled to deduct costs incurred in ensuring the prov ision of retirement benefits. 9. Article 18 of the Organisation of Economic Cooperation and Development Model Convention, in Vogel, K., Double Taxation Conventions, Kluwer Law and Taxation Publishers, Deventer-Boston, 1991, p Case C-204/90 [1992] ECR I See order for reference (p. 11).

3 Are the provisions of Community law on freedom of movement for persons, services and capital, in particular Article 49 EC, in conjunction with Article 12 EC, to be interpreted as meaning that the y preclude application of national tax rules under which an insurance policy issued by an insurance company in the UK, Germany or Denmark which meets the conditions laid dow n in Sweden for occupational pension insurance - apart from the condition that the policy must be issued by an insurance company operating in Sweden - is treated as an endow ment insurance policy with income tax effects which, depending on the circumstances in the individual case, may be less favourable than the tax effects of an occupational pension policy? Analysis 21. The question referred by the national court asks the Court whether the prov isions of the Treaty on freedom of movement for persons and capital and the freedom to provide services, as well as those on non-discrimination, have the result that national legislation is unlawful if, as in the present case, it imposes a less favourable taxation regime where occupational pension insurance is taken out with an insurance company established in a Member State other than Sweden than where the same ty pe of insurance is taken out with an insurance company established in Sweden. 22. I consider, as does the Commission of the European Communities, that the scope of the question referred for a preliminar y ruling may be confined to one of the interpretation of Article 49 EC It is settled case-law that, as they are taken out in order that pension benef its may be paid under them at a later date, pension insur ance policies are subject to the rules on the freedom to provide services within the meaning of Article 49 EC et seq. 13 The Court has also consistently held that Article 12 EC applies only to situations governed b y Community law in regard to which the Treaty lays down no specific prohibition of discrimination. 14 In the present case, Article 49 EC expressly refers to the princ iple of non-discrimination in the context of the freedom to provide services. 24. I shall therefore consider whether Article 49 EC should be interpreted as meaning that it precludes national leg islation which, as in the present case, lays down tax rules that may be less favourable in the case of an occupational pension insurance policy taken out with an insurance company established in another Member State than of one taken out with an insurance company established in the Member State concerned. Restriction on the freedom to provide services 25. The Court has consistently held that although, as Community la w stands at present, direct taxation does not as such fall w ithin the purview of the Community, the powers retained by the Member States must nevertheless b y exercised consistently with Community law. 15 It follows that in exercising their retained powers, Member States must not contr avene the fundamental freedoms guaranteed by the Treaty, such as the freedom to provide services According to the Court, [i]n the perspective of a single market and in order to permit the attainment of the objectives thereof, Article 59 of the Treaty precludes the application of any national legislation which has the effect of making the provision of services between Member States more difficult than the provision of services purely within one Member State It should next be pointed out that it is settled case-la w that discrimination can only arise through the application of different rules to comparable situations or the application of the same rule to different situations. 18 The legislation in issue in the main proceedings prov ides for the application of different tax rules to the same situation, namely the tak ing out of occupational pension insurance, depending on whether it is taken out with an insurance company which is, or is not, established in Sweden. 28. The Commission makes a distinction as regards the implications of the tax legislation for Skandia and Mr Ramstedt. According to the Commission, Mr Ramstedt is liable to tax on pay ments made to him in the same way, whether the insurance is taken out with an insurance company established in Sweden or in another Member State. On the other hand, as far as Skandia is concerned, premiums paid are not deductible at the time when they are paid. Deduction is permitted only when the corresponding pay ments are made to Mr Ramstedt as a pension and not for premiums paid. Whereas if Skandia took out occupational pension insurance for Mr Ramstedt with an insurance company established in Sweden, it could deduct the premiums at the time when the y were paid. 29. I share the Commission s view that legislation of the kind in question in the main proceedings contains a number of elements liable to dissuade or prevent an employer from taking out occupational pension insurance with an insurance company that is not established in Sweden Case 35/85 Procureur de la République v Tissier [1986] ECR 1207, paragraph See, in particular, Cases C-381/93 Commission v France [1994] ECR I-5145, paragraph 16, and C-118/96 Safir [1998] ECR I-1897, paragraph See inter alia Cases 305/87 Commission v Greece [1989] ECR 1461, paragraph 13, and C-379/92 Peralta [1994] ECR I-3453, paragraph See Cases C-279/93 Schumacker [1995] ECR I-225, paragraph 21, C-80/94 Wielockx [1995] ECR I-2493, paragraph 16, C-107/94 Asscher 1996] ECR I-3089, paragraph 36, C-391/97 Gschwind [1999] ECR 5451, paragraph 20, and C-55/00 Gottardo [2002] ECR I-413, paragraph See Bachmann, cited above, paragraph 31, and Case C-300/90 Commission v Belgian State [1992] ECR I-305, paragraph See Case C-136/00 Danner [2002] ECR I-8147, paragraph 29. See also Commission v France, cited above, paragraph 17 and Safir, cited above, paragraph See Schumacker, cited above, paragraph See the Safir case, cited above, paragraph 30.

4 30. My analysis extends only to Article 49, seen in the context of the taxation regime applying to the employer, Skandia, under Swedish legislation. 31. The taxation regime applying to an employer who takes out occupational pension insurance with an insurance company established in a Member State other than Sweden is less favourable than that which applies when the insurance company is established in Sweden. An employer who seeks to avoid the less favourable regime is forced to take out the same insurance with an insurance company established in Sweden. The necessary conclusion is therefore that the effect of the Swedish legislation is to impose a requirement of establishment in its territory on the provision of pension insurance. 32. Such a requirement represents an indirect form of discrimination, contrary to the freedom to provide services. That is recognised directly or indirectly by all the interveners in this case. It follows that the fundamental issue here is whether that disc rimination is capable of being justified. Grounds of justification proposed 33. The Swedish Government and the Riksskatteverket (Swedish National Tax Board) justify the requirement of establishment in Sweden under the legislation in question on four grounds. The grounds proposed in support of their position that the legislation is not contrary to Community law are: the cohesion of the tax system, the effectiveness of fiscal controls, the protection of the integrity of the tax base and competitive neutrality In my opinion, none of these grounds is justified. The cohesion of the tax system 35. The Swedish and Danish Governments and the Riksskatteverket rely on the arg ument of the cohesion of the tax system to justify the national legislation in question. They claim that the solution put forward by the Court in the Bachmann case, cited above, may be applied to the present case, even if the factual situation is not wholly identical. 36. In the Bachmann case, the Court required to address Belg ian tax legislation under which insurance premiums could not be deducted from taxable income when they were paid abroad. The Court held that this reg ime was compatible with Community law because there was a direct link between the deductibility of contributions and the taxation of pensions. Under the Belgian system, the loss of revenue due to the deduction of insurance contributions was compensated for by the taxation of pensions, annuities and capital sums payable by the insurance companies. Conversely, these sums were exempt where contributions were not deductible. 37. In the national system in issue in the Bachmann case, the fiscal disadvantage was compensated for b y a subsequent fiscal advantage. 38. Unlike the Swedish and Danish Governments, I am of the opinion that this solution cannot be applied to the present case. As Skandia, 21 the Commission and the supervisory authority AELE rightly point out, the c ircumstances in this case differ from those which gave rise to the Bachmann judgment. In the present matter, the Swedish taxation system provides no fiscal advantage to compensate for the f iscal disadvantage suffered by the employer, Skandia, by reason of the application of the Swedish taxation rules relating to endow ment insurance, under which insurance premiums paid are not deductible. 39. The national legislation provides that once Skandia has taken out the insurance policy in question with an insurance company established in a Member State other than Sweden, it must wait until pensions are paid before ha ving a right to deduct. The Swedish leg islation provides no fiscal advantage to counterbalance that disadvantage suf fered by Skandia. 40. In the absence of a fiscal advantage to counterbalance the f iscal disadvantage suffered by Skandia, it is not in my opinion possible to use an argument based on the cohesion of the tax system to justify the Swedish legislation under Community law. The effectiveness of fiscal controls 41. According to the Swedish and Danish Governments, the requirement of establishment in Sweden is justified by the need to have in place an effective system of fiscal controls. The Swedish tax authorities must be able to obtain the information necessar y for controls of this kind. The Community instruments which prov ide for such controls and in particular Counc il Directive 77/799/EEC of 19 December 1977 concerning mutual assistance by the competent authorities of the Member States in the field of direct taxation, 22 are inadequate. It would likewise not be possible to ensure effective fiscal controls relying only on voluntary cooperation See the written observations of the Swedish Government (pp. 8 to 12). 21. The choice which existed in the Bachmann case, cited above, (deductibility and liability to tax in the case of insurance taken out with a Belgian insurance company, or non-deductibility coupled with no liability to tax in the case of insurance taken out with an insurance company established outside Belgium) is not open to a Swedish employer who is required to take out life insurance to guarantee an occupational pension (see Skandia s written observations, paragraph 91). 22. OJ 1977 L 336, p See the written observations of the Swedish (paragraph 48 et seq.) and Danish (paragraph 39 et seq.) Governments.

5 42. I would point out that the Court has consistently held that an arg ument based on the effectiveness of fiscal controls cannot be used to justify discrimination against the freedom to provide services where Directive 77/799 may be invoked by a Member State in order to obtain from the competent authorities of another Member State all the information necessar y to ascertain the correct amount of income tax payable I would also note that the double taxation ag reements provide for mutual aid and assistance regarding the exchange of information between the tax authorities of the States which are parties to them. Nothing prevents the Swedish tax authorities f rom demanding such evidence as they deem necessary from, in this case, Skandia, Mr Ramstedt or the insur ance company itself in order to establish whether or not the requested deduction should be allowed I am therefore of the view that it is possible to guarantee the effectiveness of fiscal controls by means that are less restrictive than the Swedish legislation at issue in this case. This ground of justification is not well founded. The need to protect the tax base 45. According to the Swedish and Danish Governments, the Swedish leg islation is designed to avoid the risk that the taxable subject-matter may disappear. These Governments point out that a situation could arise in which the Kingdom of Sweden would allow the deduction of premiums paid under the insurance policy, after which the employee could leave Sweden for another Member State, thereb y avoiding tax on his insurance payments qua income. These Governments say that the need to preser ve the tax base was recognised by the Court in the Safir case, cited above, as an overriding reason relating to the public interest. 46. In my opinion, it is no possible to read and interpret the Safir judgment in this way. 47. The Danner judgment, cited above, states that: the Court has held, in par agraph 34 of Safir, that the need to fill the fiscal vacuum arising from the non-taxation of savings in the form of capital life assurance policies taken out with companies established in a Member State other than the one where the saver is resident was not such as to justif y the national measure at issue, which restricted the f reedom to provide services. 26 The Court has held that the need to take a reduction of tax revenue into account is not one of the grounds listed in Article 46 EC and cannot be regarded as a matter of overriding general interest which may be relied on in order to justif y unequal treatment This ground therefore appears unjustified. Competitive neutrality 49. The final ground put forward by the Swedish Government is in my view unclear and difficult to understand. It claims that the national legislation requiring an establishment in Sweden is necessar y in order to guarantee competitive neutrality. 28 The Swedish Government explains that an employer may deduct the costs of retirement pensions paid for by him before actual payment of the pension due to an employee in three ways: by creating a reserve in the balance sheet taking the form of an insurance credit, by the transfer of funds to a retirement foundation or by taking out a pension insurance policy. The Swedish legislation is needed in order to guarantee competitive neutrality, particularly where retirement is prov ided for by the creation of a reserve in the balance sheet taking the form of an insurance credit or by the transfer of funds to a retirement foundation. 50. I have difficulty in following the reasoning of the Swedish Government in so far as it seeks to justif y its legislation on the basis of competitive neutrality. Nevertheless, and in any event, I am of the view, firstly, that this discussion is irrelevant because, as set out above, the main proceedings involve occupational pension insurance underwritten by the taking out by the employer of a pension insurance policy. The two other methods of guaranteeing the insurance in question referred to by the Swedish Government are therefore not in issue. 51. Secondly, in my opinion, and as the Commission and the super visory authority AELE have pointed out, it is precisely in respecting the Treaty rules on the fundamental freedoms, such as Article 49 EC, that respect for the rules on competition may be g uaranteed. This ground cannot be justified in any circumstances. Conclusion 52. I am therefore of the opinion that the Court should rule as follows: Article 49 EC is to be interpreted as meaning that it precludes application of national legislation such as that in issue in the present case which lays down tax rules which are less favourable where an occupational pension insurance policy is taken out with an insurance company established in another Member State than when it is taken out w ith an insurance company established in the Member State in question. 24. See Bachmann (paragraph 18), Commission v Belgium (paragraph 11), Wielockx (paragraphs 24 and 25) and Danner (paragraphs 49 et seq.), all cited above. See also Case C-55/98 Vestergaard [1999] ECR I-7641, paragraph Under Swedish law a Swedish employer is required to make a return to the tax authorities of sums paid under an insurance contract. 26. Paragraph See Case C-307/97 Saint-Gobain ZN [1999] ECR I-6161, paragraph See its written observations (paragraph 36 et seq. and also paragraphs 57 and 58).