PensionsEurope calls to remove withholding tax refund barriers to cross-border investment in the EU

In its paper, published on 19 April 2016, PensionsEurope provides several examples of the lack of reciprocal recognition of pension funds and the problems with the withholding tax (WHT) refund processes. PensionsEurope calls on policymakers to remove WHT barriers to cross-border investments in the EU.

Janwillem Bouma, Chair of PensionsEurope:

- "The obstacles with the WHT refund processes pose a major barrier to cross-border investments in the EU and to build the Capital Markets Union. In order to boost the economic growth in the EU, PensionsEurope calls on the EU Member States and the European Commission to remove all the WHT barriers to cross-border investments. This means that the EU Member States shall respect the case-law of the Court of Justice of the European Union, reciprocally and automatically recognize pension funds, and simplify their WHT processes."

A large number of practical problems with the WHT refund processes still exist in spite of the EFTA judgment “Fokus Bank” (2004) and the case law of the Court of Justice of the European Union i.e. “Denkavit” (2006), “Amurta” (2007), “Aberdeen” (2009), and “Santander” (2012). The above-mentioned cases have shown that the WHT practices in many EU Member States are discriminatory with respect to dividends earned by foreign funds, and therefore, contradicting the European law.

Matti Leppälä, Secretary General/CEO of PensionsEurope:

- "The WHT refund processes are complex, expensive, and long-lasting. Often they can last even 10 years and cost half of the expected refunds, as costly tax advice in foreign languages is needed. Since the legal outcomes are uncertain, given that the legal recourse involves several levels of jurisdiction, often pension funds do not assert their justified reclaims. Therefore, PensionsEurope calls on the EU Member States to ensure simple, transparent, and inexpensive WHT refund processes."