08 November 2018

Investment & Pensions Europe: EC urged to exempt all pension plans from ‘unnecessary’ VAT burden

The European Commission must act to ensure all pension funds are exempt from having to “unnecessarily” pay value-added tax on contracted management services, according to two major pan-European advocacy organisations.

In a joint paper, PensionsEurope and the European Association of Paritarian Institutions (AEIP) called for EU legislation to be amended as it did not contribute to the equal treatment of pension schemes within the bloc and undermined “the freedom of contract of pension providers and paritarian institutions”.

Paritarian institutions are institutions jointly established and managed by employers and trade unions on the basis of collective agreements, and generally for the purpose of social protection.

AEIP and PensionsEurope called for all pension fund participants, regardless of the character of the schemes or the member states in which the services were received, to be freed from “unnecessary VAT burdens”.

They emphasised that the exemption of management services to pension plans must be clear and that non-discriminative policies were vital for maintaining a level playing field within the EU.

Under the current interpretation of the VAT Directive, the Brussels-based lobby organisations said, similar pension schemes in different countries were being treated differently for tax purposes with regard to the management services they procured.

The current regime also did not provide enough guidance for increasingly commonplace hybrid pension plans, PensionsEurope and AEIP said.

Alexandra Kaydzhiyska, permanent representative from AEIP, said the VAT Directive had not kept up with developments in the pensions landscape.

“It is time to update the rules to ensure that all pension funds are exempt and that they respect the principles of non-discrimination and neutrality,” she said.

PensionsEurope CEO Matti Leppälä suggested the current situation was at odds with efforts to boost funded retirement provision in Europe.

Full article

Position paper

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