C-422/01

SKANDIAAND RAMSTEDT

OPINION OF ADVOCATE GENERAL LÉGER delivered on 3 April 2003 1

1. This reference to the Court for a 4. If these conditions are not met, an preliminary ruling by the Regeringsrätten insurance policy is treated as an endow- (Supreme Administrative Court), Sweden ment insurance policy. This applies to any concerns the tax regime applying to an policy which is taken out with a foreign occupational pension insurance policy insurance company, even if it meets all the taken out for the benefit of a Swedish other conditions applying to a pension employee with insurance companies estab- insurance policy. Such a policy is treated lished in a Member State which is not under Swedish law as an endowment insur- Sweden. ance policy and is subject to the rules on direct taxes relating to it.

The applicable national law 5. There are special provisions under Swed- ish law which apply to occupational pen- sion insurance, which is pension insurance linked to employment. Occupational pen- 2. Swedish law on the rules relating to the sions may be guaranteed either by an tax treatment of insurance contracts 2dis- employer taking out a pension insurance tinguishes between pension insurance and policy and paying the premiums under it, endowment insurance and applies a dif- or by transfer to a retirement foundation, ferent taxation regime to them. or by the constitution of a special reserve which is included in the employer's balance sheet. 4

premiums, and the insured is the company in order to guarantee an occupa- employee. 5 Sums payable under an occu- tional pension is termed endowment insur- pational pension insurance policy are paid ance. 6 As far as the tax treatment is directly by the insurance company estab- concerned, premiums paid by an employer lished in Sweden to the insured, namely the are not deductible in calculating his taxable retired employee, as an occupational pen- income. Payments due under the contract sion. Where a policy is taken out with an are made by the foreign insurance company insurance company established in another to the Swedish employer, who pays them Member State, payments are usually made on to the retired employee. 7Deduction in by the insurance company to the employer, the hands of the employer is permitted only who in turn pays the retired employee. once the occupational pension is paid to the employee. 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 by an 7. Under the tax regime applying to occu- employer in ensuring the provision of pational pensions guaranteed by insurance retirement benefits thus arises at a later taken out with a Swedish insurance com- date than where the same insurance is pany, premiums paid by the employer taken out with an insurance company under the policy are immediately deduct- established in Sweden. 8The pension which ible in calculating his taxable income. is subsequently paid is taxable in whole in Retirement benefits paid out subsequently the hands of the insured beneficiary, are subject to tax in their entirety in the namely the employee, as earned income. hands of the insured beneficiary, namely the retired employee, as earned income.

6 — For the sake of clarity, I shall refer only to occupational 5 — Chapter 58, Articles 2 to 7 of the IL. Occupational pension pension insurance and shall indicate whether it has been insurance comes under what Community law terms Pillar 2. taken out with an insurance company established in Sweden Pillar 1 comprises the regime applicable generally to or in another Member State. I shall therefore not use the retirement pensions. Pillar 2 is additional to the genera] term 'endowment', but instead 'occupational pension insur- scheme under Pillar 1, and relates to occupational pensions. ance taken out with an insurance company established in a Lastly, Pillar 3, which is additional to the other two Pillars, Member State other than Sweden'. relates to private pension plans (or personal pension plans). 7 — A Swedish employer may also instruct the insurance On these points, see the Green Paper from the Commission company to pay these sums directly and on his behalf to of 10 June 1997 on Supplementary Pensions in the Single the insured employee (see Skandia's written observations at Market (C0M(1997) 283 final) and, more recently, Com- paragraph 28). munication from the Commission to the Council, the 8 — As Skandia points out in its written observations European Parliament and the Economic and Social Com- (paragraph 28), a period of up to 40 years may elapse in mittee of 19 April 2001 on the elimination of tax obstacles the case of young employees before the employer is entitled to the cross-border provision of occupational pensions to deduct costs incurred in ensuring the provision of (COM(2001) 214 final). retirement benefits.

12. Mr Ramstedt and Skandia applied for an advance ruling from the Skatterätts- nämnden (Council for Advance Tax Rul- ings), in order to establish the tax impli- 15. In its order for reference, the Regerings- cations of taking out occupational pension rätten states that the implication of the contested decision was that Skandia's right to deduct premium payments arises at a 9 — Article 18 of the Organisation of Economic Cooperation and Development Model Convention, in Vogel, K., Double Taxation Conventions, Kluwer Law and Taxation Pub- lishers, Deventer-Boston, 1991, p. 855. 10 — Case C-204/90 |1992| ECU I-249.

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OPINION OF MR LÉGER — CASE C-422/01

later date than when the premiums are 18. The national court notes however that paid, in that the deduction does not relate as far as Mr Ramstedt is concerned, to premiums paid, but to sums actually whether his employer choose an insurance paid out as pension benefits. 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.

16. The national court confirms that this difference in the applicable taxation regime 19. In its order for reference, the national entails less favourable consequences in court notes that it is possible for the certain cases for Skandia as employer when application of the tax regime for endow- insurance is taken out with an insurance ment insurance to have less favourable company established in a Member State consequences than under the regime which other than Sweden. It gives two examples. applies to occupational pension insurance. This finding led it to consider the require- ment under the IL, that an insurance company be established in Sweden in order to benefit from the tax regime applicable to pension insurance policies, in the context of the fundamental freedoms guaranteed by the EC Treaty.

interpreted as meaning that they preclude 23. It is settled case-law that, as they are application of national tax rules under taken out in order that pension benefits which an insurance policy issued by an may be paid under them at a later date, insurance company in the UK, Germany or pension insurance policies are subject to the Denmark which meets the conditions laid rules on the freedom to provide services down in Sweden for occupational pension within the meaning of Article 49 EC et insurance — apart from the condition that seq. 13 The Court has also consistently held the policy must be issued by an insurance that Article 12 EC applies only to situations company operating in Sweden — is treated governed by Community law in regard to as an endowment insurance policy with which the Treaty lays down no specific income tax effects which, depending on the prohibition of discrimination. 14 In the circumstances in the individual case, may present case, Article 49 EC expressly refers be less favourable than the tax effects of an to the principle of non-discrimination in the occupational pension policy?' context of the freedom to provide services.

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OPINION OF MR LÉGER — CASE C-422/01

present, direct taxation does not as such application of the same rule to different fall within the purview of the Community, situations. 18 The legislation in issue in the the powers retained by the Member States main proceedings provides for the appli- must nevertheless by exercised consistently cation of different tax rules to the same with Community law'. 15 It follows that in situation, namely the taking out of occu- exercising their retained powers, Member pational pension insurance, depending on States must not contravene the fundamen- whether it is taken out with an insurance tal freedoms guaranteed by the Treaty, such company which is, or is not, established in as the freedom to provide services. 16 Sweden.

27. It should next be pointed out that it is settled case-law that discrimination can only arise through the application of dif- ferent rules to comparable situations or the 29. I share the Commission's view that legislation of the kind in question in the main proceedings contains a number of 15 —See Cases C-279/93 Schumacher [1995] ECR I-225, paragraph 21, C-80/94 Wielockx [1995] ECR I-2493, elements liable to dissuade or prevent an paragraph 16, C-107/94 Asscher 1996] ECR I-3089, paragraph 36, C-391/97 Gschwind [1999] ECR 5451, employer from taking out occupational paragraph 20, and C-55/00 Gottardo [2002] ECR I-413, pension insurance with an insurance com- paragraph 22. pany that is not established in Sweden. 19 16 — See Bachmann, cited above, paragraph 31, and Case C-300/90 Commission v Belgian State [1992] ECR I-305, paragraph 22. 17 —See Case C-136/00 Danner [2002] ECR I-8147, paragraph 29. See also Commission v France, cited above, 18 — See Schitmacker, cited above, paragraph 30. paragraph 17 and Safir, cited above, paragraph 23. 19 — See the Safir case, cited above, paragraph 30.

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SKANDIA AND RAMSTEDT

36. In the Bachmann case, the Court required to address Belgian tax legislation Grounds of justification proposed under which insurance premiums could not be deducted from taxable income when they were paid abroad. The Court held that

33. The Swedish Government and the 20 — See the written observations of the Swedish Government Riksskatteverket (Swedish National Tax lpp. 8 to 12).

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OPINION OF MR LÉGER — CASE C-422/01

this regime was compatible with Commu- 39. The national legislation provides that nity law because there was a direct link once Skandia has taken out the insurance between the deductibility of contributions policy in question with an insurance com- and the taxation of pensions. Under the pany established in a Member State other Belgian system, the loss of revenue due to than Sweden, it must wait until pensions the deduction of insurance contributions are paid before having a right to deduct. was compensated for by the taxation of The Swedish legislation provides no fiscal pensions, annuities and capital sums pay- advantage to counterbalance that disadvan- able by the insurance companies. Con- tage suffered by Skandia. versely, these sums were exempt where contributions were not deductible.

37. In the national system in issue in the 40. In the absence of a fiscal advantage to Bachmann case, the fiscal disadvantage counterbalance the fiscal disadvantage suf- was compensated for by a subsequent fiscal fered by Skandia, it is not in my opinion advantage. possible to use an argument based on the cohesion of the tax system to justify the Swedish legislation under Community law.

SKANDIA AND RAMSTEDT

field of direct taxation, 22 are inadequate. It 44. I am therefore of the view that it is would likewise not be possible to ensure possible to guarantee the effectiveness of effective fiscal controls relying only on fiscal controls by means that are less voluntary cooperation. 23 restrictive than the Swedish legislation at issue in this case. This ground of justifi- cation is not well founded.

42. I would point out that the Court has The need to protect the tax base consistently held that an argument based on the effectiveness of fiscal controls can- not 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 45. According to the Swedish and Danish competent authorities of another Member Governments, the Swedish legislation is State all the information necessary to designed to avoid the risk that the taxable ascertain the correct amount of income subject-matter may disappear. These Gov- tax payable. 24 ernments 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, thereby avoid- ing tax on his insurance payments qua 43. I would also note that the double income. These Governments say that the taxation agreements provide for mutual need to preserve the tax base was recog- aid and assistance regarding the exchange nised by the Court in the Safir case, cited of information between the tax authorities above, as an overriding reason relating to of the States which are parties to them. the public interest. Nothing prevents the Swedish tax auth- orities from demanding such evidence as they deem necessary from, in this case, Skandia, Mr Ramstedt or the insurance company itself in order to establish whether 46. In my opinion, it is no possible to read or not the requested deduction should be and interpret the Safir judgment in this allowed. 25 way.

48. This ground therefore appears unjusti- fied. 50. I have difficulty in following the rea- soning of the Swedish Government in so far as it seeks to justify its legislation on the basis of competitive neutrality. Neverthe- less, and in any event, I am of the view, firstly, that this discussion is irrelevant Competitive neutrality because, as set out above, the main pro- ceedings involve occupational pension insurance underwritten by the taking out by the employer of a pension insurance policy. The two other methods of guaran- teeing the insurance in question referred to 49. The final ground put forward by the by the Swedish Government are therefore Swedish Government is in my view unclear not in issue. and difficult to understand. It claims that the national legislation requiring an estab- lishment in Sweden is necessary in order to guarantee competitive neutrality. 28 The Swedish Government explains that an employer may deduct the costs of retire- ment pensions paid for by him before actual payment of the pension due to an employee in three ways: by creating a 51. Secondly, in my opinion, and as the reserve in the balance sheet taking the form Commission and the EFTA Surveillance Authority have pointed out, it is precisely in respecting the Treaty rules on the 26 — Paragraph 55. fundamental freedoms, such as Article 49 27 — See Case C-307/97 Saint-Gobain ZN [1999] ECR I-6161, EC, that respect for the rules on compe- paragraph 51. 28 — See its written observations (paragraph 36 et seq. and also tition may be guaranteed. This ground paragraphs 57 and 58). cannot be justified in any circumstances. I - 6828