Calls to relieve EU pensions of VAT burden

The relief of pension fund participants from unevenly-applied VAT charges on contracted management services has been called for by an EU pension representative and a Brussels-based advocacy group, who criticise the lack of 'political willingness'

The joint position paper calls for a change to the current interpretation of the use of management services rendered to special investment funds, a category that includes pensions. The use of these services is at present calculated for VAT purposes based on the form and place of residence of the plan. PensionsEurope and the association européenne des institutions paritaires (AEIP), the authors of the paper, note that this results in similar pension schemes in different countries facing different tax treatments for the management services they use.

It calls for the European Commission ‘to take the necessary steps to relieve all pension fund participants from unnecessary VAT burdens, regardless the character of the schemes as well as the member state in which the services are being received’ and amendments to the VAT directive that will provide clarity and are up-to-date.

The paper suggests an amendment to clause 135 of the Directive of 17 May 1977 (77/388/EEC) in order to allow that any services rendered to pension plans irrespective of the type of plan or place of residence are exempt. This, the groups believe, would create ‘a level playing field across the EU, meaning that all pension plans are treated equally for VAT purposes’.

PensionsEurope CEO Matti Leppälä said: ‘It is clear that we need to boost funded retirement provision in Europe to make sure our aging population will continue to have decent pensions. Pension funds manage to keep costs low for their participants through economies of scale, which makes a real difference to investment performance over time.

‘Saddling pension funds with an unnecessary and arbitrary VAT burden makes them less attractive and ultimately undermines the objective of achieving adequate and sustainable pensions across Europe.’

Alexandra Kaydzhiyska, Permanent Representative from AEIP, said: ‘The VAT Directive has not kept up with developments in the pensions landscape. This leads to a different treatment of essentially similar pension funds. 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. ‘

Report by James Bunney

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