Commission urges Sweden to amend its rules on taxation of dividends to non-resident public pension institutions


After the European Commission had formally requested Sweden to stop applying a higher dividend withholding tax to foreign pension institutions and insurance companies respectively in its February 2021 infringement package, the Commission has now decided to send a reasoned opinion (the next step in infringement proceedings) to Sweden regarding its legislation on taxation of dividends paid to public pension institutions. Whereas Swedish public pension funds are, as state agencies, entirely exempt from tax liability, dividends paid to comparable non-resident public pension institutions are subject to a withholding tax, commonly at a rate of 15%, as resulting from the tax treaties concluded between Sweden and other EU/EEA countries. The Commission deems that such a fiscal scheme under which dividends paid to foreign public pension institutions are subject to less favourable treatment than similar distributions in purely domestic situations infringes the free movement of capital (Article 63 TFEU and Article 40 of the EEA Agreement). Sweden has two months to respond after which the Commission may decide to refer the case to the Court of Justice of the European Union.


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