Book a meeting
Insights

European Commission formally asks Sweden and France to stop higher withholding tax to foreign pension institutions and insurance companies

EU urges Sweden and France to align dividend tax rules with EU law, ensuring fair treatment for foreign pension and insurance entities.

From the European Commission's February 2021 infringement package: Sweden and France requested to stop applying a higher dividend withholding tax to foreign pension institutions and insurance companies respectively.

France

The European Commission formally asks France to change its withholding tax rules on dividends paid to “unit linked insurance policies” (“ULIPs”) offered by foreign insurance companies established in the  EU or EEA. A ULIP is a life insurance scheme where the premiums paid by the policy-holder are used to purchase units in investment funds selected by that person, and where the dividends paid out by the funds are passed on by the insurer to the policy-holder. Insurance companies established in the EU or EEA are required to pay a final withholding tax on French dividends received in relation to ULIPs. However, insurance companies established in France either pay no withholding tax on dividends in relation to ULIPs, or can credit the withholding tax paid against French corporation tax, which amounts to zero. This is because the dividends received constitute deductible provisions or technical reserves. The Commission deems that these rules infringe on the free movement of capital (Article 63(1) of the TFEU and Article 40 of the EEA Agreement). France has two months to reply to the arguments raised by the Commission. Otherwise, the Commission may decide to send a reasoned opinion.

Sweden

The European Commission formally asks Sweden to look at a potential incompatibility of its legislation with EU law on taxation of dividends paid to public pension institutions. Swedish public pension funds are, as government agencies, entirely exempt from tax liability. Dividends paid to equivalent non-resident public pension institutions are subject to a withholding tax, commonly at a reduced rate of 15% as provided for in the tax treaties concluded between Sweden and other EU/EEA countries. The Commission considers that such a fiscal scheme under which dividends paid to foreign public pension institutions are subject to less favorable treatment than similar distributions in purely domestic situations may infringe the free movement of capital (Article 63(1)of the TFEU and Article 40 of the EEA Agreement). Sweden has two months to reply to the arguments raised by the Commission after which the Commission may decide to send a reasoned opinion.

Source: https://ec.europa.eu/commission/presscorner/detail/en/INF_21_441

If you have any questions what these procedures may mean for your organization, please do not hesitate to send your questions to [email protected].

Jeroen van der Wal

Business Development Representative

Topics

Unlock your 

withholding tax recovery potential

Get in touch and see for yourself how you can take control and optimize your withholding tax returns

Insights you might also like

AUGUST 26, 2025 • 5 minute read

CJEU Ruling in Case C-602/23: CJEU says Austria may deny refund if income is taxed at investor level

In a decisive judgment rendered on 30 April 2025 in Finanzamt für Großbetriebe v. Franklin Mutual Series Funds – Franklin Mutual European Fund (C-602/23), the Court of Justice of the European Union (CJEU) provided clarity on the treatment of foreign investment funds under Austrian withholding tax law.

Tax news

JULY 22, 2025 • 3 minute read

U.S. – Denmark Competent Authority Arrangement Finalized: Implication from 81/100 Group Trusts and Withholding Tax Reclaims

In March 2025, the United States and Denmark finalized a Competent Authority Arrangement (CAA) clarifying which pension entities or arrangements qualify under “pension fund” status in order to qualify for treaty benefits under Article 10(3)(c) of the 1999 Denmark–U.S. tax treaty.

Tax news

JULY 11, 2025 • 4 minute read

Poland Issues Final Guidance on Beneficial Ownership for Withholding Tax (WHT) Relief

On 9 July 2025, the Polish Ministry of Finance published binding tax clarifications (Objaśnienia podatkowe) on the application of the “beneficial owner” clause to withholding tax (WHT) relief. These explanationsmark the first authoritative statement of Poland’s BO doctrine.

Tax news