Context

As you may be aware, the Belgian income tax code provides for the possibility to claim a tax credit for individual life insurance premiums provided certain conditions are met. One of those conditions is that the premiums must be paid to an insurance company which is established in Belgium. The question whether this condition could be regarded as a restriction of freedom to provide services within the meaning of Article 59 of the EC Treaty (now, after amendment, Article 49 EC) has already been debated (Bachmann-case). The European Court of Justice (ECJ) decided that this condition represented such a restriction but that it was justifiable, as the Belgian income tax code does not provide for a taxation of benefits built up with premiums for which no tax credit has been claimed.

News

Under the Finnish tax Law, premiums paid to voluntary foreign pension insurance schemes do not benefit from any tax concession while premiums paid locally do. However benefits derived from Finnish and foreign schemes are taxable. In its decision of 3 October 2002 (Danner-case: 136/00) the ECJ decided that restricting the availability of a tax deduction for premiums paid to a Finish based insurance company represented a restriction of freedom to provide services which was not justifiable.

Comment

In this respect, it should be noted that our Belgian income tax code still allows a tax deduction for the employer’s premium and a tax credit for the employee’s premium paid within the scope of a collective pension plan under the condition that such premiums are paid to Belgian-based funds or insurers. Regardless of whether such collective pension plan premiums have been paid in Belgium or abroad, pension benefits are subject to Belgian income tax. Such provision may in our view be regarded as a restriction of freedom to provide services which, based on the last decision of the ECJ, seems difficult to consider justifiable.