Belgian taxation of life insurance contracts found contrary to EC Law
Opinion of Advocate General, 3 October 2006, Case C-522/04, Commission of the European Communities v. Kingdom of Belgium
In his opinion of today, Advocate General STIX-HACKL has concluded that a number of Belgian tax provisions relating to life insurance contracts are contrary to EC law. The Belgian tax provisions include:
- Article 59 of the BITC (Belgian Income Tax Code) which makes the deductibility of employers’ supplementary pension and life assurance contributions subject to the condition that the contributions be paid to an insurance undertaking or mutual fund established in Belgium.
- Articles 145/1 and 145/3 BITC subjects the tax reduction for long-term savings granted for personal supplementary pension and life assurance contributions in the form of deductions made by the employer from the employee’s remuneration to the condition that the contributions be paid to an insurance undertaking or mutual fund established in Belgium. The Advocate General provided that Articles 59, 145/1 and 145/3 BITC constituted a restriction on the freedom to provide services for life insurance companies established in another Member State and also restricts the free movement of workers and the right of establishment.
- Article 364a BITC provides that when capital, surrender values and savings referred to in Article 34 of the BITC are paid or allocated to a taxpayer who has previously transferred his residence or the primary location of his assets abroad, the payment or allocation is deemed to have taken place on the day preceding that transfer.
- Article 364b BITC that taxes transfers of capital or of surrender values built up by means of employers’ contributions or personal contributions for supplementary retirement benefits to another pension fund or insurance institution established outside Belgium, while such a transfer does not constitute a taxable transaction if the capital or surrender values are transferred to another pension fund or insurance institution established in Belgium. According to the Advocate General, Articles 364a and 364b BITC are contrary to Directive 2002/83 concerning life assurance and constitute a discriminatory restriction on the free movement of capital.
- Article 224/2a of the General regulation on taxes assimilated to stamp duty that requires foreign insurers who have no place of business in Belgium to obtain authorisation, before providing their services in Belgium, of a representative residing in Belgium, who personally assumes, in writing, responsibility towards the State for paying the annual tax on insurance contracts, interest and fines which may be due in respect of contracts relating to risks situated in Belgium. The Advocate General considers that this obligation has been introduced in order to guarantee payment of the stamp duty and to combat tax evasion, which are objectives of public interest. However, such objectives can be effectively pursued by means of the Mutual Assistance Directive (77/799/EEC) recently amended by Council Directive 2003/93/EC. Hence, according to the Advocate General, the obligation to appoint a tax representative also constitutes an unjustifiable obstacle to freedom to provide services.
It should be noted that the Belgian Government did not dispute the Commission’s arguments in relation to the provisions of the BITC. The Belgian government only defended the compatibility with EC law of the obligation to appoint a tax representative pursuant to Article 224/2a of the General regulation on taxes. Therefore, it can be reasonably expected that the European Court of Justice will, as a minimum, find the Belgian income tax measures contrary to EC law.
Author: Mathieu Isenbaert
