Tax & Legal

In this issue: Official pronouncements, Tax Court Cases and From Europe

The Lower Tax Court of Munich referred preliminary questions to the European Court of Justice regarding the compatibility of the German regime of dividend withholding tax imposed on a Canadian pension fund with the free movement of capital as provided in Article 63 of the Treaty on the Functioning of the European Union.

The ECJ has held that an employer pension fund is not a “special investment fund” within the meaning of the VAT Directive; thus management charges to it are subject to VAT as an ordinary service.

The ECJ has rejected a claim by the Commission that the German withholding tax on gross dividends discriminates against foreign pension funds, because the Commission did not substantiate the expenses excluded from deduction.

The German and US authorities have agreed to treat employee retirement savings schemes and investment trusts holding pension fund assets as pension funds for the tax treaty exemption of dividend income.

The Supreme Tax Court has held that an employer’s pension fund contribution paid on behalf of an employee is not taxable merely because it was described as a payment on behalf of the employee.