EU withholding tax reclaims for UK-resident pension funds
Produced in partnership with Ramzan Bashir of Mazars LLP and Ian Ahkong and Annie Du of Deloitte LLP
EU withholding tax reclaims for UK-resident pension funds

The following Pensions practice note Produced in partnership with Ramzan Bashir of Mazars LLP and Ian Ahkong and Annie Du of Deloitte LLP provides comprehensive and up to date legal information covering:

  • EU withholding tax reclaims for UK-resident pension funds
  • Why is EU withholding tax reclaimable?
  • WHT in practice
  • EU law
  • CJEU considerations on a WHT reclaim
  • What is the applicable TFEU provision?
  • Is there a restriction/discrimination?
  • Is the restriction justified?
  • Is the restriction proportionate?
  • Current position for UK-resident pension funds
  • More...

There is a common misconception that pension funds do not pay tax. In reality, for many pension funds, tax on investments can be significant, in particular withholding taxes incurred on dividends paid on shares. However, there can be opportunities to recover some or all of this tax. This Practice Note highlights the legal basis on which otherwise irrecoverable EU withholding taxes may be reclaimed.

Why is EU withholding tax reclaimable?

A number of European Union (EU) Member States (Member States) apply a withholding tax (WHT) on locally sourced dividend payments distributed to non-resident pension funds. This can be in direct contrast to resident pension funds, which may be exempt from the same WHT.

While taxation rights are outside the scope of EU law, the EU free movement of capital provision is broad enough to bring within its scope domestic taxation rules which treats resident and non-resident pension funds—subject to the tests listed below—differently. Accordingly, WHT claims under EU law should be considered.

As a result of jurisprudence from the Court of Justice of the European Union (CJEU), many Member States (eg France, the Netherlands and Spain) have amended their legislation to remove the difference in treatment between a resident and non-resident pension fund. This ensures that resident pension funds and non-resident pension funds are subject to the same WHT charge. However, some Member States still retain different treatments

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