CJEU – Recent Developments in Direct Taxation 2019

1. S. 144College Pension Plan of British Columbia (C-641/17)

The case College Pension Plan of British Columbia, which was decided by the CJEU on 13 November 2019, concerns a request for a preliminary ruling on the impact of the free movement of capital on the taxation of pension funds. More specifically, at issue was the rule in the German Corporation Tax Act, which denies the deductibility of costs for pension provisions incurred by corporations with restricted tax liability, even though corporations or persons with unlimited tax liability may deduct such costs.

1.1. Facts of the case

The taxpayer had the legal form of a Canadian Common Law trust. Its business purpose was to operate the pension scheme of former public sector employees of the Canadian province British Columbia. Due to its similar investment structure, it was considered comparable to a German pension fund. It made portfolio investments in German stock companies and the income generated from those investments was to a large extent payable to the pensioners. The dividends received were subject to a definitive withholding tax of 15%. German resident corporations were also subject to a withholding tax. However, as the investment...