The Sweden Supreme Court found that the provisions for the respective payments from the occupational pension insurance are the same income, that the payments from the insurance constitute a pension and are covered by a different provision in the agreement than the one that the provisions according to the conditions provided are covered by, and that AA, when taxing the payments from the insurance, has right to offset the tax he has paid in Italy on amounts allocated to the insurance.
In order for the right to offset to exist according to Article 24 paragraph 2 of the tax agreement, it is required that the income taxed in Italy refers to the same income as the Swedish taxation measure, and that Italy may tax the income in accordance with the provisions of the agreement.
18. The Supreme Administrative Court states that both the provisions and the payments will have their basis in, and be compensation for, the work that AA performs in Italy. There is thus a clear connection between the funds that are transferred to the occupational pension insurance through the provisions and the payments that are then made from the insurance to AA. It is therefore a question of the same income. The fact that taxation takes place at a different time in Sweden than in Italy does not prevent it being considered the same income that is taxed in both countries.
In Sweden, a provision that an employer makes occupational pension insurance for an employee is normally not taxable for the employee. Payments from occupational pension insurance constitute a pension for the employee and are taxed in the service income category.
The tax agreement between Sweden and Italy, salaries, fees and similar remuneration received due to employment (income from individual services) are taxed as a general rule only in the state where the person to whom the remuneration is paid is based. The agreement follows that even pensions and other similar compensation are normally only taxed in the country of residence.
If a person domiciled in Sweden receives income which, according to the provisions of the tax agreement, may be taxed in Italy, the agreement follows that double taxation must be avoided by deducting a corresponding amount from his Swedish income tax.
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Issue Raised
Whether the provisions for the occupational pension insurance and the payments from it will be considered the same income and whether the payments are regulated in a different provision in the tax agreement than the provisions for the insurance?
Whether the tax paid in Italy on account of the provisions will entitle him to set-off in connection with the taxation of the payments from the insurance.
Facts
AA who is taxpayer is the managing director of a Swedish limited company. He is a Swedish citizen but lives and works in Italy, where he is domiciled for tax purposes. He has been offered to take out a defined premium occupational pension insurance with a Swedish insurance company to which the employer must make monthly provisions to secure his future pension.
AA applied for a preliminary ruling to clarify the tax consequences of the offer. The application shows that he will be taxed in Italy for the provisions for occupational pension insurance. When a pension is paid out from the insurance at a later stage, he will be unlimitedly liable for tax in Sweden and have tax domicile here. The payments from occupational pension insurance will thus be taxed in Sweden.
