TALLINN - The European Union has begun legal proceedings against Estonia and Germany for alleged tax violations whereby dividends paid to foreign countries' pension funds are taxed at a higher rate than those distributed to local pension funds.
The Czech Republic also received a warning from the European Commission, the EU executive, as that country's tax code permits taxing dividends paid to foreign companies at a higher tax rate than those paid to domestic companies.
"These official letters are part of the European Union's consistent activity to rule out discriminatory taxation of such dividends that are paid to shareholders residing elsewhere in the European Union or the European Economic Community," said Laszlo Kovacs, the EU's tax and customs commissioner.
All three countries have two months to reply.
In Estonia, dividends paid to local pension funds are not taxed, while 22 percent is deducted from the dividends paid to foreign countries' pension funds.
Other member states, including Sweden and Finland, received official letters involving taxing pension funds from the European Commission last year.
Estonia is preparing to amend its taxation law in order to bring it into line with the EU's mother companies and subsidiaries directive.
