Sampension is heading to the European Court of Justice to determine whether Denmark's current rules and practices violate European Union (EU) directives, suggesting that a successful outcome could result in "millions" in savings for Sampension.

The case concerns whether VAT should be applied to the services sold by Sampension Administrationsselskab to the group parent company, Sampension Livsforsikring.

If the two companies are registered together for VAT purposes, the services provided by Sampension Administrationsselskab to Sampension Livsforsikring are not subject to VAT, called joint registration.

According to the Danish VAT Act, to be jointly registered Sampension Administrationsselskab must be 100 per cent owned by Sampension Life Insurance.

This is currently not the case as Sampension Livsforsikring's ownership share is 88 per cent, meaning the companies cannot be registered jointly.

However, the Danish VAT regulations are based on an EU directive that does not stipulate that ownership must be 100 per cent for joint registration to occur.

According to the directive, joint registration is based on the actual "financial, economic and organisational links between companies".

Given this, Sampension chief financial officer, Ole Fabricius, said Sampension believes that the two companies should “obviously” be able to be registered jointly, and the services between them should therefore not be subject to VAT, based on the criteria of the EU's VAT Management Directive, which is above the Danish VAT Act.

“The management company's basis for existence is based on the close ties to Sampension Life Insurance, and therefore, in our opinion, the companies should be registered together in terms of VAT,” Fabricius said.

Up to and including 2016, Sampension Livsforsikring owned 100 per cent of Sampension Administrationsselskab and thus fulfilled the requirements of the Danish VAT Act.

Since 2016, the ownership has decreased as the pension funds ISP Pension, Pensionskassen Arkitekter & Designere and Pensionskassen for Jordbrugsakademikere & Dyrlæger have become part of the Sampension community and co-owners of Sampension Administrationsselskab.

Given this, in February 2019 the Danish Tax Agency rejected the idea that Sampension Administrationsselskab and Sampension Livsforsikring could continue their joint registration.

As a result of the rejection, Sampension Livsforsikring brought legal proceedings against the Ministry of Taxation with reference to the EU Directive.

The Eastern High Court has referred the case to the European Court of Justice, where the case submission has been prepared in collaboration between Sampension and the Ministry of Taxation.

There is no timetable yet for when the European Court of Justice will consider the case.

"As a customer-owned company, we naturally have a strong focus on keeping costs for customers as low as possible,” Fabricius said.

“In our view, the requirement for 100 per cent ownership in order to obtain joint registration is a Danish invention, which ultimately means an extra bill for our customers.”

He said that Sampension has been “fighting this battle” for six years so far, and on this basis, it is an “important partial victory” for Sampension and its customers that the case has now been brought before the European Court of Justice.

Sampension is represented in the case by Andersen Kaer Law Firm and KPMG Acor Tax.

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