Allocation of Taxing Rights of Occupational Pension in Cross-Border Situations between an ETT- and EET- or TET-system : An Analysis between Sweden and Portugal

Abstract: The fact that pension consists of three cashflows that can be taxed at different points in time has resulted in a great divergence in how states treat the income of pension. Nonetheless, a majority of tax treaties allocate the exclusive taxing rights of private occupational pension to the residence state as advocated by the Organisation for Economic Co-operation and Development. With the globalization and increased interest in the prevention of tax avoidance there may exist reasons to consider other types of allocation rules for private occupational pension. Particularly, states should consider shared taxation as an option for allocation of taxing rights of private occupational pension. As demonstrated in this thesis, in treaty negotiation both general issues related to the allocation rule and issues of the allocation rule amounting from mismatches of domestic systems for tax treatment of pension must be taken into account. The mismatch of different systems for tax treatment may cause undesired tax consequences such as double taxation, double non-taxation, loss of tax revenue, transfer of fiscal capital and more. As for cross-border situations between an ETT- and EET- or TET-system, the thesis demonstrates that shared taxation would be an alternative allocation rule for private occupational pension if administrative difficulties could be solved and the preferential tax treatment would be upheld.