NPS to Recover 11.5 Billion KRW in Taxes from Sweden

Tax-Exempt Status Recognized by Swedish Tax Authorities
Annual Tax Burden to Decrease by About 8.6 Billion KRW
Additional Refunds Underway in Germany and Other Countries

The National Pension Service (NPS) will receive a refund of 11.5 billion KRW in withholding tax on dividends from listed stocks from the Swedish tax authorities. The related annual tax burden is also expected to decrease going forward.

On November 20, the NPS Fund Management Division announced that the Swedish tax authorities had recognized NPS’s tax-exempt status for withholding tax on dividends from Swedish listed stocks, and finalized the decision to refund the taxes already paid on October 28.

As a result, the NPS will recover approximately 11.5 billion KRW in dividend income tax paid on Swedish stock investments from 2016 to 2020, and will be exempt from paying about 8.6 billion KRW in taxes annually in the future (based on the 2024 withholding tax amount). The NPS is also in the process of seeking an additional refund for approximately 11.8 billion KRW in taxes paid from 2021 to 2024.

While Sweden’s public pension equivalent, the AP Funds, is exempt from taxes domestically, the NPS, despite having a similar nature, did not receive the same benefits due to its status as a foreign institution. In response, the NPS applied for exemption to the Swedish tax authorities in 2021, citing the European Union’s anti-discrimination law, which stipulates that foreign institutions similar to domestic ones should not be treated unfavorably.

However, due to the lack of clear regulations regarding the decision deadline, the review was delayed for nearly five years. The NPS continued to submit documentation and sought local tax advisory services as part of a multi-faceted effort. Earlier this year, when the Finnish public pension fund won a similar case in Sweden, the NPS used this as a precedent and urged Swedish authorities for a refund decision in May.

As a result, the NPS succeeded in obtaining a refund decision without litigation between countries. This marks the first time a Korean pension fund has been recognized for tax exemption status in Sweden. Previously, the NPS also recovered approximately 8 billion KRW from Finland last year, based on the EU’s anti-discrimination provisions. Currently, refund procedures are also underway in Germany, Italy, Austria, and Poland.

Suh Wonjoo, Executive Director of the NPS Fund Management Division, stated, “This refund is the result of proactively identifying tax-saving opportunities in each country and persevering despite the challenges of the international tax environment, in order to increase the retirement assets of our citizens. We will continue to strengthen our tax reviews to contribute to the stable growth of the fund.”