Netherlands
Pension and annuities
for seconded workers
The Income Tax Act 2001 and related
legislation came into effect on
1 January 2001. This legislation has
resulted in:
-
removal of pension accrual
obstacles for migrating employees
-
retention of Dutch tax
claims/prevention of alleged abuse.
Prior to 2001, premiums for
deferred annuities were already
deductible from taxable income
(under certain conditions and up to a
certain maximum), deductibility being
dependent on the benefits being taken in the form of an income
stream.
Contract modifications that resulted
in benefits being paid other than as an
annuity usually gave rise to a tax
penalty. In some cases this tax penalty
was applied even if the tax payer had
emigrated. The penalty was enforced
by issuing an assessment for the
retention of rights when a tax payer
emigrated, if Dfl 100.000 or more in
annuity premiums had been deducted
from taxable income. The assessment,
however, was collected only if the
premium deduction conditions were
no longer met during the first five
years after emigration.
The Income Tax Act 2001 amends
the system in several ways:
- the minimum limit of Dfl 100.000
is abolished
- the maximum period in which the
assessment for the retention of rights
can be collected has been extended to
ten years
- preliminary and additional
assessments for the retention of rights
can be raised
- the system is extended to qualified
pension plans.
The basic rule has been that
pension premiums and accrued
pension rights are regarded as taxable
income in the year of premium
payment or the year of accrual.
However, under a qualified pension
plan, the so-called 'reversal rule' applies whereby tax is suffered when
the pension is paid out or when the
plan ceased to qualify.
Prior to the introduction of the
Income Tax Act 2001, only those
occupational pension plans that were
insured with pension funds or
insurance companies that were
tax-domiciled in the Netherlands could
qualify. Similarly, deferred annuity
premiums were only deductible from
taxable income if they were paid to an
insurance company with a Dutch tax
domicile. Under the new Act, a
pension plan insured outside the
Netherlands can qualify. Also, deferred
annuity premiums paid to foreign
insurers become tax deductible from
2001.
The good news is that it is now
easier than before to get tax benefits
for deferred annuity and occupational
pension plans when living/working in
the Netherlands. The bad news?
According to the tax authorities,
Dutch regulations apply even after
migration and they are ready to
pursue tax claims by every means
available.
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The news contained in the
Newsbriefs section of The
Multinational is drawn from the News and Issues section of the Watson Wyatt website.
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