The Belgian tax treatment of the surrender of Dutch pensions under self-administration

Just before the end of the year, the tax administration finally made a decision and published a circular (Circulaire 2017/C/87 dd. 22/12/2017) which addresses the Belgian treatment of the phasing out of the Dutch “pension under self-administration”. 

Phasing out Dutch pensions under self-administration 
Until 1 April 2017, a Dutch director-major shareholder or “DGA” (comparable to a business manager in Belgium) could accrue a pension “under self-administration”, which means that the management of the pension contributions and the payment of the pensions were not carried out by a professional insurer or pension fund but by his own company or another self-management body (such as a Dutch pension company). On 1 April 2017, however, the Netherlands published a law [law on the phasing out of pensions under self-administration and other fiscal pension measures], which no longer permits this accrual under self-administration from 1 July 2017.  

Consequently, a DGA can opt to either: 

  • surrender the already accumulated pension (with a discount on the tax base). The advantageous surrender is only possible up to and including 2019;
  • convert this to a Dutch old-age pension commitment (“ODV”). Here too, the choice must be made by no later than 2019;
  • freeze this, whereby the existing pensions remain untouched and the previous legislation remains applicable.  

Treatment in Belgium of the surrender 
For the inhabitants of Belgium who wanted to surrender their Dutch pensions under self-administration, it was uncertain for a long time how the Belgian tax authorities would handle this surrender. On 22 December 2017, the tax authorities took the decision and by means of a circular, went into the treatment of such capital in Belgium in more detail.  

As already mentioned above, a natural person (resident of Belgium) who chooses to surrender his Dutch “pension under self-administration” will receive a tax reduction in the Netherlands of 34.5% (in 2017), 25% (in 2018) or 19.5% (in 2019). This means that in case of a surrender in the course of 2018, only 75% will be taken into account for taxation and 25% of the value in the Netherlands will be exempt from tax.  

Where will taxes be payable?
One should first of all consider where taxes are payable, in Belgium or the Netherlands. What is important here is whether the pension has commenced or not. If the pension has already commenced, Belgium will in principle be entitled to levy the tax, although the Netherlands may also tax the income in certain cases. The Netherlands will however be entitled to levy the tax if the pension has not yet commenced. It is however possible that taxes are also payable in Belgium based on the so-called subject-to-tax-clause. This clause states that Belgium only provides for an exemption (with progression) in so far as the income is effectively taxed in the Netherlands. Since the discount on the surrender value is exempt in the Netherlands (i.e. the 25% for surrender values ​​in 2018), this discount will still be subject to Belgian tax rules in Belgium.

Which rate applies?
What Belgian tax rules apply depends on the status of the DGA at the time of payment or recognition of the surrender value.   If the person is still active as a DGA, everything he receives will be considered as professional income (based on the principle of attraction) and jointly taxable at the progressive rate.If, however, no more DGA activities are exercised at the time of payment or allocation, this “free capital” in Belgium will be regarded as a pension. Pensions are taxable separately in Belgium at 16.5%, provided that the capital is paid out as a result of actual retirement (at retirement age or in one of the five preceding years) or as a result of death. Payment of the capital at another time will result in a tax at the progressive rate.  

Conclusion 
The discount on the surrender value of Dutch pensions built up under self-administration seems at first sight an interesting way to obtain capital more advantageously. For Belgian residents, however, this advantage will be neutralized as this discount will still be taxed in Belgium either at the progressive rate (increased by 50% with municipal tax) for persons who are still active as directors or at a separate rate of 16.5% as a pension (unless the payment was made at an unfavourable time).  For converting a pension under self-administration into an old-age pension commitment, the tax authority will publish another separate addendum.

 

Want to know more?​

Eline Potters
Senior Tax & Legal Associate
eline.potters@moorestephens.be

The requirement to register gets a broader scope
More entrepreneurs must register with the Crossroads Bank for Enterprises (CBE)
Under the aim of creating a more attractive business climate, changes were made to the existing company law. In that context, the legislator has done away with the ‘trader’ concept, replacing it with the umbrella term ‘enterprise. Besides forming the basis for the rules of the Code of Economic Law, the Judicial Code and the Civil Code, the new enterprise concept also has consequences for reg
More specific: matrimonial property law
A new compensation obligation in the legal system
What if a spouse practices his profession in a company whose shares all form part of his separate property? The Act of 22 July 2018 has introduced considerable changes to matrimonial property law. This article addresses a specific addition to that law, namely the possible disadvantage incurred by the matrimonial property when a spouse practices their profession through their own company1. 
Changes in the cary proxy and usufruct
Estate planning: recent developments
Over the last few months, we have regularly reported on the important changes in estate planning and inheritance planning. Below is an update of some of those changes.   The care proxy: secure your estate for later The classic example is a person who, due to a physical or mental limitation (e.g. coma, dementia), is – temporarily or permanently – unable to manage their assets properly.
Happy Brexmas?
How to prepare your company for Brexit?
On 10 December 2018, the British Prime Minister decided to postpone the vote on the Brexit deal in the House of Commons. The risk of a ‘no deal’ disaster scenario is increasing. What are the important dates? On 29 March 2017, the United Kingdom formally informed the European Council of its intention to leave the EU (according to the procedure provided in Article 50 of the Lisbon Treaty). C
A popular control structure
The all-powerful manager of a civil-law partnership: was it always a fiction?
The civil-law partnership has long been a popular control structure among wealth planners. In many cases, donors do not want to give up their assets entirely, and still want to retain some control over what they donate. Definitely in cases of transfers of family companies, the donors (often parents or family members) still want to retain control over the course of the business.  The advant
The tax framework
Company subsidies: exempted or not?
Various subsidies were briefly described in the article by our colleagues from Strategy and Operations. They explained that they can assist you and your company with guidance on subsidies, from A to Z.1 In this context, we would like to discuss the tax framework for subsidies: how are awarded subsidies treated tax-wise within companies? Are these subsidies exempt from corporation tax and, if
Right to deduct VAT possible for costs incurred during the purchase of shares
The Ryanair ruling
Right to deduct VAT also possible for costs incurred during the purchase of shares, if the purchase ultimately does not (fully) go ahead The European Court of Justice recently confirmed that VAT on costs incurred during the purchase of shares may be deductible even if the purchase ultimately does not (fully) go ahead. As such, the Court of Justice has upheld the principle that the preparatory t
What are the options?
The deduction for investment: an illustration of the options
The deduction for investment allows companies and natural persons who earn profits or benefits to reduce their taxable profits by placing part of the acquisition or investment value of investments in new tangible and intangible fixed assets. Depending on the size of your business and the nature of your activities, you can generally apply the regular, one-off deduction for investment of 20% (tem
Valuation of usufruct
Now also a witch hunt when usufruct is sold?
In previous editions, we have already written about the valuation of usufruct when purchasing property, but recently there have also been regular reports of checks on the valuation of usufruct when reselling. However, up until now, the case law has followed the viewpoint of the taxpayer. Brief description For several years, there has been a lot of controversy regarding the valuation of usufruc
Vlabel is using conciliatory language
Has the decrease in Flemish sales duty led to an increase in the costs for purchases of usufruct?
The decrease in sales duty: also for split purchase usufruct-bare ownership The recent drop in the rate (to 7.00%) for purchases of family homes comes with a number of conditions. For example, the purchaser must be a natural person. Following some uncertainty, it was subsequently confirmed that, in the event of a split purchase of such a property by a company for the usufruct and the bare owner f

Subscribe to our newsletter