Most expatriate employees who start working in the Netherlands can join a tax favorable Dutch pension scheme. However, according to a recent article by Bas Dieleman in ‘Pensioen & Praktijk’ (an English language version of which is available below), joining a tax favorable Dutch pension scheme is, in most cases, not tax effective if the 30%-ruling is applicable.
The 30% ruling allows for Dutch employers to pay a tax-free allowance for up to eight years to employees recruited from abroad, provided they satisfy certain criteria. From 1 January 2015, this allowance will be included in pensionable salary, meaning that pension rights will be accrued in relation to the 30% tax-free allowance as well as normal salary. However, as the 30% ruling effectively reduces an employee’s income tax contributions, the benefits of a tax favourable pension scheme may be lost.
In addition, as the tax favourable treatment for approved (‘designated’) foreign pension schemes only applies for a maximum of five years, remaining in their home country pension scheme may also not be the most tax effective option for those under the 30% ruling who remain in the Netherlands for a longer period. Instead, for these employees – in particular those who are EU residents* – joining a non tax facilitated Dutch pension scheme may be the most tax effective way of accruing pension benefits whilst working in the Netherlands.
Cross-border pensions are a complex issue and there may be further issues to take into consideration depending on the home country of your expatriate employees.
* Following the ‘Danner’ ruling, taxation of benefits under non tax facilitated foreign pension schemes is contrary to EU law.
- ‘Netherlands – pension accrual and the 30% ruling’: Bas Dieleman, Loyens & Loeff NV
- Danner judgement – C-136/00
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