Is joining a tax favourable Dutch pension scheme the best option for expatriate employees?

Posted on 1st January, 2015

Estimated reading time 3 minutes

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.


Further information

For further information or to discuss any of the issues raised, please contact Bas Dielemann or Rina Driece, Loyens & Loeff Rotterdam, +31 10 2246424


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