Netherlands: New employer tax charge on pension contributions for high earners

Posted on 3rd January, 2010

Estimated reading time 2 minutes

With effect from 1 January, 2010 the Netherlands has enacted a provision to discourage excessive remuneration

Pension contributions for employees with a ‘high pensionable wage’ will be subject to income tax at a rate of 15%. Where applicable, this tax charge will be borne by the employer.

Conditions for charge

The tax charge will only be levied if:

  • The pension contributions are made as part of a final salary pension scheme, that is the pension benefits are based on the final salary of an employee on the pension date;
  • The ‘pensionable wage’ of the employee must exceed € 519,000 (this is the pensionable wage amount for 2010, but it will be indexed annually);
  • The employee must also have received salary increases.  A salary increase results in a so-called ‘backservice’. A backservice is an increase in the pension entitlements of the earlier years of employment due to the salary increases, which is set out as a percentage of the final salary of the employee.  A switch to another employer may also lead to a backservice.

The employer’s income tax charge is based on a ‘notional’ backservice contribution.  This notional contribution is fixed at four times the amount by which the salary exceeds € 519,000 in 2010. On any excess of salary above € 519,000 for 2010, the 15% tax charge will arise on the notional amount of the backservice contributions.

The tax charge is relevant only for the employer and is made in addition to any tax charges which may subsequently arise for the employees when the pension benefits are taken at retirement.


The pensionable wage of an employee is € 450,000.  After a salary increase, his wage becomes € 600,000.  The pension contribution is based on a final salary pension scheme.
In 2010, the threshold for salary before the employer tax charge is levied is € 519,000. The employee’s salary is now € 600,000, exceeding the threshold by €81,000.

The employer’s notional backservice contribution will be € 324,000 (being 4 x € 81,000)

The tax charge for the employer in 2010 is calculated as follows:

15% x (€ 600,000 - € 519,000) x 4 = € 48,600

For further information or to discuss any of the issues raised, please contact Peter Bos ( on +31 20 578 57 85 or Marieke de Vries ( on 31 20 578 51 76.

This article was produced by, and re-produced with kind permission of, our correspondent firm in The Netherlands, Loyens & Loeff N.V.

Loyens Leoff