In the Netherlands, contributions to pension schemes are not taxed. The pension benefits paid later are taxed, however. This does require that the scheme complies with the Dutch criteria. With a foreign posting, the pension scheme merits special attention.
Continuation of pension build-up during foreign postings
With postings within a group, continuation of the pension build-up in the home country is often chosen. However, because the income is taxed in the country of employment, it will have to be assessed in the country of employment whether and to what extent fiscal facilitation of the contributions to the Dutch pension scheme applies. There are countries that will fiscally facilitate a pension scheme from another country, certainly within the European Union. If this is not the case, participation in a pension scheme in the country of employment can be considered. Alternatively, the build-up of pension can be temporarily discontinued and the foreign pension years can be bought in on return to the Netherlands in order to improve the pension.
Exterus can offer support with:
- assessing the fiscal consequences for pension build-up during foreign postings;
- advice on alternative pension build-up.
Continuing build-up of pension during postings from other countries
The foregoing also applies for postings to the Netherlands: often, employees will wish to continue the build-up of pension in their home countries.
It must then be assessed whether the pension contributions are fiscally facilitated in the Netherlands. Because the foreign pension scheme will often not comply with the Dutch laws and regulations, this will not usually be the case. However, subject to conditions, it is possible to have the foreign pension scheme designated, so that it is treated in the same way as a Dutch pension scheme.
We regularly provide assistance with:
- assessment of foreign pension schemes;
- designation of foreign pension schemes.
The payout phase
Have you built up pension without enjoying fiscal facilities during (part of) the build-up period? Then you may face double taxation. After all, the pension benefits will be taxed, while no fiscal facilities were enjoyed for the build-up.
However, it is possible to receive part of the pension benefits free of tax during the payout phase. It must be shown here that no fiscal benefits were enjoyed during the build-up period. It is advisable to draw your employees’ attention to this in good time, as proof must be collected during the build-up period in order to show later that no fiscal benefits were enjoyed.
Obviously, Exterus can assist with avoiding double taxation on pension benefits, firstly by providing good information in the build-up phase and secondly by providing for the exemption request in the benefit phase.