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Expats with pensions in the Netherlands and abroad

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Your pension could be an important aspect of your employment conditions but it could also be something you have paid less attention to when entering into your new employment contract in the Netherlands.

When you decide to immigrate to or accept a job in the Netherlands it might not be the first thing you think of.

However, it is important to make sure your pension is arranged properly and the future does not hold any unwanted surprises.

Here are some things to consider about your pension if you move to the Netherlands for employment.

Employer pension plan

In the Netherlands an employer is not obligated to provide a pension plan (werkgeverspensioen) for the employees unless a pension should be granted due to a collective labor agreement.

An employee hired from abroad has three options when it concerns his or her pension:
taking part in a Dutch pension scheme facilitated by the employer
continuation of the pension scheme in the country of origin
saving for retirement privately

Option 1: Participation in a Dutch employer pension plan

For Dutch tax purposes the term "pension" is bound by strict conditions concerning the provider of the pension scheme as well as the maximum amount for the accrual of the pension rights, among other things.

Only when the plan meets certain conditions it will be treated as a qualifying pension scheme. If so, the employee contributions are tax deductible and the employer contributions are tax exempt. The benefits are subject to taxation at the time of payment.

If a pension scheme does not meet these conditions, the employee contributions are not tax-deductible and the employer’s contributions are taxable income for the employee.

In addition the value growth of the pension rights will most likely be subject to taxation for the Dutch personal income tax on a yearly basis (box 3).

TIP: In this case, it is advisable to determine how this Dutch pension will be taxed in your country of origin if you intend to return at some point. This will usually be determined in a tax treaty between the Netherlands and your country of residence.

Option 2: Participation in a non-Dutch pension scheme

Participation in a non-Dutch pension plan requires some particular attention, as these schemes often do not meet all the aforementioned conditions for a qualifying Dutch pension plan.

This means that, in order to ensure that the non-Dutch pension scheme qualifies for Dutch tax purposes, approval could be requested from the Dutch tax authorities. Approval will only be granted for a limited period of time.

TIP: In case you are only coming to the Netherlands for a short period of time and intend to return to your country of origin, this might be the best choice for you. It's advisable to discuss this option and the criteria for appointment with your employer.

Option 3: Private pension and saving plan

If your employer in the Netherlands does not provide a pension plan or if you choose not to participate, you could choose to either put away money for your retirement or to get a life annuity privately.

The deposits to the savings account or premiums for the annuity could lead to a deduction in your Dutch income tax return. This deduction is based on the height of your salary and the pension you have already built up.

The website of the Dutch tax office provides a model calculation that you can use to determine the deduction you are entitled to concerning annuities. The bank account has to be a closed bank account that you can only use for these types of savings.

TIP: Have a look at the model calculation to see whether your plan entitles you to a deduction.

TIP: Ask the bank or insurance company assisting you about the fiscal treatment of the account or annuity.

Dutch state pension

In addition, during your stay in the Netherlands you might build up a Dutch state pension (so called "AOW"). If you are covered by the Dutch social security system you pay contributions to the national insurances, which includes the AOW. Yearly you build up 2 percent of the total AOW-payments receivable (tax free).

At the moment you reach the AOW-age (now 67 and going up), you will receive the pension payments (taxable). The amount of the payments is dependent of the number of years you have been subject to the Dutch social security system.

It is possible to voluntarily build up AOW, but only if certain conditions are met. One of these conditions is that you were covered by the Dutch social security scheme at least one year before.

Protective assessment for emigration and double taxation

If you choose to set up a pension based on one of the aforementioned options, a protective tax assessment could be imposed at the moment of emigration.

It would be applied to the value of either the pension rights accrued or the tax-exempt contributions paid during the period of employment in the Netherlands. However, if certain conditions are met, the protective assessment will not actually be enforced.  

In addition, it is important to be aware of which country will tax the eventual pension payments when returning. This will be based, among others, on the tax treaty between the Netherlands and your country of residence at the time.

TIP: Before you leave the Netherlands, find out the answer to the following questions:
Which country has the right to levy taxes concerning the pension payments? This will usually be determined in a tax treaty between the Netherlands and your (new) country of residence.
Which actions will affect my protective assessment?
 

Do you have questions regarding your pension in the Netherlands, or would you like to know how relocation affects your pension? Contact BDO for expert advice.
 

Femke

Author

Femke Bakker

Femke Bakker is working at the Amstelveen office of BDO. After studying international tax law at the University of Amsterdam she specialized in the international income and wage taxation. As...

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