Dutch general old age pension only taxable in Belgium to the extent it relates to a professional activity

On 5 May 2017, the Belgian Court of Cassation (Hof van Cassatie/Cour de Cassation) rendered a decision (Case No. F.15.0119.N/2) on the issue whether the Dutch general old age pension (AOW) is taxable in Belgium.

(a) Facts. The taxpayer, a Belgian resident, was for 50 years a (partly voluntarily) insured person under the AOW. However, only 10 out of the 50 years related to an employment activity.

(b) Legal background. Art. 34, §1, 1° of the Belgian Income Tax Act 1992 provides that pensions, annuities, periodical payments and other comparable payments which directly or indirectly relate to a professional activity are taxable as pension income.

The Belgian tax administration argued before the Court of Cassation that the total amount of the pension should be taxable in Belgium under article 34, §1, 1° BITC 1992. The decision of the Court of Appeal of Ghent of 17 February 2015 is not inconformity with the law because it ruled that only 20% (10/50) is taxable.

(c) Decision. The Court observed that although Belgium has the competence to tax under article 18 of the Belgium – Netherlands Income and Capital Tax Treaty 2001, this does not imply that such a pension becomes automatically taxable in Belgium. This has to be established on the basis of Belgian national tax law.

The Court rejected the argumentation of the Belgian tax administration. The wordings of article 34, §1, 1° BITC do not foresee that the total amount of pension income becomes taxable if, at some point in time, some contributions related to a professional activity.

Furthermore, such an interpretation is not contrary to article 1 a of Regulation (EEC) No 1408/71 of the Council of 14 June 1971 on the application of social security schemes as this provision does not impose that an Dutch old age pension must be taxable as a pension in Belgium on the basis of article 34, §1, 1° WIB 1992.

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