Belgium treaty position on the Dutch phasing out of self-managed pension plans

As of 1 July 2017, the Netherlands has abolished the so-called self-managed pension plans (“pensioen in eigen beheer”). The higher commercial saving facility has been reduced to a lower tax-facilitated pension facility with no drawbacks.

The beneficiary, in most cases the director and shareholder of the company administering the self-managed pension plan, is left with the option to redeem the pension plan with a tax discount. In which case the effective tax rate in 2017 is reduced to 34% (discount becomes less every year) with no penalty interest being payable. Or, if the beneficiary/company decided not to redeem the pension plan, it could convert the plan into a self-managed savings variant. In all cases, no further accrual may take place.

Given the fact that many beneficiaries reside in Belgium, the question arose whether Belgium would be allowed to tax the amount of the discount. After all, the Belgium – Netherlands Income and Capital Tax Treaty contains a subject to tax clause which, in its joint memorandum of understanding, is interpreted in such a manner that Belgium must not avoid double taxation for items of income which have not been included in the Dutch taxable base.

The Belgian and Dutch tax administrations discussed the issue in the framework of the revision of the treaty (seventh round of negotiations).

Apparently, they did not reach an agreement. On 21 December 2017 the Belgian tax administration published a unilateral statement that it will tax the discount (Circular letter 2017/C/87 of 21 December 2017).

Consequently, if uphold in court, the Netherlands will be subsidizing the Belgian state.

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