As of 1 July 2017, the Netherlands has terminated the further use of self-administered pension plans (pensioen in eigen beheer).
Before the end of 2019, the beneficiary, in most cases the director or shareholder of the company administering the self-administered pension plan, has the option to redeem the pension plan with a tax discount (“afkoop”), to convert the plan into a self-administered savings variant (“ODV”), or to freeze the plan (“bevriezen”). In all cases, no further accrual may take place.
On 21 December 2017, the Belgian tax administration published, in respect of Belgian resident beneficiaries, a circular letter on the first option (“afkoop”) stating that it will tax the discount and that an update will follow on the other two options (Circular letter 2017/C/87 of 21 December 2017).
Circular letter 2019/C/109, published on 18 October 2019, fully replaces the circular letter of 2017. Briefly summarized, the circular letter clarifies the tax consequences of the various options in the hands of Belgian resident beneficiaries as follows:
Redemption of the plan (“afkoop”)
The redemption amount, if not effectively taxed in the Netherlands, will be taxed in Belgium at a reduced rate of 16.5% if the director has retired (on or in one of the five years prior to the normal pension date or in case of decease). The amount will, in all other cases, be taxed at progressive rates. In 2019, the taxable base (i.e. the balance sheet value) will be reduced by 19.5%.
The 19.5% discount is fully taxable in Belgium because it will not be effectively taxed in the Netherlands.
Conversion of the plan into a savings plan (“ODV”)
The conversion into a savings plan is a non-taxable event for tax purposes. Annuities paid under the savings plan are fully taxable in Belgium at progressive rates.
The savings plan can also be converted in the Netherlands into a tax-exempt annuity scheme. However, if the conversion tax place after receipt of the first payment under the savings plan, the exemption only applies if the following two cumulative conditions are met:
- the entire claim under the savings plan is converted into an annuity; and
- before the conversion, the taxpayer has filed an authorization request to the tax administration regarding the application of this exemption.
Annuities paid under the savings plan are fully taxable in Belgium at progressive rates.
In Belgium, the redemption of the savings plan into an annuity product is a taxable event and will lead to taxation at 16.5% or at progressive rate (see under Redemption of the plan). An exemption will not be granted if the redemption amount has not effectively been taxed in the Netherlands.
Income from the annuity product is taxed at 30% (the taxable base is 3% of the redeemed amount) unless the Netherlands has the competence to tax (this is the case if the payments exceed EUR 25,000) and has effectively taxed the income.
Freezing of the plan
The annuities paid under the self-administered pension plan are fully taxable in Belgium at progressive rates.