Settlement Agreement + response before 1 January 2018

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Pensioners from a number of international organisations (e.g. EPO, ESTEC, NATO) who retired after 2010, will receive a choice form from the Dutch tax authorities around this time. With this form a choice can be made between the balance method and the splitting method (see previous news items). After choosing, the pensioner receives a settlement agreement (VSO). The tax returns and assessments of the years after retirement will be adjusted and determined according to the method chosen.

When you return the signed VSO, a calculation should be provided indicating how to adjust the income in box 1 and box 3 and how to account for losses and a residual personal deduction. The assessments 2010 and 2011 (against which objections can no longer be lodged) will not be taken into account. This implies that 2012 is the oldest year to be eligible for one of the two methods. However, that request must have been submitted before 1 January 2018.

If you think you qualify, please contact me as soon as possible!

Non-standard pension scheme?

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In September 2013 a pension compromise between the Dutch tax authorities and the EPO Pensioners Association was concluded. The compromise dealt with the situation that in the past pension contributions were deducted from the net salary. This situation not only concerns EPO, but also a number of other international organisations, like ESTEC and NATO. The outcome of the compromise is that pensioners who retired before I January 2010 could choose between two methods for balancing the pension contributions: a splitting method and a balance method. The balance method provides a settlement of the non-deducted pension contributions as a one-off benefit.

Employees who retired after 1 January 2010 can until now only benefit from the balance method. Depending on the contributions paid, some retirement years can be exempt for tax, as the pension contributions paid by the employee may still be deducted. As a result, there may be the possibility to retire earlier.

In order to benefit from the balance method it is necessary to take action. If you think you qualify, please contact me as soon as possible.

Reasons to apply for a provisional assessment?

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Despite having enjoyed an exempt salary for many years, your pension will usually be subject to tax. The tax allowance and the tax adjustment or partial compensation will therefore also be included in the tax levy. Depending on the tax burden, income tax can amount to up to € 60,000 a year. It is also possible that the tax assessment is not made until 18 months later, so that tax is suddenly levied over a two-and-a-half-year period. This would require you to reserve a sum of €150,000.

Prevent this kind of unpleasant surprise and make sure you ask for a provisional assessment in good time! Moreover, this will prevent you having to pay a high rate of tax interest.

Pension judgement and objection 2010 and 2011

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If you lodged an objection to the tax assessments for the years 2006-2009, pay extra attention when you receive your tax form for 2010 and 2011! You should lodge your objection to the 2010 or 2011 tax assessment promptly in order to maintain your rights if you opt for the splitting method that was concluded following the compromise made between the Dutch tax authorities and retired European Patent Office staff. Moreover, an objection must be lodged against the taxation of ‘partial compensation’. This return for the tax that is paid after retirement is tax free according to the European Patent Office, but taxable according to the Dutch tax authorities.

Tax consultant Jan Ritzema is experienced in drawing up notices of objection and is more than happy to take this task off your hands. For further information, please do not hesitate to contact me.

Pension judgement: choose now!

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The conclusion to the objections regarding the pension judgement is now imminent. Those who promptly submitted objections to the taxing of their EPO pensions can expect to receive a letter from the tax department shortly. This letter allows them to state their choice between Compromise A (the balance method) and Compromise B (the splitting method).

The compromise is the result of the test procedure for taxing EPO pensions. The EPO Pensioners Association brought these proceedings on the basis of the judgement of the Supreme Court made on 16 January 2009, no. 07/12243.

Tax consultant Jan Ritzema will be glad to advise you on choosing between Compromise A or B. Please feel free to contact him.