Life assurance rather than pension contribution | 02


LEGAL ATTENTION POINTS | PROTECTIVE TAX ASSESMENT

LEGAL ATTENTION POINTS

In order to benefit from the above mentioned tax benefits, the employee and his spouse/ partner has to sign a pension waiver. From a perspective of duty care of the employer (“zorgplicht”) it is advisable to renew this waiver annually, in order to make sure that the employee is well aware of his choice. Furthermore the employer should be aware that paying a bonus rather than a pension contribution may have an effect on income related benefits and payments. For example it may also affect the amount of a termination payment. Therefore it is important to label the additional salary in a correct way.

PROTECTIVE TAX ASSESSMENT

For the sake of completeness, please note, that upon emigration from the Netherlands of the expatriate employee, Dutch tax law provides for a protective tax assessment in order to prevent the employee from redemption of the pension or life assurance policy during 10 years after emigration. After the lapse of said 10 years, the employee may consider redemption after all, however, he would wish to first review which state has the right to tax the redemption proceeds according to the applicable tax treaty, and secondly, if the new residence state has the right to tax, how much.

The system of protective tax assessments applies to pension as well as life assurance policies. As such it will not make a difference whether the employee participates in a pension plan or in a life assurance policy.

For a more detailed discussion of the above tax planning opportunity, please contact us.

NEXT: Life assurance versus bank savings schemes

OTHER MEMOS IN THIS ISSUE

Salary split

Directors' remuneration

Dutch tax facilities for innovative companies

Legal obligations of recognised sponsors