dutch aow benefit fully taxable as a pension in belgium

Wealth and pension planning
23 May 2018

by Ivan Maes and Karlien Van Melkebeek

Dutch AOW benefit fully taxable as a pension in Belgium

On 8 March 2018, a circular on the tax system with regard to Dutch state pension benefits was published. It lays out clearly how the Dutch pension in Belgium should be taxed after 1 January 2017.

Dutch AOW benefit fully taxable as a pension in Belgium

Each country has its own pension scheme. For example, Dutch statutory pensions are paid on the basis of the General Old Age Pensions Act (AOW). The General Old Age Pensions Act means that every Dutch resident is automatically insured and accrues pension rights. People who work in the Netherlands but do not live in the Netherlands also accrue Dutch pension rights.

When Dutch pensioners opt to spend their retirement in Belgium after their career, they are not taxed in the Netherlands, but are taxed in Belgium, according to the double taxation agreement. It has generally been accepted in Belgian case law that if a professional activity was exercised in the past, all pension benefits were taxable in Belgium.

The full pension payment was taxed up to the moment when both the Court of Cassation and the Antwerp Court of Appeal decided otherwise. According to these judgements, the AOW benefit must therefore be divided into two categories:

  • a non-taxable part that was accrued during the period of residency, or by means of voluntary insurance without any connection to a professional activity;
  • a taxable part that was accrued during the period in which a professional activity was carried out.

These decisions resulted in no tax being due on some state pension benefits. To rectify this situation, the legislature introduced a legislative amendment on 25 December 2017. This amendment to the law implies that all state pension benefits will be fully taxed with effect from 1 January 2017, regardless of whether or not a professional activity was carried out in the past.

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Ivan Maes

Certified Tax Advisor

Karlien Van Melkebeek

Senior Advisor International

In our opinions, we rely on current legislation, interpretations and legal doctrine. This does not prevent the administration from disputing them or from changing existing interpretations.

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