Receiving pension benefits in another country then the country in which you contributed is not a problem. Until it is a problem.
Receiving pension benefits in another country
The moment you work for an employer in the Netherland, the employer can facilitate for you a pension scheme. That implies the employer withholds for you pension contributions from your salary specification. Or a very good employer pays the full pension contribution themselves.
The pension is build up during your working life time, which is in the Netherlands till about 67 years old. Not every employee will stay in the Netherlands, and moves abroad before pension date.
Frequently asked question: Can I take the buildup pension value with me abroad?
Answer, yes you can. However, as this is undesired behavior and the contribution was deducted from your Dutch taxable salary, the Dutch tax office will apply the 52% tax rate. That is a rate from the past still active for these solutions. On top of that 52% is put a 20% revision charge. That is for the interest factor the Dutch tax office missed during the period you deducted the pension premium. And not to encourage individuals a 25% penalty is put on top of the 52% and 20%. That is a 97% taxation on your pension value.
Living abroad with a Dutch pension benefit
The moment you moved abroad, you have become a tax resident of the other country. The tax treaty states that the other country can levy the tax over your Dutch pension. To convince the Dutch pension insurance company, you need to obtain from your tax resident country tax office a resident tax payer statement. This statement should stop the Dutch pension insurance company to levy Dutch tax. Local tax is then what you pay over your Dutch income.
Court case: Portuguese tax resident enjoying a Dutch pension income – Dutch tax to be paid
The former employee of a Dutch company had built up pension rights in the Netherlands. Currently he resides in Portugal. The tax treaty then states that to prevent double taxation, the country of residence can tax the Dutch Pension income. In this case that is Portugal.
The Dutch tax office however noticed that in Portugal this tax payer was under the Non Habitual Residents (NHR) and the Dutch pension was not taxed as such. And for a double taxation relief there needs to be the situation of double taxation in the first place. Now in Portugal no tax was levied over the Dutch pension benefit, there is no need for double taxation relief. The Netherlands can withheld tax on the Pension benefits.
The Portuguese tax resident argued in court that his Portuguese tax return should be judged before the application of the Portuguese NHR. The court ruled that the full picture needs to be taken into account. One of the two countries can tax the income. If Portugal is not using its right, the Netherlands will. Regardless of the NHR.
Tax is exciting
We think tax is exciting. The double treaty is a treaty we refer to on a daily basis. In case there is no double taxation, then there is also no need to refer to the double taxation treaty. Sometimes even our profession can be simple.
