Double taxation on pension benefits for cross-border workers from Belgium

The Dutch State Secretary for Finance has responded to parliamentary questions on the issue of double taxation being levied on the pension benefits of cross-border workers from Belgium. The double taxation convention between Belgium and the Netherlands essentially places the right to tax private law pension benefits with the state of residence, albeit that the former state of employment will also be authorised to levy tax provided particular conditions have been satisfied, one of which is that the pension benefits should be subject to inadequate taxation in the state of residence.

According to Belgian court rulings, for reasons of national law Belgium has to stop short of taxing pension benefits having originated in the Netherlands in their entirety. The position adopted by the Belgian court has raised doubts with the Dutch Tax and Customs Administration as to whether pension benefits having originated in the Netherlands are being adequately taxed in Belgium and made the Dutch tax authorities think twice before they grant instant payroll tax exemption. This may result in the pension benefits remaining whether untaxed or becoming double taxed in both countries. It is the lower pension benefits which are the subject of confusion: the Belgian-Dutch double taxation convention stipulates that only the state of residence is authorised to levy tax as long as the gross pension benefits for the calendar year do not exceed € 25,000.

As neither the Dutch nor the Belgian authorities consider double taxation on non-domestic pension benefits to be a good thing, they have agreed to get together shortly to discuss the matter and come to a satisfactory solution.

Dutch version: Dubbele belastingheffing pensioen grensarbeiders uit België