Pension premiums paid outside Belgium are tax deductible
Date: 20 January 2007
The Belgian Parliament has finally complied with
European Community Law in respect of cross border occupational
pensions (Law of 27 December 2006, Belgian State Gazette 28 December
Indeed, with effect from income tax year 2007
(calendar year 2006) Belgium lifts the ban on the tax deduction of
the employers’ contributions paid to a pension organism established
outside Belgium. This means that if an employer contributes to a
pension institution established in another Member State of the
European Economic Area (i.e. the 27 Member States of the European
Union as well as Norway, Iceland and Liechtenstein), the
contributions are tax deductible within the conditions mentioned in article
59 I.T.C. 1992 (in particular the 80 %-rule)
The same rule applies to the tax credit an
employee is entitled to in respect of his personal contributions to a
non Belgian pension institution.
This modification makes it easier to second
employees (temporally or permanently) to another EEA Member State;
they can maintain and continue to build up their occupational pension
in one Member State. It also offers opportunities for your company to
look for the best conditions on the European market for the funding
of your occupational pension plan.
On another tack, the parliament has also taken
the opportunity to limit the effect of the ‘exit tax’. Article 364bis
I.T.C. 1992 provides that the cross border transfer of the pension
capital is deemed to have been paid out on the day before the
taxpayer takes up residence abroad. The effect of this ‘exit tax is
limited to taxpayers taking up residence outside the European
Economical Area unless a double tax treaty applies.
Also since income tax year 2007, the pension
capital or pension reserves can be transferred to another pension
fund, insurance company or pension institution located in another
Member State of the European Economical Area, without incurring any
tax liability (article 364ter, 1ste paragraph I.T.C. 1992).
We would be pleased to discuss these issues with
you and to examine whether these important modifications offer
planning or tax optimisation opportunities to your company in respect
of your occupational pension plans.