A solid pension scheme involves a range of complex and non-standard legislation. As a result, there are tax challenges for all parties concerned (employees, employers and pension funds or administrators). Meijburg & Co's pension specialists are here to help you.
Research has shown that a good pension scheme is one of the most important fringe benefits. As an employer, not only does this make you an attractive party to deal with, but you are also giving your employees some security for the future. A tax-friendly regime exists for pension schemes, meaning that pensions are supported fiscally by the application of the so-called EET system (exempt-exempt-taxed). This entails that pension accrual is exempted, pension premiums are deductible and tax is levied only at payment. Pensions are also not included in your box 3 assets. However, in respect of pension schemes, the legislature has established a rather strict regime. In order to avoid unnecessary tax assessments and/or fines, adequate knowledge of tax in respect of the pension benefits accrued and paid, and of the various pension types, as well as the transfer and conversion of pension rights and commitments, is thereby essential.
Your pension allows you to arrange a proper income for your retirement or in case of incapacity to work (including long-term disability), and, should you die, for your relatives. The tax regulations stipulate a variety of schemes for pension benefits. Pension premiums paid are deductible, and tax is levied on pension payments only. That makes pension benefits tax-efficient. Regulations also offer flexible schemes for saving additional amounts for retirement. However, the options are bound to strict conditions. Failure to fulfill these conditions can lead to high (potentially excessive) taxation and fines.
For employees who work cross-border, the tax legislation of other countries is also important. Also tax treaties are relevant. During the pension accrual period, there is often a failure to keep a sharp eye on when which pension is being built up, and in which country. It is often not clear how foreign tax legislation with respect of the pension benefits, has been applied. These details are important for the taxation of the pension once it has commenced. As a result, often more tax than necessary is levied on the pension that has been built up during cross-border work.
Taxation is not given equal prominence by all pension funds and pension administrators. As a consequence, these may be confronted unnecessarily with higher costs as a result of various taxes. Not only the levies themselves are important, also the tax compliance obligations concerning investment (both domestic and foreign). Pension funds and administrators are frequently confronted with wide-ranging and unknown tax compliance obligations.
Knowledge and information regarding the tax opportunities, risks and (international) compliance obligations offer pension funds and administrators the possibility to reduce their compliance costs and to limit the risks of fines and tax assessments, whether expected or unexpected.
How can Meijburg & Co help you?
Current developments in the market are forcing many pension funds and administrators to change their policies, and where possible, to exploit synergies. Pension funds can realise cost savings by joining forces, by affiliation to industry-wide pension funds, through the formation of multi-company pension funds or through transfers to insurance companies.
Creating a multi-company pension fund, or a merger or liquidation of a pension fund carries a number of opportunities and tax risks. Meijburg & Co helps you to detect and analyse opportunities for tax savings and avoiding tax risks, fines and liabilities. Naturally, we work closely together with our KPMG colleagues.
In addition, Meijburg & Co can optimise the domestic and international investment structures of pension funds and administrators (e.g. asset pooling, real estate and private equity investments), limiting withholding taxes and other levies. In this context, we reduce your tax burden and compliance to a minimum.