The European Court of Justice has ruled that the Netherlands is acting in violation of EU law on two points of pension law. The EU judges have ruled in favor of the European Commission in a long-standing issue in which outgoing Prime Minister Mark Rutte repeatedly said 'that Brussels should stay away from our pensions'.
In two judgments, the European Court of Justice recently ruled on two controversial conditions that the Netherlands applied to international pension value transfers. This concerns employees who have built up a pension in a Dutch job and want to transfer that amount to a foreign pension fund when switching to a job abroad.
One of the conditions declared invalid is that the foreign pension fund may not have broader redemption options than in the Netherlands. If payment is made before retirement age, income tax must still be paid on the amount in the Netherlands. Moving and then having the pension accrued in the Netherlands paid out (early) was made virtually impossible by the Netherlands with this condition.
The Netherlands also applied the condition that the intended foreign pension fund had to accept liability for the payment of Dutch tax obligations on (future) pension benefits. Virtually no fund wants to issue such a statement. The liability claim served as a future collection to prevent unintended use of tax deductions for pension accrual.
The European Commission considered these two conditions to be contrary to the right to free movement of workers because the Netherlands was thus obstructing the acceptance of a job abroad. This would also apply to foreigners working in the Netherlands if they wanted to return to their home country after a few years.
The judgment of the European judges also means that these two specific conditions may no longer be imposed with immediate effect for an international individual value transfer of pensions. For the Netherlands, combating the tax consequences of early payment of pensions abroad can only be dealt with if agreements are made about this in a tax treaty with other countries. But there is (yet?) no tax treaty with several countries.
A major legal dispute between the Netherlands and the European Commission is the fact that Brussels believes that the reserves of Dutch pension funds should be counted as part of Dutch tax assets. The Netherlands disputes this and says that pension money is collectively owned by employers and unions, and not by the government. In the other EU countries, pension money is collected (by the government) as 'taxes', while in the Netherlands it is an earmarked target tax ('deferred wage').
State Secretary Van Rij of Finance says in a response that some provisions of the Pension Act and tax regulations now need to be adjusted. To combat these types of tax routes, the Tax Authorities will monitor to which countries such value transfers take place and what amounts are involved.
It is not yet clear when and how this will be done. It will be clear that Brussels will monitor whether the Netherlands will now adapt the Pension Laws on these points to European law.