ITEM focal point taken up: addition to Dutch qualification policy for German social insurance schemes

The Dutch Ministry of Finance has updated the guideline on the tax qualification policy of foreign social security schemes. According to expertise centre ITEM, the addition concerning certain German social insurances is a positive development, which is in line with their vision and commitment in respect of cross-border pension regulations. The tax treatment of, among others, liberal professions and professional soldiers is addressed.

In part due to a practical case study, the ITEM expertise centre has called attention to a further completion of the Dutch policy regarding the fiscal qualification of foreign social insurances. More specifically, ITEM has given an impetus for how two German social insurances: the social security contributions for berufsständische Versorgungseinrichtungen and the Soldatenversorgung, should be treated fiscally.

The tax qualification policy - laid down in a policy decision of 24 March 2014, DGB2014/144M, and a notice - is aimed at providing practical guidance on how to carry out a conversion to determine the Dutch taxable wage.

The tax qualification policy is particularly relevant if a foreign employee is liable to pay tax in the Netherlands and remains socially insured abroad.

The original version of the policy decision already contains the Dutch view regarding the conversion of contributions paid for the purposes of the Rentenversicherung​, the German statutory pension for employees. However, the German statutory pension system also has separate pension schemes for farmers (Alterssicherung der Landwirte), civil servants (Beamtenversorgung), liberal professions (berufsständische Versorgungseinrichtungen) and professional soldiers (Soldatenversorgung).

Case: Pension Premiums Seconded German Professional Soldier
The tax treatment of premiums for the pension scheme Soldatenversorgung was the subject of proceedings before the Court of Appeal of 's-Hertogenbosch. In this judgment of 10 November 2017, the Court of Appeal - referring back to the policy decision of 24 March 2014 - indicated that the premiums for Soldatenversorgung should be treated in the same way as the premiums for the benefit of the Rentenversicherung.
(Source: ECLI:NL:GHSHE:2017:4841)

Address in the Lower House
In the General Consultation in the Lower House of Parliament of 5 March 2020 on the tax and social security position of cross-border workers, the State Secretary for Finance announced that the outstanding German statutory pension schemes would be addressed. In anticipation of the amendment of the current policy, the assessment of the four German pension systems as mentioned above was already published in a Kamerbrief in mid-September 2020, following the aforementioned General Consultation. The outcome of the assessment is that the employee contributions for the Soldatenversorgung and Beamtenversorgung are deductible and the employer contributions are exempt. With regard to the berufsständische Versorgungseinrichtungen, a distinction is made between the situation of compulsory participation and voluntary continuation, in the first case the employee contributions are deductible and the employer contributions are exempt. In the case of voluntary continuation, the employee contributions are not deductible and the employer contributions are not exempt. A similar assessment has been made in respect of the Alterssicherung der Landwirte.

More recently, a new notice has been published in respect to the document 'Fiscal qualification of foreign social security schemes'. Besides the views on the aforementioned German pension systems discussed above, the notice of 26 November 2020, DGB 178296 also contains some other additions. Among others on the qualification of the social security systems of France, Poland and Cyprus.

  employee premiums deductible? employer premiums exempt?
Alterssicherung der Landwirte    
Berufsständischen Versorgungseinrichtungen
In case of compulsory insurance:
In case of voluntary continuation:

Source: Ministry of Finance (2020)

Dissertation Dr Bastiaan Didden
The doctoral dissertation 'Cross-border qualification problems: between social security and supplementary pensions' by Dr Bastiaan Didden (former ITEM doctoral candidate) takes a closer look at the way in which foreign statutory pension schemes are qualified. Also with regard to the other qualification issues, such as the recognition of a foreign supplementary pension scheme and the distinction between a tax and a social security contribution, several (other) relevant developments have taken place since the PhD ceremony on 8 November 2019. For example, reference can be made to the Notice Fiscal Treaty Policy 2020, which, among other things, also takes into account the discrepancy between social security and taxation.

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