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New lower taxation of supplementary pension capital in Belgium after a complete career

Defined Contribution|Global Benefits Management
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May 20, 2019

Workers who retire now can enjoy reduced taxation of 10% on their supplementary pension capital.

The law of 27 February 2019 'amending the Income Tax Code of 1992 concerning the concept of statutory retirement age' was published in the Belgian Official Journal of 15 March 2019 and came into effect on 1 January 2019.

What exactly does this law involve?

Workers who retire now and do so before the current statutory retirement age of 65, provided that they satisfy certain conditions, can enjoy reduced taxation of 10% on their supplementary pension capital that is paid out as from 1 January 2019.

This favourable tax treatment only applies if ALL the following conditions are met:

  • Retirement before the statutory retirement age of 65
  • Having continued working until retirement
  • Have a complete 45-year career according to the applicable pension legislation.

What were the tax arrangements previously?

Supplementary pension capital accumulated through employer's contributions:

  • A social security (RIZIV) contribution of 3.55% and solidarity contribution of maximum 2% on the pension capital and profit-sharing.
  • Withholding tax on the pension capital depending on age when drawing down from the capital:
    • Age 60: 20%. On actual retirement, this rate is reduced to 16.5%
    • Age 61: 18%. On actual retirement, this rate is reduced to 16.5%
    • Age 62 to 64: 16.5%
    • Age 65: 16.5% or 10% if the worker was working for at least a continuous period of 3 years before the statutory retirement age
  • Local authority tax

Workers who had a 45-year career and who could retire according to the applicable rules even if they had not reached the statutory retirement age were thus confronted with higher taxation on their pension capital than workers who retired at the age of 65. This amendment of the law eliminates that anomaly, and higher taxation only applies to workers who did not have a complete 45-year career.

Supplementary pension capital accumulated through personal contributions:

  • A social security (RIZIV) contribution of 3.55% and solidarity contribution of maximum 2% on the pension capital and profit-sharing.
  • Withholding tax on the pension capital depending on the date when the contributions were paid in:
    • 10% on the capital accumulated by payments made from 1 January 1993 onward
    • 16.5% on the capital accumulated by payments made before 1 January 1993
  • Local authority tax

The amendment to the law does not change anything about this rule.

What about capital that has already been paid out?

At present, the competent authorities are examining how the withholding tax overpaid can be refunded (possibly via tax return) to the persons affected.

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