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Nederlands (Dutch)
Dutch Supreme Court has ruled that standing right (stamrecht) annuities – following from severance payments – do not comply with the annuity definition in tax treaties that the Netherlands has concluded.
Previously, taxpayers with an annuity were entitled to an exemption from deduction of wage tax on their annuity, because the annuity met the conditions of the definition of the term annuity in the tax treaties. The Supreme Court now states that the employment history of the severance payment from which the annuity has arisen must be examined. In these cases, this means that both the severance payment from the past and the subsequent annuity payment are qualified as income from work.
This means that the annuity – as a result of severance payments – paid abroad by the Dutch entities are regarded as earned income. Despite the tax treaties concluded by the Netherlands, these revenues are taxed in the Netherlands. If an annuity results from a severance payment of an employment in the Netherlands, it in principle is taxable in the Netherlands. If part of the initial severance payment can be contributed to an employment outside the Netherlands a partial exemption may be allowed.
Only if an annuity payment is intended as a pension for the bridging period until the pensionable age can it be qualified as a pension benefit. The employee and employer must have agreed this at the termination of the employment.
The tax exemption remains in force for the year 2017, but from 1 January 2018, these annuities are taxable in the Netherlands. The exemptions granted in the past are withdrawn from 1 January 2018.
