Fiscal Retirement Reserve in the Netherlands
When you work as an employee, you often save supplementary pension through your employer. But if you want to build up a supplementary pension as a self-employed professional (ZZP), you have to arrange this yourself. Via the fiscal retirement scheme (FOR), you may set aside part of your profit annually to save for your pension.
Dutch government plans to abolish the retirement reserve in 2023
The 2022 spring statement contains the plan to abolish the fiscal retirement reserve from the 1st of January, 2023. If the plans go ahead, the FOR can no longer be built up from 2023. The amount that has already been accrued may be settled based on the current rules. Be aware: the plans are not final yet.
Who may use the retirement reserve?
If you want to use the fiscal retirement reserve, you have to be an entrepreneur for income tax purposes in the Netherlands. Next to this, there are two other conditions:
- You meet the hour criterion in which you spend at least 1,225 hours per year in your company. You can include everything in this calculation, such as time for travel, administration, and education.
- You have not reached the state pension age at the start of the Dutch fiscal year.
How does the fiscal retirement reserve work?
Do you want to save for your old day as an entrepreneur in the Netherlands? In 2022, you may still do this via the fiscal retirement reserve. You keep aside part of your profit, but there is a maximum to this reservation. In 2022, this will be 9.44% of the profit, with a maximum amount of €9,632. The retirement reserve adds up to your Box 3 capital.
On your balance sheet, you put the amount as a reservation. You will receive a postponement of payment on this reservation, so you do not have to pay tax on it immediately. You only do this when you retire (or quit your company).
Short term tax benefit
As we mentioned earlier, the retirement reserve provides a tax advantage in the short term. You only pay tax on this when you stop your company or retire. Many entrepreneurs use this tax advantage to invest in their companies.
Please note: if you do nothing else with the reserve, you will not obtain a tax advantage. On the contrary, it can even have a negative effect on you. When the whole amount is added to your income, you may end up paying a higher tax rate.
If you want to achieve a tax advantage in the long term, it is wise to convert the fiscal retirement reserve into an annuity in the meantime. The annuity is tax-deductible as long as you stay within your annual margin. You compensate for two items: the release of the retirement reserve and the deposit of annuity.
The moment you have the annuity paid out periodically, you will pay tax on it. There are two advantages to this:
- You spread the tax to be paid over a certain period
- When you reach retirement age, a lower tax rate applies
Make sure to optimally
Make sure to optimally use the fiscal retirement reserve so that you obtain a tax benefit in the long term. Would you like some help with this? We are happy to help! Contact us using the details below.