How is your complementary pension capital taxed?
The complementary pension paid out to you on retirement has been built up over the years and can be broken down as follows:
- Premiums paid by your employer
- Your own premium contributions paid before 01/01/1993
- Your own premium contributions paid on or after 01/01/1993
- Payments of profit-sharing on your contract (= additional return depending on results of the insurance institution)
The capital that you receive when you retire is taxed as follows:
Sickness and disability contribution (RIZIV/INAMI contribution): 3.55 %
This contribution is deducted from the total gross capital (= own premiums + employer premiums), incl. profit sharing.
Solidarity contribution: between 0% and 2%
The solidarity contribution is payable on the total gross capital incl. profit sharing. The percentage varies between 0% and 2% and is determined by the size of the total gross capital incl. profit sharing. Specifically, this means a deduction of 2% on capital from EUR 24,789.35 upwards and 1% for capital between EUR 2,478.94 and EUR 24,789.35. No solidarity contribution is payable on smaller capital amounts.
Corporate withholding tax
The withholding tax is calculated on the gross capital without profit sharing, reduced by the INAMI contribution and the solidarity contribution.
- The tax rate on capital built up by employer premium contributions depends on your age at the time of payout.
- The capital accumulated by individual contributions is subject to withholding tax depending on when the premiums were paid.
The table below shows the withholding tax applied to your pension capital, both for the employer contributions and on your own premium contributions.
|Age when claiming complementary retirement benefits ||
EMPLOYER PREMIUMS || EMPLOYEE PREMIUMS|
|If no (early)|
|62 to 64 y||16.66|
|65 y|| 10.09 %
(if actively employed until|
statutory retirement age), otherwise 16.66 %
The above percentages present the withholding tax for which a portion of the municipal tax has already been deducted.
As mentioned, the withholding tax on employers' contributions depends on your retirement age. Look here to know from what date you can take down your pension capital.
The pension institution retains the withholding tax when paying out the supplementary pension. The year after the payment of the capital, you receive a tax form that you can use when completing your personal income tax return. The final assessment is made on the basis of this income tax return.
Note also that the tax rate applied can vary depending on your personal situation at the time of payment. You must also take into account the municipal tax applicable in your place of residence, for which an advance is deducted from the payment of the supplementary pension capital. The final assessment is made via your tax return in the year following the payment of your capital.
For a complete picture you can discover here your personal retirement capital.
What if you take down your supplementary pension in the form of an annuity?
If under the rules of your pension scheme, your supplementary pension capital takes the form of an annuity, this will be taxed as a professional income. That means that it will be added to your statutory pension. The sum of your statutory pension and your annuity, less the 3.55% INAMI contribution, forms the annual pension annuity amount (see table), that is taxed progressively: i.e. the higher your income, the higher the charge.
Caution: unlike taking your capital in a lump sum - with one-off tax - capital taken down in the form of an annuity is taxed annually as personal income. You get an annual statement that you can use with your tax return.
ANNUAL ANNUITY PAYMENT IN EUR||
WITHHOLDING TAX RATE|
|up to 1 790,00||0%|
|from 1 790,01 to 2 990,00||11.11%|
|from 2 990,01 to 8 900,00||16.15%|
|from 8 900,01 to 14 820,00||21.20%|
|from 14 820,01 to 29 640,00||27.25%|
|from 29 640,01 to 44 460,00||32.30%|
|above 44 460,00||37.35%|
The above annuity amounts are the taxable amounts. The 3.55% RISIV/INAMI contribution has been deducted.
Third option: conversion of capital into annuity
If you take down your pension capital as a lump sum, you can still opt afterwards to convert your funds to an annuity. In that case, the taxable basis is a lump sum amount of 3% of the total net capital converted into an annuity. This amount is considered as investment income and is subject to a separate annual tax of 30%, plus local tax. Again, you get an annual statement to help you with your tax return.