German Rentenversicherung is only taxed insofar as contributions are deductible

German Rentenversicherung pension insurance

A lived and worked in Germany from 1 January 1980 through 13 April 1997 and was compulsorily insured under the so-called Rentenversicherung during that period. He resided in the Netherlands during all of 2018. When determining the 2018 income tax and national insurance contributions assessment, the Tax Inspector included the full amount of the payments received as taxable income.

Appeal proceedings

On appeal, A argued that only 45% of the contributions paid under the Rentenversicherung were deductible from German wage and income tax. He therefore took the position that the box 1 tax should also be limited to 45% of the payments received in 2018.

The Arnhem-Leeuwarden Court of Appeal agreed with this. After all, Article 3.82(b) of the Income Tax Act 2001 (Wet inkomstenbelasting 2001) (‘ITA’) indicates that payments under a pension scheme of another jurisdiction are not counted as wages insofar as it is plausible that the entitlement has been subject to taxation which, in nature and scope, corresponds to wage tax or income tax. This is not altered by the fact that the Supreme Court ruled in 1994 that payments from a Rentenversicherung were fully taxable as wages under the Income Tax Act 1964. After all, Article 3.82 ITA had not yet come into force at that time.

Supreme Court judgment

In the appeal before the Supreme Court, the State Secretary argued that it follows from Article 3.81 ITA that the payments under the German Rentenversicherung are part of the wages and that it is irrelevant whether, and if so to what extent, the contributions paid had been deducted in Germany. According to the State Secretary, the introduction of the ITA did not change the concept of ‘wages’ in respect of wages from previous employment, and the previous case law remains relevant.

However – following the Court of Appeal’s decision – the Supreme Court ruled that Article 3.82(b) ITA broadens the concept of ‘wages’ and takes precedence over the general rule in Article 3.81 ITA, which is based on wages in accordance with the statutory provisions governing wage tax. This means that the 1994 judgment is no longer relevant to the present case. The Court of Appeal therefore correctly assessed the extent to which the pension payments must be taxed as wages for the purposes of Dutch income tax under Article 3.82(b) ITA. The Supreme Court noted that this produces a result comparable to the effect of the reversal rule (omkeerregel) provided for in the Wages and Salaries Tax Act 1964 (Wet op de loonbelasting 1964), and is, thus, inherent in the application of Article 3.81 ITA in domestic situations.

During the appeal before the Supreme Court, the question also arose as to whether the German Rentenversicherung qualifies as a pension scheme of another jurisdiction as referred to in Article 1.7(2)(c) ITA, or whether the payments qualify as social security benefits that are taxed in the Netherlands as designated periodical payments under public law (Article 3.100(1)(a) ITA). However, the Supreme Court ruled that, on the basis of the arguments put forward by the parties on appeal, the Court of Appeal was entitled to conclude that it was not in dispute that the German Rentenversicherung qualifies as a pension scheme. The order of precedence therefore means that Article 3.82(b) ITA takes precedence. The appeal in cassation was unfounded.  

Practical consequences

This Supreme Court judgment has broader implications for the expat practice. The average expat coming to the Netherlands has a pension entitlement abroad. For this entitlement, it must be determined whether it constitutes a pension scheme under the tax laws of the source country and whether those laws correspond in nature and scope to Dutch wage and income tax.

It must then be made plausible whether – and if so, to what extent – the pension entitlement is taxed in a manner comparable to wage and income tax. On top of that, an extremely complex transitional regime must be taken into account in respect of pension entitlements accrued in whole or in part before 1 January 2001.

The above may lead to the conclusion that the pension entitlement must be split, resulting in taxation partly in box 1 and partly in box 3. This raises questions as to how that split should be made and how the box 3 portion will then be valued. In its judgment, the Supreme Court did not address this issue since the Tax Inspector had agreed to a capital yield tax base of zero for the year in dispute (2018) before the Court of Appeal. Nevertheless, the judgment may have potentially significant consequences for expats.

Source:

• HR 19 June 2026, 22/04928, ECLI:NL:HR:2026:961