The Zeeland-West Brabant District Court ruled that the Dutch pension of a Dutchman living in Germany was rightly taxed in the Netherlands.
New tax treaty
This issue has been in play since the new tax treaty concluded between the Netherlands and Germany. This new treaty entered into force on 1 January 2016, with a transition period of one year, during which it could still be opted to apply the old 1959 treaty (and a compensation scheme still applies in the following years, including for those entitled to annuity and pension payments). The proceedings before the Court therefore concerned the levying of income tax for 2017.
Foreign taxpayer
A Dutch citizen whose tax residence is in Germany is in principle taxable in his country of residence, Germany. However, the Netherlands levies income tax on income from certain Dutch sources. The taxpayer resident abroad is “foreign taxpayer” for these sources.
One such source is annuity and pension payments whose premiums were deducted in the Netherlands or were exempt when paid.
Change
The old tax treaty assigned the right to levy income tax on annuity and pension payments to the country of residence. As a result, the Lower German's pension was taxed in Germany, and that tax was generally not too bad.
The new tax treaty also allocates the levy on annuity and pension payments to the country of residence, except when the total annual amount of the payments exceeds €15,000. Then the source country may levy. In the proceedings, the Lower German enjoyed €23,281 in pension benefits (in addition to his AOW, which does not count) from the Netherlands in 2017. The court now confirms that these benefits were rightly taxed in the Netherlands in 2017.