Advance levy

WHAT IS THE ADVANCE LEVY?

This article applies to insured pension savings and long-term savings. The tax on your pension savings contract is withheld on your 60th birthday or on the tenth anniversary of the contract. The latter applies to contracts underwritten after age 54. It is an advance levy and also a final levy, which means that you no longer pay taxes on these contracts afterwards. It is the insurance company that automatically withholds the advance levy and transfers it to the tax authorities. You do not need to do anything yourself for this.

HOW MUCH IS THE ADVANCE LEVY?

Since 1 January 2015, the advance levy for pension savings is 8 %. Note: for long-term savings the advance levy is still 10%.

Pension savings contracts underwritten from 1 January 2015

Since 2015, the normal tax rate for a pension savings contract has been 8%. This 8% is in most cases withheld in advance on the 60th birthday of the policyholder. In the other case there is an ordinary taxation on the tenth anniversary of the contract (if the contract started after the age of 54).

Pension savings contracts underwritten before 2015

In this case, since 2015 the normal tax rate for these pension savings contracts has decreased from 10% to 8% for the taxable base formed by payments made from 1/1/1993.

From 2015 to 2019 you already paid 1 % each year on the reserve of your contract as at 31 December 2014. Has the advance tax already been levied on your 60th birthday or on the tenth anniversary of the contract? Then you no longer need to pay early collections of 1 %. In the year in which your contract is taxed in advance, there is also no more early collection. On your 60th birthday or on the tenth anniversary of the contract, your contract is taxed at 8 % and all early collections of 1% already paid from the years 2015, 2016, 2017, 2018 and 2019 are deducted from this.

For the sake of completeness: if there is still a taxable base in the contract, formed by payments made before 1/1/1993, then a taxation of 16,5% originally applied to that. In 2012, however, a tax of 6,5% was charged on all these contracts, to help fund the treasury. As a result, the full taxable base became 10% from the start of 2013, later reduced in 2015 to 2015.

CAN I PAY THE ADVANCE LEVY VIA CURRENT ACCOUNT INSTEAD OF VIA DEDUCTION FROM MY POLICY?

No, you cannot. This question could be relevant if your policy was invested in, for example, Branch 23 funds. In this case the insurer will sell part of the funds to collect the advance levy. Perhaps you expect these funds to rise sharply in value, which is why you would prefer to pay the tax in cash. Unfortunately, this is not possible.

WHAT HAPPENS AFTER THE ADVANCE LEVY IS WITHHELD?

It is a final levy, which means that you no longer pay taxes on these contracts afterwards. The payments you make into the contract after the advance levy has been withheld therefore continue to entitle you to a tax reduction, while the capital formed from these later payments is nonetheless no longer taxed. Continuing to make payments after the advance levy is therefore quite worthwhile.

WHAT IF YOU NEVER DEDUCTED THE PREMIUM FOR TAX PURPOSES?

If you did not make use of the tax advantage associated with this insurance, your contract should not be taxed. You must provide the insurer, as soon as possible (within two years after the incorrect levy), with a certificate from the tax inspector (document 276 C1 (B)). The term "never" should incidentally be taken literally. If you have deducted even a single premium, then the capital built up in the contract is taxable. It is clear that this situation almost never occurs.

WILL THE INSURER NOTIFY ME WHEN THE ADVANCE LEVY IS WITHHELD?

Yes, by means of an ordinary letter. If Life Experts has received a copy of this letter, we will in principle give you a heads-up by email. Please note, however, that we do not receive a copy of all correspondence that insurers send to clients, and therefore we will not proactively notify every client.

WHAT IF I ONLY DISCOVER AT AGE 65 THAT THE ADVANCE LEVY WAS INCORRECTLY WITHHELD AT AGE 60?

Suppose you never deducted the premium for tax purposes. At age 65 you receive a settlement statement from the insurance company and you find that at age 60 the insurer incorrectly withheld an advance levy. Can you still demand a correction? For the record: in practice this almost never occurs. The limited experience we have in this area shows that by then it is too late to request a refund of the advance levy. In practice, an insurance company has 2 years to reclaim the taxation from the tax authorities (see above) by means of a certificate (document 276 C1 (B)) issued by the tax inspector to the policyholder.

At age 60 you received an ordinary letter from the insurer informing you that an advance levy would be withheld. This also included a status overview of the policy and the amounts withheld. This is considered sufficient information. But suppose you did not receive this letter? And you argue that, as policyholder, you were not adequately informed about the tax nature of the policy. Even then, this argument seems difficult to sustain to us:

1. At the outset you underwrote a tax-advantaged contract, the characteristics of which you are assumed to know. The quotes, proposals, and policy clearly refer to the tax nature of the policy you underwrote.

2. The taxation on the end date of pension savings has been changed favorably several times in recent years. It is to be expected that on each of those occasions the insurer sent a communication, possibly in addition to the annual statement, referring to the tax nature of the policy. Because the tax authorities have made a number of advance deductions on the advance levy at age 60, we may be certain that this letter referred to the advance levy at age 60.

3. The taxation of the pension savings premium has also changed in recent years (see dual pension savings). There has also been communication about this linked to your policy number.

4. You received an annual status overview of your policy. Of course, not everyone reads this closely, but this does mean that, for example, at age 61 you could have noticed that the accumulated reserve had decreased (or, in an exceptional case, had increased less strongly).

5. You probably paid a premium every year. In the early days of the contract, you may therefore have received a paper tax certificate each year, which was used to declare the premium in your personal income tax. Later, that certificate was replaced by an automatically pre-filled amount in Tax-on-Web. This means that, if you deliberately did not deduct the premium, you or your accountant proactively reset this premium to zero in Tax-on-Web.

Experience shows that if you do not respond in the prescribed manner within 2 years of the levy, it is then impossible to recover the advance levy. If it is any consolation in such a case: you at least did not pay tax on the pension savings premium.

CAN I SUBSEQUENTLY CHECK THE INSURER'S CALCULATION OF THE LEVY?

Life Experts, and by extension probably every insurance intermediary, does not perform proactive checks on the deduction at age 60. Experience also shows that errors are almost never made in these automatic processes. If you do have questions or doubts, you are welcome to contact us. Checking it yourself is certainly possible, but not easy. The difficulty is that you need to know the status of your contract on the 60th birthday. On the capital reserve of this contract (i.e. excluding profit sharing, for contracts in Branch 21) or on the value of the contract (in Branch 23), you deduct 8% (or, where applicable, 10% in the case of long-term savings). The early collections already made in the preceding years are deducted from this taxation and can be found on the insurer's statement. You can verify these deductions by referring to the status overviews of your contract (certificates or account statements) for the preceding years 2015 up to and including 2019. It goes without saying that checking this calculation is not a 5-minute job.