Dutch tax & United States pensions - Maguire (2024)

FAQs

Is a Dutch pension taxable in the US? ›

U.S.-Netherlands Tax Treaty and the Foreign Tax Credit

Pensions usually are taxable only in the country of residence. In other words, if you worked in the Netherlands, now live in the United States and receive a Dutch pension, you should not be subject to Dutch income taxation. However, there are some exceptions.

Taxation of pensions

In general, foreign pensions (including United Kingdom and United States pensions) are taxable sources of income in Ireland. They are liable to Income Tax and Universal Social Charge (USC), but not Pay Related Social Insurance (PRSI).

The pension annuity is taxed as of pension age. Taxation is therefore much later and often at a modest rate. If not all conditions are met, instant and total taxation including a stiff fine might materialize. Each country can have certain limitiations on these kind of tax benefits.

If you move out of the Netherlands before you retire then you will receive a reduced state pension as you will not be continuously insured for the AOW pension and will stop accruing pension rights. Additionally, you will not be covered by the Anw survivor benefit scheme for your partner if you pass away.

If the pension is in a non-treaty country then the general rule is that the pension is taxable even during all phases of contribution, growth, and distribution because there is no specific rule that exempts foreign pension income in a non-treaty country from U.S. taxation.

This includes both your Dutch income and your foreign income, which includes your foreign pension benefits as well. However, it's important to note that this doesn't necessarily mean you will always be taxed on these benefits in the Netherlands. Not all foreign pensions are treated as taxable income.

Absence from U.S. territory

Normally, people who are not U.S. citizens may receive U.S. Social Security benefits while outside the U.S. only if they meet certain requirements. Under the agreement, however, you may receive benefits as long as you reside in Ireland regardless of your nationality.

The convention between Ireland and the United States (US) covers inheritance tax in Ireland and federal estate taxes in the US. It does not apply to gift tax. Neither does it apply to any taxes in the nature of death duties, which may be imposed by US states.

The exemption from United States tax was agreed to by the US tax authorities on the basis that these pensions would be subject to tax in Ireland. Therefore, an Irish resident recipient of a United States social security pension is a chargeable person on such pension for income tax purposes.

The basic pension benefit for a single person equalled EUR 1 334.94 per month in 2022. For couples, the amount per person is EUR 914.15 for a total amount of EUR 1 828.30 per couple.

What are the pension rules in the Netherlands? ›

Old Age Pension (AOW)

Everyone who resides or works in the Netherlands builds up this pension over the years. The state pension age (AOW age) is gradually changing, until it reaches 67 years in 2024. In 2028 the state pension age will be raised again, to 67 years and 3 months.

Why are the Netherlands taxes so high? European countries have notoriously high tax rates – but the advantages and benefits residents of these countries receive usually make the extra costs worth it. The Dutch tax rate covers several social programmes, including unemployment, health insurance, sickness benefits, etc.

If you plan on a longer residency, you will have to apply for a permit. Requirements will differ, depending on the reason for your stay. However, you should note the Netherlands has no specific option for retirees. So your pension income needs to be sustainable.

The Netherlands, Iceland, Denmark and Israel all had A-rated pension systems, meaning they provided robust retirement income and good benefits, as well as being sustainable with a high level of integrity.

You may withdraw up to 10% of your old-age pension in one go. You may also withdraw less than that, for example 5%.

Navigating Foreign Pension Income Reporting

It's important to note that income received from foreign pensions or annuities may be subject to full or partial taxation, even if you haven't received a Form 1099 or a similar document that reports the income amount.

Your pension will be reported on a Form 1099-R, Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc. Form 1099-R will show you how much you contributed to the plan and how much tax was withheld.

Will I Pay Taxes on My Pension Income When Living Overseas? Yes. Even if you are enrolled in a foreign pension plan, the IRS will typically treat your pension as income and tax it accordingly. With that said, the US has a number of tax treaties and credits in place to protect expat retirees from double taxation.