The beneficial entitlement to pension accrual for tax purposes (deferred taxation system) can only be applied to a pensionable salary up to a maximum of €185,000. Existing pension commitments in which the pensionable salary exceeds this limit do not need to be adjusted. However, before the capping scheme is introduced on 1 January 2009, the employer must submit a request to the tax inspector to divide the scheme into a net and gross part. As far as the gross part is concerned, the entitlement will be calculated as part of the employee’s salary (the contribution). Any personal contribution is not deductible and the payments can only be received tax free when the time arises.
Furthermore, the value of the gross entitlement will have to be added annually to the tax base of ‘Box
We believe that the employer and the pension administrator must consult each other on this matter. Simply continuing with the pension scheme (after division) will produce an undesirable net effect in the accrual phase. After all, the employee will be taxed on the gross entitlement, whereas this contribution must be financed from net income (excluding pension contribution). Furthermore, the ‘Box
A division of the scheme into a net and gross part will entail considerable costs, both for the pension administrator (pension statement, ‘Box