This article discusses whether former Dutch tax residents who are now UK-residents will need to provide security for their Dutch conservative assessments (so-called “conserverende aanslagen”) after the brexit becomes a fact?
There many predictions about the financial and tax consequences of the Brexit. Especially businesses are on guard and rightly so. But how about private individuals? For example, those private individuals who moved from the Netherlands to the UK in the past and for which the Dutch tax authorities issued so-called conservative assessments (“conserverende aanslagen”) with respect to pensions and annuities built-up in the Netherlands?
Conservative assessment are issued when a person migrates
When a person migrates from the Netherlands, the Dutch tax authorities tries to secure her right to tax income that has not been taxed before but has not paid out yet. In order to do so, conservative assessments are issued. These assessments tax the increase in value of certain possessions or rights which have not been taxed yet of which pension and annuity rights are the most common, with the value of shares in a substantial shareholding (and relating rights) are second best. In a few occasions, depending on the applicable tax treaty, only the premiums deducted earlier may be taxed instead of the value of the claim.
Extension of payment or providing security?
The tax authorities automatically provide for an extension of payment of this pension/annuity related assessments if the individual moves to and stays in an EU/EEA country. In case of a move any other country you will either be required to pay the assessment immediately or you will be required to provide a guarantee or security for the amount of the assessment, think of a bank guarantee, mortgage or a pledge on certain assets.
If it is not possible to provide a security, no extension of payment will be granted and the conservative assessment will be collected. Due to the many treaties the Netherlands have with other countries, the other countries will help the Netherlands collecting the Dutch tax due.
The brexit: Will my extension of payment be withdrawn? How will I pay that bill?
If the Brexit really takes place, the United Kingdom will no longer be part of the EU. A separate agreement will be required for the United Kingdom to become part of the EEA, but if such an agreement will not be reached the United Kingdom will qualify as a third country. As from that moment, the conservative assessment for which an extension was granted earlier, may suddenly become payable unless security is provided. However, for many the question is whether means are available to pay or to provide security.
It is therefore very important that former Dutch tax residence who moved to the United Kingdom to keep an eye on these developments. Are you able to provide security or to pay the conservative assessment? If not, this may have serious consequences. Think about a forced sale of your house in order to use the excess value to pay the assessment or think about a forced return to the Netherlands so that the conservative assessment is withdrawn.
Langendorff Tax Consultancy has extensive experience with conservative assessment and fiscal migration issues. If you require more (non-binding) information, feel free to contact us.
Langendorff Tax Consultancy is specialized in Dutch and international tax. We understand cultural and legal differences that Dutch resident internationals, expats and businesses are facing. Give us a call to discuss how we can help you dealing with the Dutch legal system better! We have offices in Amsterdam and Laren.