Pension funds will continue to be exempt from charging VAT on pension contributions, the Dutch State Secretary for Finance has confirmed, despite two recent Court of Appeal rulings that appeared to challenge the long-established VAT exemption for pension administration.

In a notice published this week, the State Secretary clarified that the government will not adopt the position taken in two judgments issued on 30 September by the Arnhem-Leeuwarden Court of Appeal, arguing that the Court's rulings only applied to the old pension system.

In those cases, the court held that the execution of a pension scheme constitutes a single service that does not qualify as a VAT-exempt insurance service.

This means that pension funds would have the right to deduct input VAT but would also be required to levy VAT on the entire pension premium.

The State Secretary emphasised that these rulings conflicted with the Amsterdam Court of Appeal’s 2023 judgment, which found that pension execution should be treated as a VAT-exempt insurance service.

The earlier decision is currently under appeal at the Dutch Supreme Court, and the government has now confirmed its intention to maintain the existing approach until the Supreme Court issues its final ruling.

Accordingly, the Dutch tax authority will continue to apply the VAT exemption for pension administration, meaning pension funds following the prevailing interpretation remain under no obligation to charge VAT on pension premiums.

In its 2023 judgment, the Amsterdam Court of Appeal held that pension execution exhibited the “essential characteristics” of an insurance service under both Dutch VAT law and the EU VAT Directive, citing the legislative history of the Pensions Act and the Civil Code.

The State Secretary cited this reasoning in reaffirming the government’s position, noting that Dutch lawmakers have consistently treated pension execution agreements as a form of insurance.

The clarification is expected to provide welcome reassurance for Dutch pension funds and employers, who faced uncertainty following the contradictory September rulings - particularly given the potential scale of VAT liabilities if pension premiums were deemed taxable.

However, the situation remains subject to change once the Supreme Court delivers its decision in the ongoing appeal, which is expected to provide definitive guidance on the VAT status of pension execution arrangements.

The State Secretary said further updates will follow once the Supreme Court ruling is issued.

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