Retirement Annuities (lijfrente)
A retirement annuity provides a guaranteed monthly or annual income for after your retirement. The annuity is usually funded years in advance, either in a lump sum or through a series of regular payments. The cash reservation may return fixed or variable cash flows later on. Typically. an annuity has large up-front costs and early withdrawal penalties. The great benefit is when you retire as it provided an extra income. Annuity savings are taxes when it is being consumed after reaching the statutory retirement age, at a significantly lower income tax rate.
Conditions Dutch tax office
The Dutch tax office recognizes a retirement annuity (lijfrente) if the retirement payment amounts are not predetermined. A retirement annuity (lijfrente) is not recognized if the amount payable upon retirement is determined upfront either as a lump sum or periodic payment. It is allowed to agree upon a minimum retirement payment amount, leaving room for a higher payout amount due to capital gains.
Taxation of retirement annuity (lijfrente)
Insurance premiums and deposits for a retirement annuity (lijfrente) are tax deductible if the retirement annuity is managed by a recognized insurer, bank or fund manager.
You should be the beneficiary of the periodic annuity payments (minimal one payment per year, equal payment periods, fixed and stable period payment amounts).
You pay (reduced) income tax over the received annuity payments upon retirement.
If you withdraw money or close the retirement annuity early you will be taxed over the fund deposit taken. Additional penalty charges (revisierente) may be charged.
Note: if your retirement annuity agreement states that you are receiving a net payout scheme than premiums are not tax deductible.
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