- An “annuity exemption”
- A requirement that existing annuity entitlements must be disbursed in installments
“Rebate rules” would apply to existing annuity entitlements that are “fully surrendered” or paid in a lump sum in 2014 (in such situations, only 80% of the surrendered amount would be taxed).
The rebate rules imposing 80% tax on the lump-sum payment, however, would apply only if the employer transfers the severance pay to the annuity's administrator before 15 November 2013.
Employees often receive severance pay when they are made redundant. This can consist of an agreement for periodic payments from amounts that are deposited in an annuity (and from which the periodic payments are made to the employee).
If the annuity meets certain conditions, the employer can transfer the severance pay without having to withhold payroll tax and social security contributions (which only are payable by the employee at the time the periodic payments are made).
Proposals in Tax Plan 2014
As proposed, the “annuity exemption” would no longer apply beginning in 2014, and it would no longer be possible to have severance payments disbursed in installments.
Rather, severance payments would be subject to income tax (at progressive tax rates reaching as high as 52%).
Under the “rebate rules, if “surrendered” (paid out in one lump sum) in 2014, only 80% of the annuity would be taxed. For the rebate rules to apply employers would have to transfer the amount before 15 November 2013.
Read an October 2013 report prepared by the KPMG member firm in the Netherlands: Rebate rules for existing annuity entitlements surrendered in 2014 only to apply if severance pay is paid by employers before November 15, 2013