Individual pension commitment and 80% rule
Individual pension commitment and 80% rule
General
Premiums paid under an IPC are deductible for corporate income tax, provided they meet a number of conditions, including the 80% rule.
According to this rule (see formula below), statutory (1st pension pillar) and non-statutory (these refer to the 2nd pension pillar and therefore not to pension savings) retirement benefits (expressed as an annual interest rate) may not exceed 80% of the last normal gross annual salary, taking into account a normal period of professional activity.
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Formula: ELP ≤ (80% x R - PL) x N/A
In which: ELP = extra legal pension (expressed as an annual interest rate) R = last normal gross annual salary PL = statutory pension (see point 2 below) N = number of years worked D = normal duration of a full career (40 years) |
Recent administrative circulars
The Act of 15 June 2021 amending various provisions relating to pension schemes aligned the calculation of the statutory pension of the self-employed with that of employees by abolishing the harmonisation coefficient (with retroactive effect to 1 January 2021). The revaluation of the statutory pension of the self-employed has the effect (among others) of reducing the amount of deductible contributions under an ELP.
Before the law came into force, the statutory pension (taken into account in the formula above) could be estimated:
- for employees, at 50% of gross pay (pay limited to the maximum taken into account for calculating statutory pension benefits)
- for company executives, at 25% of gross income (without this amount being allowed to be lower than the minimum pension or higher than the maximum pension).
In its circulars 2022/C/33, 2022/C/79 and 2022/C/81, the administration now provides that the statutory pension of the independent manager can be estimated:
- for the years before 2021 as a self-employed person, at 25% of his gross income for the year 2020 (this amount cannot be lower than the minimum pension or higher than the maximum pension for the year in question)
- for the other years (those in which the activity was exercised as an employee and those exercised as a self-employed person from 2021 onwards): at 50% of the gross income of the taxable period (limited to the income ceiling or maximum pension, if applicable).
For the year 2021, the minimum pension is set at EUR 15,911 and the maximum pension at EUR 17,948 (EUR 19,118 for the year 2022).
Circular 2022/C/79 adds that, regardless of the method of calculating the statutory pension, the part of the premiums that are not deductible only because of the increase in the estimated statutory pension should in principle not be included as disallowed expenses in tax years 2022 and 2023.
This administrative tolerance is allowed to the extent that the company records these premium excesses in an account #49 (deferred expenses) during the taxable period relating to the assessment year 2023 (with then the accounting question: how to record a deferred expense on 31/12/2022 relating to an amount that was charged on 31/12/2021)?
These surpluses are then considered advances on premiums payable in the next taxable year (assessment year 2024) (it is as yet unclear whether any excess can also be carried forward to subsequent years).
However, this tolerance does not apply to contracts expiring in 2021, 2022 or 2023, nor to the portion of premiums related to back service applied in the last 5 years of the contract.
Impact of recent circulars
The estimate of the statutory pension presented above is overestimated in many cases. This overestimation leads to a reduction or even overpayment of contributions for a supplementary pension under an IPC .
To neutralise this overestimation, Assuralia (professional association of insurance companies) has asked to use the data available on the ‘MyPension.be’ portal to estimate the statutory pension.
Although this data comes from another government agency, the tax authority has informed Assuralia that this data cannot be used, which is surprising to say the least. According to our information, at least one insurance company has nevertheless decided to use the data available on the aforementioned portal.
In conclusion
Administrative circulars represent the tax administration's view on the matter at hand and do not necessarily reflect the views of other stakeholders (doctrine, case law).
However, our experts recommend that if premiums paid in 2021 and/or 2022 are capped, you should ask your broker for a recalculation to check whether there is a risk of (partial) non-deductibility of premiums for these years.