AOW, pension and tax in Morocco: the treaty is missing one article

If you live in Morocco, your AOW, the Dutch state pension, and your occupational pension are taxed only in Morocco. The Netherlands doesn't tax them.

Three things to know up front:

• That is because of an article that is missing. Most tax treaties have an article on social security, and that article decides where your AOW is taxed. The treaty with Morocco, concluded in 1977 and in force since 1987, doesn't have that article.
• A government pension, such as ABP, may be taxed in both countries.
• Even then your pension fund keeps withholding wage tax until you have applied for and received the exemption from it.

What does the missing article do?

Without a social security article the AOW falls back on article 22, the residual article for income that falls under no other article. That says: items of income of a resident of one of the States to which the preceding articles of this Agreement do not apply are taxable only in that State.

If you live in Morocco, Morocco taxes, and the Netherlands doesn't.

Your occupational pension goes the same way, but through a different article. Article 19 paragraph 1: private pensions and other similar remuneration paid to a resident of one of the States in consideration of past employment are taxable only in that State. There is no threshold amount and no Dutch withholding at source: the Netherlands, the country the pension comes from, may levy nothing on it. That is unlike the newer treaties with, say, Cyprus or Portugal.

Which exception overturns the picture?

Article 19 paragraph 2: government pensions and other similar remuneration paid to a resident of one of the States in consideration of past employment may be taxed in both States.

May be taxed in both. So whoever has ABP, or another pension from past employment with the government, cannot be done with one exemption request. For that source the taxing right, the right to levy tax, does not lie exclusively with Morocco. The outcome depends on how the relief from double taxation works out on your amounts.

Have that worked out before you leave.

Income	Treaty article	Who may tax
AOW	article 22, the residual article	Morocco only
Occupational pension	article 19 paragraph 1	Morocco only
Government pension, such as ABP	article 19 paragraph 2	both States

Apply for the exemption, otherwise the Netherlands simply keeps withholding

Even when the treaty places the taxing right with Morocco, your pension fund keeps withholding wage tax until you have applied for and received the wage tax exemption. For that you need a Moroccan residence certificate.

Without that application you first pay in the Netherlands and have to reclaim it afterwards. That works, but it costs a year and a tax return.

What does Morocco itself do with it?

Two schemes stack on top of each other.

The deduction. Article 60 of the Moroccan tax code first deducts seventy percent of your gross pension, up to 168,000 dirham a year. On the excess the deduction is forty percent.

The reduction. Article 76 gives on top of that a reduction of eighty percent on the tax you owe over your pension.

Scheme	What the Code Général des Impôts says
Deduction, article 60	70 % of the gross pension up to 168,000 dirham a year; 40 % on the excess
Reduction, article 76	80 % of the tax on the pension, for amounts transferred definitively in non-convertible dirham

Together those two make the Moroccan levy on a Dutch pension low; that is where the reputation comes from.