AOW, pension and tax in Poland: the treaty was reversed in 2022

Most Dutch-language pages on tax in Poland were written under the treaty of 2002. That treaty placed your pension with the country of residence, and whoever searched for it found a favourable story: move to Poland, apply for the wage tax exemption, and pay the low Polish rate.

That story stopped being true on 30 April 2022.

What the protocol of 2020 did

The Netherlands and Poland signed a protocol amending the treaty on 29 October 2020, and it entered into force on 30 April 2022. The core is in article 18, and that is now a source-state article.

Paragraph 1: pensions and other similar remuneration, as well as annuities, arising in a Contracting State and paid to a resident of the other Contracting State may be taxed in the first-mentioned State.

Paragraph 2: pensions paid and other payments made under the provisions of the social security legislation of a Contracting State to a resident of the other Contracting State may be taxed in the first-mentioned State.

May be taxed in the first-mentioned State. Your occupational pension arises in the Netherlands, your AOW is a Dutch social security payment: the Netherlands may tax both, without threshold and without condition.

What that means on the Dutch side

The Netherlands simply withholds wage tax. Unlike with Spain, Portugal or Morocco there is no wage tax exemption to apply for — there is nothing to exempt, because the taxing right lies with the Netherlands.

Whoever reads a page saying you have to apply for that exemption is reading a page from before the protocol.

And on the Polish side: a credit

Poland taxes alongside as the country of residence on your worldwide income, and avoids the double taxation with a credit. Article 23 paragraph 5: if a resident of Poland derives income that may be taxed in the Netherlands, Poland allows a deduction equal to the income tax paid in the Netherlands, limited to the part of the Polish tax attributable to that income.

A credit is something else than an exemption. In total you pay the higher of the two rates. If the Dutch levy sits above what Poland would charge, nothing remains in Poland. If it sits below, Poland tops up the difference.

The Polish yardstick: a tax-free allowance of 30,000 złoty, a rate of 12% up to 120,000 złoty and 32% on the excess. For most Dutch pensions the Dutch levy sits above that, and then the Polish return is a formality with nothing to pay. For low pensions it can work out differently because of the Polish allowance and the low first rate. Work it out on your amounts; don't assume it.

The government pension follows your nationality

For ABP and every other pension from past employment with the government a rule of its own applies, article 19 paragraph 2: such a pension is taxable only in the other state if the recipient is a resident and a national of that state.

Whoever is only Dutch keeps their government pension with the Netherlands. Whoever holds Polish nationality alongside the Dutch and lives in Poland sees their government pension go exclusively to Poland — at the Polish brackets, without Dutch levy. It is the one part of your income for which your passport decides the answer, and with this destination that is no rare case.

Your AOW comes along in full

Apart from the tax: within the EU the AOW is paid without reduction. Report your move to the SVB in time, with the date, your Polish address and your bank details. Your further accrual stops on the day of deregistration; whoever leaves before AOW age can continue it voluntarily.