AOW, pension and tax in Romania: the Netherlands taxes everything, Romania credits

Where do you pay tax on your pension if you live in Romania? In the Netherlands, on everything. That is the outcome, but the way there is unusual: the treaty of 5 March 1998 says in article 18 that a company pension and an annuity are taxable only in your state of residence, and immediately reverses that in protocol XII. The Dutch tax authority applies that protocol and taxes. Romania taxes pensions only above 3,000 lei a month, at 10 percent, and deducts the Dutch tax from that. So do not apply for a wage tax exemption; it doesn't exist here.

The treaty: residence state on paper, source state in practice

The treaty was signed in The Hague on 5 March 1998, entered into force on 29 July 1999 and has applied since 1 January 2000. Article 18, paragraph 1: pensions in respect of past employment and annuities are taxable only in the state of residence. With that, Romania would tax. But protocol XII to the same treaty says: notwithstanding article 18, paragraph 1, the Netherlands may apply its national legislation to those payments, until Romania notifies that it can tax them itself and both countries determine by mutual agreement to what extent article 18 then applies.

The Dutch tax authority, in its overview of treaty states, places the taxing right over a private pension and an annuity for Romania under "18, paragraph 1 / protocol XII", on the side of the Netherlands. Your company pension is thus taxed in the Netherlands, at the normal rates, and you continue to file a return on it as a non-resident taxpayer.

The rest is simpler. Article 18, paragraph 3: payments under a social security system may be taxed in the country that pays them; that is your AOW. Article 19, paragraph 2: a government pension may be taxed by the country that pays it, unless you are a resident and a national of Romania. And a lump sum in place of a pension or annuity may, under article 18, paragraph 2, be taxed in the country it comes from.

Income from the Netherlands	Treaty	Who taxes	And Romania?
AOW, Anw, WAO, WIA, Wajong	article 18(3)	Netherlands	10% above 3,000 lei a month, with credit
company pension	article 18(1) and protocol XII	Netherlands	idem
annuity	article 18(1) and protocol XII	Netherlands	idem
lump sum of pension or annuity	article 18(2)	Netherlands	credit
government pension (ABP)	article 19(2)	Netherlands, unless resident and national of Romania	credit
rent from your Dutch home	article 6	Netherlands	credit

What Romania does with it: 10 percent above 3,000 lei

As a tax resident of Romania you declare your worldwide income, so your Dutch pension too. The European Commission's guide and EURES say the same: income tax on pensions is payable on the part exceeding 3,000 lei a month, at 10 percent. Romania has one rate of 10 percent, without brackets.

Then comes article 24, paragraph 5, of the treaty: Romania allows a deduction equal to the income tax paid in the Netherlands, up to at most the Romanian tax on that same income. Because the Dutch tax on a pension almost always exceeds that 10 percent, there is on balance nothing left to pay in Romania. What you pay in the Netherlands is what you pay. You need a tax adviser here for the return itself, not for the outcome.

Do not apply for a wage tax exemption. With Spain or Portugal that is the first step after departure; here the request is refused, because the Netherlands keeps the taxing right. Anyone who meanwhile asks their pension fund to stop withholding gets an additional assessment.

When are you a tax resident of Romania?

According to the ANAF's guide: if your home is in Romania, if the centre of your vital interests is there, or if you are there for more than 183 days in total within twelve months. Within thirty days of those 183 days you file a questionnaire; how that goes is in registration and numbers in Romania. From that moment you file in both countries: in the Netherlands on the Dutch income, in Romania on your worldwide income with credit.

Your AOW comes with you in full

Within the EU the AOW is paid without reduction. In a SEPA country the SVB transfers it in euros, around the 24th of the month, and the bank costs are at most 0.48 euro per payment; a Romanian account in lei is not needed for that. Report your move to the SVB in time, with the date, your Romanian address and your bank details.

Your further accrual, 2 percent per insured year, stops on the day of deregistration. Anyone who leaves before the AOW age can, according to the SVB, sometimes insure voluntarily; check that before departure. What this means for your healthcare is in healthcare in Romania, and the order of closing things in the Netherlands in the step-by-step plan for Romania.

In Vertrekklaar this is phase 1 of 5 of the journey, step 1.2: the same steps, but for your situation — in your order, tickable, and with the deadlines watched. See the whole journey to Romania or go straight to step 1.2 in the open plan.