AOW, pension and tax in Turkey: article 18 in two halves
The treaty of 1986 gives your company pension to Turkey, and whether Turkey exempts it depends on your fund. Your AOW (the Dutch state pension) stays with the Netherlands as long as you're not a Turkish citizen. Whoever keeps the two halves of article 18 apart knows exactly what changes net; whoever believes the forum is counting chickens.
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Written and checked by Auke on , against the sources at the bottom. Is something no longer right? Report it below and I'll fix it.
Your company pension is taxed in Turkey, your AOW (the Dutch state pension) in the Netherlands. Those are the two halves of the tax treaty of 1986:
- Only Turkey may tax your company pension. Whether Turkey actually does so depends on your pension fund.
- On your AOW the Netherlands keeps withholding wage tax (the tax deducted straight from your benefit), as long as you are not a Turkish national.
On Dutch-language sites you often read something else: "in Turkey you pay no tax on your pension and your AOW". That sentence appears on more sites than there are treaty articles, and it is half true. The half that's wrong costs you precisely the wage tax on your AOW.
This article reads the treaty as it is written.
Where is your company pension taxed, and does Turkey then really levy?
Article 18, first paragraph: pensions and annuities paid to a resident of one of the states are taxable only in that state. As a resident of Turkey your company pension and annuity therefore go exclusively to Turkey. There is no threshold, and there is no source-state taxation: the Netherlands, where the pension comes from, levies nothing.
And then the second step, where it becomes uncertain. The Turkish income tax act exempts pensions paid by foreign social-security institutions (article 23, item 13). That exemption has no maximum, no withholding and no filing obligation.
The conclusion that a Dutch company pension is therefore untaxed in Turkey is too quick. The act nowhere defines what a foreign social-security institution is. For the AOW the answer is clear: that is social security. But a Dutch industry-wide pension fund, the pension fund of a whole sector, is an in-between form. It is compulsory and regulated by law, and at the same time not a state body. Whether it falls under the exemption is a factual question of classification that the Turkish tax authorities answer case by case.
The difference is big enough to tip your budget. If your fund falls under the exemption, you pay zero. If it doesn't, the payment counts as wages on which nothing has been withheld: you declare it annually and pay the progressive rate, which rises to 40 per cent. And because the treaty gives the taxing right exclusively to Turkey, the Netherlands doesn't credit that levy — you bear it in full.
For an annuity with an insurer or bank savings annuity the answer is probably the unfavourable one: those are not social-security institutions, and Turkish practice treats such payments as wages to be declared.
So before you leave, have a Turkish tax adviser apply for a ruling for your specific fund: an advance decision by the Turkish tax authorities. Only after that do you apply to the Belastingdienst for the wage-tax exemption, with a Turkish certificate of residence. That exemption is justified under the treaty. But it only says that the Netherlands doesn't levy, not that Turkey doesn't either.
Why doesn't the Netherlands let go of the AOW?
Article 18, third paragraph, says it literally: pensions paid under a social-security system may be taxed in the source state. They are only then taxable exclusively in the country of residence if the recipient is both a resident and a national of that country of residence. A Dutch citizen in Alanya is a resident of Turkey, but not a Turkish national. The result: the Netherlands keeps withholding wage tax on the AOW, and the Belastingdienst grants no exemption for it.
The exception does exist, but you have to become Turkish for it: whoever naturalises (for instance via the investment route) shifts the taxing right over the AOW to Turkey.
Beyond that, the familiar list stays with the Netherlands:
- the government pension (article 19): ABP years as a civil servant, teacher, police officer or in defence;
- a lump sum from pension or annuity (non-periodic, article 18 paragraph 2), so cashing in is fiscally unattractive here;
- Dutch property, with its rent and gain on sale.
| Income | Treaty of 1986 | Who levies when you live in Turkey |
|---|---|---|
| Company pension and annuity | art. 18(1) | Turkey only; exempt if it comes from a "foreign social-security institution" (income tax act art. 23/13), otherwise up to 40% |
| AOW | art. 18(3) | the Netherlands, as long as you are not a Turkish national |
| Government pension (ABP) | art. 19 | the Netherlands |
| Lump sum from pension or annuity | art. 18(2) | the Netherlands |
| Wages for work from Turkey | state of work | Turkey, progressive up to 40% |
| Dividends from the Netherlands | treaty up to 20% | the Netherlands withholds 15%; Turkey credits |
| Voluntary AOW continuation | — | apply within 1 year; every missed year costs 2% |
What happens with work and assets?
Wages follow the state of work, the country where you work. Whoever physically works from Turkey, including remotely for a Dutch employer, is taxed on that in Turkey. The rates are progressive and run up to 40%. Profits of a business without a permanent establishment in the Netherlands fall in Turkey. On Dutch dividends the Netherlands withholds its dividend tax of 15% (the treaty allows up to 20%); Turkey credits it as state of residence. Turkey has no general wealth tax, and the treaty has no capital article. The box 3 levy ends on emigration, except for Dutch immovable property.
If you come to Turkey not on a pension but on a WIA or WAO benefit, read emigrating on a Dutch benefit: what UWV lets come with you, and what happens to the supplement.
Does the accrued AOW come along in full, and which clocks are running?
Turkey is a treaty country: the AOW is fully exportable, including accrued supplements. Report your new address and every later change to the SVB within six weeks, and count on the proof of life that the SVB usually sends once a year and that you have signed in Turkey. Accrual stops on the day of departure. Every missed year before your AOW age costs 2%, unless you apply for voluntary continuation within a year.
The year of departure goes with an M return, the return for the year in which you emigrate. An annuity or substantial shareholding travels with a protective assessment. Outside the EU that comes without automatic deferral. The treaty also gives the Netherlands five years' room to keep taxing gains from a substantial shareholding. The sum of all this is the conversation with a tax adviser who knows both countries.
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 Turkey or go straight to step 1.2 in the open plan.
What this means for your numbers →
What this rests on
The facts in this article come from these official pages. Rules change. When in doubt, go by the source, not this article.
- Wetten.overheid.nl — the treaty with Turkey (1986), articles 18 and 19 — wetten.overheid.nl
- Mevzuat — Gelir Vergisi Kanunu (law 193), article 23: the exemptions — mevzuat.gov.tr
- NederlandWereldwijd — pension from the Netherlands and the wage-tax exemption — nederlandwereldwijd.nl
- SVB — voluntary insurance when you go to live outside the Netherlands (2% a year, apply within 1 year) — svb.nl
- SVB — which changes you report when you live outside the Netherlands (within 6 weeks) — svb.nl
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