A DGA accrued a pension in his own private limited company. The fair value of the pension was €1,130,000. At some point, the BV paid the BV a dividend of €600,000. The tax authorities then impose an assessment for abandoning the entire pension. The DGA goes to court.
DGA's point of view
The DGA argues that, in anticipation of the conversion of the self-administered pension into a retirement obligation (ODV) under the Pension Phase-out Act, he was allowed to take into account the reduction of the self-administered pension to its tax value. In that case, sufficient profit was available to make the dividend payment of €600,000.
Judge's considerations
The court held that the self-administered pension had been relinquished by the dividend payment. This is because the dividend distribution means that the BV is no longer able to meet its pension obligations. After all, the pension liability is almost double the balance sheet total after the dividend payment. This means that the DGA's entire pension entitlement has been bought out and the entitlement (at its commercial value) is regarded as wages from previous employment.
The DGA's argument does not lead to a different opinion. The Phase-out Act offered the possibility of tax-free cancellation of the commercial pension liability to the fiscal balance sheet value from 1 April 2017 to 31 December 2019. Tuning down the pension liability had to be immediately followed by either a facilitated surrender or conversion into a PSO. Therefore, the fact that a write-down could be made in anticipation of the conversion to allow a dividend distribution is based on an incorrect view of the law.
Conclusion judge
The right is for the Inland Revenue.
Note: Although the BV still had sufficient assets to pay out half of the pension, according to the law, the entire pension entitlement will be taxed. Consult your advisor before paying dividends from your BV.
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