Taxes: Exemption from wage tax on the AOW? The answer of the SVB

Wim, the state pension is taxed elsewhere under the treaty with Thailand, I don't believe that! But if you succeed, you have my blessing, one may slip through.

As far as 'that lady' in Heerlen is concerned, as far as I know she has long since retired.

Andre van Schaik, it is difficult for me to judge whether your neighbor is a top lawyer, but I can judge whether she has any understanding of international tax law and social insurance. However, this knowledge is completely lacking.
I therefore think that it is best for her to deal with quarrels between neighbors and possibly also with divorces, but then it soon stops.

According to your spokeswoman, Thailand would not want to conclude a new treaty with the Netherlands as long as the Netherlands insists on taxing a social security benefit, such as an AOW, WAO or WIA benefit, and does not want to qualify such a benefit as a private pension to be taxed in Thailand .

Three notes on that:
1. an AOW benefit is not a pension; it falls under the 1st pillar of our old age provisions, while pensions fall under the 2nd pillar;
2. In principle, Thailand has just as many taxing rights with regard to social security benefits as the Netherlands (a pity that your top lawyer is apparently not aware of this);
3. If Thailand would like to have this arranged differently, then it is important to negotiate with the Netherlands or to terminate the Treaty.

Every Thai tax official knows only too well that a social security benefit from the Netherlands is also taxed in Thailand and acts accordingly. Loyal readers of Thailandblog now also know that Thailand must then, pursuant to Article 23, paragraph 6, of the Treaty, grant a reduction in respect of the tax included in the Personal Income Tax on, for example, the state pension component, which means that it Thai tax law is severely curtailed.
When I came across a special clause in the said article last March, containing this reduction, I paid ample attention to it in Thailandblog.

Incidentally, Thailand should count itself lucky with the treaty it has concluded with the Netherlands to avoid double taxation. This Treaty is in accordance with the OECD Model Treaty and the accompanying explanatory notes.
Thailand has concluded quite a few treaties that deviate significantly from this model treaty, which means that Thailand has little or no taxing rights in respect of these countries. Think, for example, of the treaties concluded by Thailand with Belgium and France (to stay somewhat close to the Netherlands) and so I can add a list.

Thailand is quite prepared to enter into negotiations with the Netherlands to arrive at a revision of the current treaty or to conclude a new treaty.
A few years ago there were also plans for this within the Dutch and Thai governments. At the request, I advised the Ministry of Finance, International Affairs Directorate, on this matter.
The fact that the negotiations did not really start then did not surprise me, given the (then) political situation in Thailand, while now the corona pandemic is also an important obstacle to expanding the countries with which the Netherlands is negotiating.

Incidentally, Thailand will never advocate in negotiations to classify an old-age pension under the category of 'private pension', but rather advocate that social security benefits should only be regarded as taxable in Thailand. I already encounter this situation in 1/3 of the treaties concluded by the Netherlands, or in 33 countries. In view of recent new treaties, however, I give Thailand little or no chance of a good negotiation result on this point.

Dutch people living in Thailand can count themselves lucky with the fact that the 1975 Treaty with Thailand has not yet been revived or replaced.
In the event of revision or replacement, Article 27 of the current Treaty (the remittance base provision) will be revived. This provision limits the tax relief to be granted by the Netherlands as follows:

“Article 27. Limitation of tax relief

If, pursuant to a provision of this Convention, a reduction of tax on certain income must be granted in one of the States, and under the laws of the other State a person is not subject to tax in respect of that income in full, but only to the extent that such income has been remitted to or received in that other State, shall the deduction to be made by the first-mentioned State under this Convention apply only to that part of the income remitted to or received in the other State.”

As a result of two Supreme Court judgments at the end of 1979, this article has lost its legal force. These judgments concerned the Treaty concluded between the Netherlands and the UK at the time. This Treaty was then quickly repaired.
However, the Netherlands has failed to amend the similar Treaty with Thailand. That this is then rectified, you can take poison on that.

Lammert de Haan, tax specialist (specialized in international tax law and social insurance).