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Netherlands: Severance package vs. taxation of early retirement scheme (RVU)

Netherlands: Severance package, early retirement scheme

The Dutch Supreme Court (Hoge Raad) on 22 June 2018 issued its judgment in a case concerning whether a severance package is to be regarded as an early retirement scheme (“regeling voor vervroegde uittreding”—RVU).


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An RVU is a scheme or plan that has as its sole (or almost sole) purpose to provide one or more benefits to bridge the period between the end of employment and retirement or an earlier pension date. Since 2005, the Payroll Tax Act 1964 has discouraged such schemes by imposing a 52% tax on an RVU withheld for the employer, in addition to the normal tax withheld for the employee. 

In the case before the Supreme Court, an employer requested that the Dutch tax authority rule that a scheme was not an RVU. The tax inspector rejected this request, and this finding was upheld by lower courts. The Supreme Court concluded that the decisive factor in assessing whether there is an RVU is whether the payments and provisions are intended to bridge or supplement the former employee’s income until the retirement date. The Supreme Court noted that the following factors are irrelevant in assessing whether a scheme is an RVU:

  • The withholding agent’s reasons for making payments and provisions
  • Intentions and choices of employees to opt for the severance package
  • Actual outflow of employees
  • Amount of the redundancy payments actually agreed

KPMG observation

Because of this judgment of the Supreme Court, reorganizations that result in staff layoffs and that include a replacement or voluntary severance scheme are unlikely to be regarded as an RVU if the scheme is not intended to bridge or supplement the former employee’s income until the retirement date.


Read a June 2018 report prepared by the KPMG member firm in the Netherlands

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