Dutch pension funds will no longer have to pay VAT on costs for pension administration and asset management, saving them at least €500m.
In the current defined benefit (DB) system, pension funds are required to pay VAT on bills for pension administration and external asset managers.
They have been trying to get an exemption from this for years but so far to no avail. The Dutch Supreme Court said in 2016 pension funds were indeed required to pay VAT.
But the switch to a defined contribution (DC) system turns out to be a game-changer, the ministry of Social Affairs confirmed in an explanatory memorandum that accompanied the proposed new pension law.
Pension funds will become eligible for a VAT exemption because in the new system all investment risk will be transferred from members to pension funds. This equals pension funds to mutual funds which are exempted from paying VAT.
The change will save Dutch pension funds at least €500m in VAT costs, according to the Dutch pension federation.
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