Early retirement and 52% tax penalty
In 2006, the so-called ‘RVU-heffing’ or ‘RVU-levy’ was introduced. This levy leads to 52% extra taxes for the employer in case of dismissal of older employees. The threat of this tax has proven to be very effective as nowadays most employees continue working until just before the state pension age.
How to avoid RVU-levy
There are several ways for an employer to avoid RVU levy:
- Being able to convincingly demonstrate that there is no age-related dismissal but that there are one or more other objective reasons to part with the employee.
- Being able to demonstrate that the amount relating to the settlement is not sufficient to serve as a bridge to the retirement date.
- Use of a threshold exemption to the RVU-levy.
- Use of an alternative arrangement which, legally speaking, can never an RVU, such as pension improvement or a so-called senior citizen arrangement.
The employer has an investigation and remittance obligation with regard to the RVU. Employers cannot wait and see whether the tax authorities take action. KWPS is highly specialized in RVU analyses and solutions. An RVU levy can usually (but not alwasy) be avoided. If there is any doubt, or just to be on the safe side, we can coordinate with the tax authorities.