The premiums for the Individual Pension Agreement and for the Group Insurance for company directors count as deductible business expenses for your company. However, in order to benefit from this tax advantage, you need to comply with the so-called 80% rule.
The 80% rule states that the statutory pension and the extra-legal pension taken together may not amount to more than 80% of the 'normal' gross salary during the previous year. If this limit is exceeded, the company will be unable to deduct the portion of the premium that exceeded the 80% rule as a professional expense.
In concrete terms, the 80% rule is made up as follows:
Extra-legal pension ≤ (80% of the 'normal' gross salary – statutory pension)
X (n/D) x (coefficient) – other additional capital sums
- The extra-legal pension refers to any pension that is accrued under the second pension pillar: this includes the Private Supplementary Pension for the Self-Employed (VAPZ), the Individual Pension Agreement, the Group Insurance for company directors, and any group insurance policies you may have had as a salaried employee. Any pensions accrued as a private individual under the third pillar – such as pension savings – are not included in the calculation.
- The 'normal' gross salary that is taken into account comprises: the regular and monthly salary payments, plus any other periodic/monthly benefits in kind – such as a company car or personal use of your home if it is owned by the company, and so on.
Irregular salary payments – such as a one-off bonus – are not considered to be part of the 'normal' gross salary. Directors' bonuses (tantièmes) are also not included. - The statutory pension for company directors may be estimated at 25% of the gross salary, taking into account the legal minimum and maximum (which are revised annually).
- n/D refers to (the number of years served + still to be served) / the duration of a normal career, and has a maximum value of 1. The duration of a normal career is currently set at 40 years for a self-employed person.
- The coefficient converts the annual pension received into a capital sum. It is defined by law, and fluctuates between 11.3761 and 18.3749. This depends on the age and marital status of the individual in question, as well as whether or not the annuity is subject to indexation.
- Other additional capital sums expressed as an annuity: group insurance policies, RIZIV/INAMI contracts, Individual Pension Agreements, Private Supplementary Pensions for the Self-Employed, etc.
Things to remember:
The formula calculates the maximum extra-legal pension, including profit participation. The profit participation is assessed on a fixed basis at 20%. To work out the maximum capital to be insured, divide this amount by 1.2.
The 80% rule does not apply to the Private Supplementary Pension for the Self-Employed (VAPZ), but any capital accrued through a VAPZ is taken into account when calculating the maximum premium for your Individual Pension Agreement or Group Insurance policy.
Your insurer will provide you with a tax certificate when you sign the contract, provided that this rule has been adhered to and based exclusively on the information provided to the insurer by you and your company.
Checks will also be made whenever you transfer a one-off premium.