Camille Van Vyve
09 Dec 2021
December: gifts for children, tax reductions for adults
Do you see the arrival of December and its usual share of expenses with concern? Bad news: in addition to the tree and gifts, it would be wise to save a little budget to spend on your pension products. Good news: these "expenses" will constitute a very useful supplementary pension in a few years, and are also tax deductible! You have a few days left to pack it all up.
Spend to better recover
Given the limits of the statutory pension, the government has provided tax incentives for Belgian citizens wishing to build up a pension supplement. These incentives vary according to each person's status: employee or self-employed, as a natural person or in a company. In practice, this means that, depending on the formulas, the amounts paid into these supplementary pension products are deductible (that is to say they reduce your tax base) or partly recoverable (they will be refunded to you). To maximize your tax benefits, there are maximum amounts you can invest in these pension products each year. If it hasn't been done for 2021, it's now or never!
The 80% rule
To prevent abuse, the government has set the "80% rule" which sets investment ceilings in supplementary pension products. This rule calculates the amount of the annual premium that you can invest in your supplementary pension while retaining your tax advantages. The principle is that your statutory pension and your supplementary pension cannot together amount to more than 80% of your last salary. In practice, the formula is complex and has many parameters. To see more clearly, a simulation adapted to your situation can be carried out on the easyvest website.
CIPA
The Company Individual Pension Account (CIPA) is a pension planning tool reserved for company directors, allowing them to build up additional capital to their statutory pension. This pension plan takes the form of a tax-deductible life insurance to which the company of the manager contributes and of which the manager is the beneficiary of the pension. 100% of the amounts paid are deductible for the company.
FSP
The Free Supplementary Pension (FSP) is the equivalent of the CIPA for self-employed persons. This pension plan takes the form of a tax-deductible life insurance to which the self-employed person contributes and of which he is the beneficiary at the pension. 100% of the amounts paid are deductible and the self-employed benefits from a guaranteed annual return of 0,85%. This return therefore applies to the plans offered at easyvest in 2021.
PIPA
The Personal Individual Pension Account (PIPA) is another pension planning tool reserved for the self-employed, which also takes the form of tax-deductible life insurance. Here, you recover 30% of the amounts paid, and it is possible to invest in a branch 23 equity index fund. The tax advantage is therefore less, but in combination with the FSP, the PIPA allows to increase the supplementary pension amounts and benefit from potentially greater returns.
Pension savings also capped
Finally, pension savings and a complementary pension product accessible to all, distributed by banks - not by easyvest - in the form of equity and bond funds. This product does not fall under the 80% rule, but contributions are also capped. There are two thresholds: the one of 990 euros per year which gives the right to a 30% tax reduction, and the one of 1270 euros per year which gives the right to a 25% tax reduction.
Note: This article was written when Easyvest was authorized and regulated by the FSMA as an agent in banking and investment services.