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The "Gouden Handdruk"

Once an employee finds himself in a situation where he’s about to get laid of, there is a possibility that he’s entitled to a severance payment or "gouden handdruk".

If you have questions about the size of your "gouden handdruk" or if you have questions regarding the negotiations that have to be made with your (former)-employer, please contact one of our English-speaking consultants. Our extensive know-how on "gouden handdrukken" for non-residents will almost certainly help you in this process.

What to do with the "Gouden Handdruk"?

Once the lay-off compensation is known, the ex-employee has to decide what to do with the "gouden handdruk". Dutch Law offers the laid-off employee four ways to use the "gouden handdruk".

  • The first option is to simply choose to immediately pay income tax over the complete "gouden handdruk";
  • The second option is to use the "gouden handdruk" to buy a life-annuity from an Dutch insurance company;
  • The third option is to use the "gouden handdruk" to set up a "stamrecht BV";
  • The fourth option is to put the "gouden handdruk" on a blocked bank savings account.

No matter how high the "gouden handdruk" may be, it’s always a sensible idea to consult a specialised firm in these matters. If you want to know what the best way is to use your "gouden handdruk" please consult us. We will assist you with personal advice without any obligation on your part. If you prefer to read specific information about "de stamrecht B.V." you can order a copy of the "yearbook severance pay 2018" (this information is in Dutch).

1. Immediately paying income tax over "de gouden handdruk"

You can choose to receive the "gouden handdruk" on your bank account. The advantage of this option is that you immediately have access to the money. You are now free to do with the money as you please. For example, you can buy a new car, because you had to return your company-car. There is however one important disadvantage to this option: you immediately have to pay income taxes over the entire "gouden handdruk". This means that the "gouden handdruk" can be taxed for a maximum of 52%. The Dutch income-tax system is based on graduated tax system). Therefore this option is only advantageous if the "gouden handdruk" is relatively small or if there is an immediate need for money. An additional disadvantage of this option is that the Dutch tax system also taxes wealth. You annually pay 1,2 % tax over the wealth you have in access of € 20.785,- per person.

The possibility of paying 51,95% income tax over your income seems unpleasant. It’s therefore advisable to only think about this option if you have an immediate need for the money. You can also choose to pay immediate taxes over just a part of your "gouden handdruk". Our English-speaking consultants can help you with these choices and posses an extensive know-how on "gouden handdrukken" for non-residents.

2. Buying a life-annuity

You can also decide to use your "gouden handdruk" to buy a life-annuity. This is convenient if you prefer to receive you "gouden handdruk" periodically. This option is usually interesting if there is no immediate need for the money to increase current income. With this option you can use the "gouden handdruk" as extra pension or as a tool to retire at a younger age. If you decide to buy a life-annuity with the "gouden handdruk" the "gouden handdruk" needs to be transferred to a Dutch insurance company. They will use the "gouden handdruk" as a life insurance and eventually pay out the "gouden handdruk" to you (the latest date at which the pay out period can start is at the age of 65).

Buying a life annuity tax-free

When an ex-employee receives a right for periodically payouts as compensation for lost, past or future, wage, this right is not subjected to income tax. The fact that this right is not subjected to income tax is also known as the "stamrechtvrijstelling". The transfer from employer to the insurance company is therefore not subjected to income tax (the entire "gouden handdruk" will be transferred!). With this option you will not pay income tax over the "gouden handdruk" until you start receiving your payouts. The percentage income tax you’ll have to pay at that time is dependant on your income at the time of the payouts.

The employee cannot first receive the money on his personal account and then transfer it to an insurance agency. If this does happen, the possibility to transfer the "gouden handdruk" free of taxes will be lost.

Conditions for buying a life-annuity

Since 1995 the buying of a life-annuity has to comply with several strict conditions:
The periodical payouts need to be addressed to the ex-employee. The periodical pay-outs can start immediately but can also be postponed, however to no later than the age of 65;
If the ex-employee passes away the periodical payouts have tot start immediately. The periodical pay-outs may then be addressed to the spouse, ex-spouse, partner or own children, who haven’t reached the age of 30;

The right for periodical payouts is called "stamrecht". This ’stamrecht" needs to be placed with a Dutch official insurance company;
The "stamrecht" may not be bought-off, alienated or made subject of security.

Which insurance company is most suited?

If you’ve made the choice that you want to use your "gouden handdruk" to buy a life-annuity, the next question is which insurance company is most suited for your specific situation.

We keep precise track of which insurance companies are suited for your specific situation and give the highest rate-of-return on your "gouden handdruk". Therefore we can optimally advise and guide you during this process. Objectiveness is a key word in our policy because we operate independent from insurance companies.

Because of our independent position our insurance specialists can use objective and independent survey outcomes to base their advice on.

Reality examples

There will now follow two examples. In the first example an ex-employee uses his "gouden handdruk" to buy a direct life-annuity. In the second example the same ex-employee uses the "gouden handdruk" to buy a life insurance.

Example 1: Direct Life-annuity

An ex-employee 50 years of age has received a "gouden handdruk" of € 100.000,-. He wants to use his "gouden handdruk" as a supplement on his "WW-uitkering" for five years.

This will result in the following:

"Gouden handdruk": € 100.000,-
Duration: 5 years

Payouts per years based on bonds: € 23.350,-
Payouts per year based on stocks (8%): €23.776,48

The height of the periodical payouts from the direct life-annuity depends on different factors such as: duration of the direct life-annuity, rate-of-return, additional security in the direct life-annuity and the height of the "gouden handdruk" itself. The final outcomes are based on bonds and stocks (you are free in your choice between the two).

The outcomes based on stocks are a prognosis; these numbers can be higher but they can also be lower as shown. In this example we used a rate-of-return of 8%.

Example 2: Postponed Life-annuity

An ex-employee 50 years of age receives a "gouden handdruk" of € 50.000,-. He uses his "gouden handdruk" to buy a postponed life-annuity for the duration of 10 years.

This will result in the following:

"Gouden handdruk": € 50.000,-
Duration: 10 years

Accumulated capital based on bonds: € 85.554,-
Accumulated capital based on stocks (8%): 111.153,-

The original "gouden handdruk" of € 50.000,- (example 2) has grown to an amount of € 85.554,- in ten years based on bonds. Based on stocks the "gouden handdruk" could have grown to an amount of € 111.153,-. At the end of a postponed life-annuity the ex-employee is obligated to buy a direct life-annuity, in order to receive the periodical payouts.

3. Setting up a stamrecht BV

Setting up a stamrecht BV is an attractive alternative instead of buying a life-annuity from an insurance company. When you’ve come to agreement with your ex-employer with regards tot the size of the "gouden handdruk" it can than be directly transferred to the account of the stamrecht BV You can than receive the periodical payouts out of your own stamrecht BV instead of an insurance company.
The setting up of the stamrecht BV offers you a greater deal of flexibility than the buying of a life-annuity. With this option you keep complete control over your "gouden handdruk" through the 100% control in your own "stamrecht BV". This is not the case if you transfer the "gouden handdruk" to an insurance company.

The option of a "stamrecht BV" has been created for the ex-employee in case he desires to start his own company. Other possibilities however are to invest in different funds of your choice or to lend the "gouden handdruk" from the "stamrecht BV" to yourself.

An important advantage of the "stamrecht BV" is that you do not have to immediately pay income taxes over the "gouden handdruk". Therefore the entire "gouden handdruk" can grow. The eventual payouts are however subjected to income taxes.

The different aspects of the "stamrecht .V" are extensively described in the "yearbook severance pay 2011" (This information is in Dutch).

Conditions for setting up a "stamrecht BV"

The "stamrecht BV" has to comply with the following conditions:

The "stamrecht BV" has to be set up in the Netherlands;
The payouts have to start no later then at the age of 65;
The payouts are subjected to income tax;
The "stamrecht BV" cannot act as an insurance company until it’s completely set up.
Because of costs that have to be made to set up the "stamrecht BV" and several annual cost, the "stamrecht BV" usually isn’t profitable with a "gouden handdruk" smaller than € 70.000,-.

Investing in the "stamrecht BV"

The "gouden handdruk" can be used for investment-activities in the "stamrecht BV". The advantage of this is that the entire "gouden handdruk" can be used (no income taxes have been paid yet).

As director and sole-owner of your "stamrecht BV" you can chose any investments strategy you want. The "stamrecht BV" is free in its choice of investment objects. Real estate and such are therefore also options.

If you would like to read more about the "stamrecht BV" You can order the "yearbook severance pay" . This memorandum is in Dutch. The same information can be given in a, free of charge, meeting with one of our English-speaking consultants.

4. Putting the amount in a blocked bank savings account

As of 2010, there is fourth option. With this option you can put the money (your employer transfers the money to the bank without having to pay taxes first) on a blocked savings account where the money can be used for monthly payments while gaining interest, or the money can sit still and accumulate interest until you wish to commence payment of benefits. This has no start-up costs and low yearly costs. There are two options: putting the money in a savings account, or in an investment account. By investing the risk is much higher, but the possible interest is higher as well. The savings account has a relatively low, but safe interest rate. The account is not like any other bank account, as it is blocked and can only give out money in fixed payments while paying income taxes. In this sense it is much like the life-annuity.

The duration of payments is reliant on the amount of money in the bank account, the interest rate, and the desired monthly payments. The payments are due to start at the latest at becoming 65 years old, and have a minimum number of payments the money is tobe divided over, based on age and gender.

In case of death, the remaining payments will transfer to your partner or children under 30 years old. This is a great benefit compared to the insurance option, where a separate insurance policy is needed to ensure transfer of the money to partner or children. Since you are the owner of the bank account, and not the bank, your offspring or partner will inherit what is left on your account

Structure of the Income tax-law

Box 1 determines how the income from work and home is taxed. For example your salary, pension and profits from your own company. This box uses a graduated taxation, which means that the tax pressure increases when the income rises.

Taxable income from work and house Percentage income tax
More than: No more than:  
.... € 20.142,- 36,55 %
€ 20.142,- € 33.994,- 40,85 %
€ 33.994,- € 68.507,- 40,85 %
€ 68.507,- .... 51,95 %  

Box 2 determines the "winst uit aanmerkelijk belang", for example the profits you receive from a company in with you hold at least a 5% share. The levy in this box is 25% on profits derived from dividends. Box 3 contains the "vermogensrendementsheffing", this is a taxation of your wealth (the total accumulation of your possessions minus your debts). The levy in this box is 1,2% over your wealth in access of € 20.785,-