How can you optimise your IPA from a tax standpoint?


Do you work as a self-employed person in a company? You can therefore take out an individual pension agreement (IPA) through the company in question and thus build up a supplementary pension while receiving a significant tax benefit. But how exactly can you maximise this tax benefit?

The individual pension agreement is taken out by your company. This means that the company is the policyholder and pays the premiums, and you are the beneficiary. And even if the company goes bankrupt, your IPA will remain yours.

Your company can deduct the premiums for your IPA as professional expenses provided that the 80% rule is respected, which stipulates that your pension (the sum of your statutory pension and the supplementary company pension) cannot exceed 80% of your last regular monthly and regular gross remuneration. Therefore, with your accountant, your broker will be able to calculate the exact premium which your company can pay in the framework of your IPA in order to receive a maximum tax benefit. Note that if your company pays more than 80%, the amount exceeding this limit will not be deducted. Another important condition is that you receive a regular monthly income.

Another interesting point in the framework of an IPA is what is referred to as backservice, which allows you to benefit from the unused tax margin over the previous years (maximum 10 years also outside your company) by paying additional premiums. Here is an example to help you understand better. You have been self-employed for a while now and your company pays the premium for your IPA each year. At a given point, you increase the remuneration which your company pays you each month. Due to this increase, the 80% limit will increase and you can pay a higher premium for that year (catching up in your company). And via a backservice, you can also optimise the additional margin for the previous years from a tax standpoint.

As of the 2019 taxation year (for the fiscal year beginning on 1 January 2018), for SMEs, the rate for the first bracket of €100,000 of profits will be 20.4%. In order to benefit from this, the company will, however, have to pay at least a company manager salary of €45,000. Your company will therefore be able to pay a higher premium for your IPA and carry out a more significant movement to catch up through a backservice, provided that you receive a regular monthly income from the company. For the sake of clarity: if the taxable profit is lower than €45,000, the remuneration of a manager must be equal to the amount of the profit. 

Find out about the IPA solution at NN.