This section contains a simplified example of how the basis of taxation is determined under Section 4 of PAL. The example corresponds to the example in the comments on Section 4 of PAL in L 10 of 28 November 2007.
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End-of-year custody account (retrospective provision), cf. Subsection 2: |
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Custody account, beginning of year |
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10,000 |
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Premium paid |
1,000 |
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Costs |
-250 |
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Risk premium |
-80 |
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Interest in accordance with the plan, after tax |
300 |
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Bonus (interest, risk and cost bonuses), after tax |
130 |
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Pension disbursement |
-100 |
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Jump in reserves |
800 |
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Custody account, end of year |
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11,800 |
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Adjustment of end-of-year custody account, cf. Subsection 3: |
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Custody account, end of year |
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11,800 |
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Pension disbursement (Subsection 3, Item 1) |
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100 |
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Adjustment for risk and cost bonuses (Subsection 3, Item 5) |
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-30 |
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Tax on yields from pension plan assets, withheld before addition to custody account, cf. Section 21(2) (Subsection 3, Item 2) |
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71 |
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Costs (Subsection 3, Item 4) |
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250 |
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Risk premium (Subsection 3, Item 3) |
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80 |
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Jump in reserves (Subsection 3, Item 10) |
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-800 |
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Adjusted end-of-year custody account, cf. Subsection 3 |
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11,471 |
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Adjustment of beginning-of-year custody account, cf. Subsection 4 |
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Custody account, beginning of year |
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10,000 |
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Premium paid |
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1,000 |
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Adjusted beginning-of-year custody account, cf. Subsection 4 |
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11,000 |
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Adjusted end-of-year custody account, cf. Subsection 3 |
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11,471 |
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Adjusted beginning-of-year custody account, cf. Subsection 4 |
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11,000 |
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Basis of taxation |
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471 |
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Tax on yields from pension plan assets (15 per cent), withheld before addition to custody account, cf. Section 21(2) |
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71 |
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Concerning tax on yields from pension plan assets, withheld before addition to custody account
►In the example, the tax added to the end-of-year custody account corresponds exactly to the tax on the basis of taxation, which is determined as the difference between the adjusted end-of-year custody account, i.e. after the addition of tax for the year, and the adjusted beginning-of-year custody account. ◄
►This is only possible if the pension provider calculates the PAL tax iteratively, i.e. using chain calculation. According to this method, the pension provider continues to calculate the PAL tax until the PAL tax which is added to the end-of-year custody account is the same as the PAL tax on the basis of taxation for the year. ◄
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Iterative calculation no. |
1 |
2 |
3 |
4 |
5 |
6 |
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Custody account, end of year |
11,800 |
11,800 |
11,800 |
11,800 |
11,800 |
11,800 |
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Pension disbursement (Subsection 3, Item 1) |
100 |
100 |
100 |
100 |
100 |
100 |
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Adjustment for risk and cost bonuses (Subsection 3, Item 5) |
-30 |
-30 |
-30 |
-30 |
-30 |
-30 |
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Tax on yields from pension plan assets, withheld before addition to custody account, cf. Section 21(2) (Subsection 3, Item 2) |
0 |
60 |
69 |
70 |
71 |
71 |
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Costs (Subsection 3, Item 4) |
250 |
250 |
250 |
250 |
250 |
250 |
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Risk premium (Subsection 3, Item 3) |
80 |
80 |
80 |
80 |
80 |
80 |
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Jump in reserves (Subsection 3, Item 10) |
-800 |
-800 |
-800 |
-800 |
-800 |
-800 |
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Adjusted end-of-year custody account, cf. Subsection 3 |
11,400 |
11,460 |
11,469 |
11,470 |
11,471 |
11,471 |
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Determining the basis of taxation |
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Adjusted end-of-year custody account, cf. Subsection 3 |
11,400 |
11,460 |
11,469 |
11,470 |
11,471 |
11,471 |
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Adjusted beginning-of-year custody account, cf. Subsection 4 |
11,000 |
11,000 |
11,000 |
11,000 |
11,000 |
11,000 |
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Basis of taxation |
400 |
460 |
469 |
470 |
471 |
471 |
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Tax on yields from pension plan assets (15 per cent), withheld before addition to custody account, cf. Section 21(2) |
60 |
69 |
70 |
71 |
71 |
71 |
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Tax amounts for adjustment of custody account = |
0 |
60 |
69 |
70 |
71 |
71 |
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