Legal Translation and Pension Plans for Foreign Nationals

We’ve blogged about legal translation services and foreign tax treaties and about foreign language translation and foreign income and taxes. Most countries have a Double Tax Treaty with the US, but depending on the individual country’s treaty, whether or not a foreign national can contribute to their US pension fund without tax penalties is questionable. For example, in Belgium the treaty was amended to hold that when an employee comes to work in Belgium, he and his employer can continue to pay into his US pension plan for a maximum of ten years. His employer’s contributions are not taxable income and the employee’s personal contributions are tax-deductible.


When such exemptions are allowed, typically the tax relief for contributions to a US pension plan is limited under the so-called 80 percent rule. This means the employer’s pension contributions are only tax-deductible insofar as they allow a build-up of sufficient pension reserves to finance a pension of 80 percent of the employee’s last annual salary before taxes. The calculation is complex – it takes account of state pension and private benefits and of total contributions made over a normal professional career. If an employee has made personal contributions to the pension plan, he is entitled to a tax credit limited to 40 percent.
If the employee has not been contributing to the plan or is not a member of the pension plan, he cannot get the relief for a US pension plan. If he contributes to a pension plan in the country of residence, he can get tax relief in that country, and if he is a US citizen he can also get relief in the US.

Clearly, as this can all be confusing, it is essential to have a full understanding of the each country’s tax laws and the tax treaties. To do so, a foreign language translation of all relevant laws is essential.

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