Compensation in DGA-Divorce in Rijswijk
In a divorce where one or both partners are director-major shareholder (DGA), specific legal and financial issues arise. Dividing pension rights and the value of a business requires careful consideration, especially since the DGA pension and shares in a BV often form part of the marital property. This guide provides insight into compensation arrangements for DGA’s in divorce, based on the Act on Equalisation of Pension Rights upon Divorce (Wet VPS) and relevant provisions from the Civil Code, with specific attention to the Rijswijk region and support via the Juridisch Loket Rijswijk.
What Makes a DGA-Divorce So Complicated?
A DGA is someone who is both a director of a private limited company (BV) and holder of a substantial interest (at least 5%) in that BV. In a divorce, three core components of the assets are relevant:
- The value of the shares in the BV
- The DGA pension, often accrued within the own BV
- Other assets such as real estate or savings
The challenge lies in the unique fiscal and legal treatment of these asset components, which differs from standard pensions or employment income.
Legal Basis: Wet VPS and Civil Code
Act on Equalisation of Pension Rights upon Divorce (Wet VPS)
Under the Wet VPS, pension rights accrued during the marriage must be divided. For DGA’s, article 2 of this act provides that the old-age pension accrued during the marriage is in principle split equally (50/50), unless otherwise agreed.
Civil Code (BW)
Article 1:141 BW regulates the division of the marital community. In the event of matrimonial property arrangements with a settlement clause, the increase in value of the business assets during the marriage must be included in the settlement.
Fiscal Regulations
Fiscal rules, as laid down in the Income Tax Act 2001 and the Corporate Income Tax Act 1969, play a major role. Distributions or buy-outs of rights from the BV may have tax consequences for both parties.
Options for Compensation in Divorce
1. Division of Pension Rights (Wet VPS)
The DGA pension accrued during the marriage is divided according to the Wet VPS. The non-DGA partner is entitled to half of these rights, with two possible methods:
- Standard division: The ex-partner receives his/her share of the pension upon the DGA's retirement
- Conversion: The rights are converted into an independent pension provision with an external insurer
2. Buy-out as an Alternative
Instead of division, the DGA may opt for a one-time buy-out, whereby a fixed amount is paid to the ex-partner as compensation for the pension rights. However, this has fiscal implications that must be carefully assessed.
3. Settlement of Business Assets
If the value of the BV has increased during the marriage, this increase may form part of the division, depending on the matrimonial property arrangements. In the case of community of property, this increase in value standardly falls into the divisible estate.
Practical Steps for Compensation Calculation
Step 1: Valuation of the Pension
An actuary determines the value of the DGA pension, taking into account:
- The old-age provision in the BV
- Fiscal reserves such as FOR/VPV
- The expected retirement age and life expectancy
- The expected return
Step 2: Establishing Marriage Years
Only the portion of the pension accrued during the marriage is divided. This is calculated as: Number of marriage years / Total number of accrual years.
Step 3: Determining Compensation Amount
The ultimate compensation amount is based on the actuarial value of half of the rights accrued during the marriage.
Help in Rijswijk: Juridisch Loket and District Court of The Hague
For residents of Rijswijk who need help with a DGA-divorce, the Juridisch Loket Rijswijk offers low-threshold legal support. For legal proceedings, you can go to the District Court of The Hague, under which Rijswijk falls. Both institutions can assist in navigating the complex regulations surrounding divorce and compensation.
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