The finance ministry has issued a decree on the calculation of the 75% of salary limit indicating a possibly excessive promise reflecting future salary rises.
Employee pension provisions must be calculated in accordance with the plan and be based on the facts as they existed on balance sheet date. They may not therefore take future salary increases into account. The Supreme Tax Court has established a limit of 75% of present salary as a rough and ready rule of thumb to reveal attempts to bring current pension costs forward by making "excessive" pension promises. The ministry of finance has now issued a decree on some of the details of this calculation and its import.
- Present salary includes all emoluments and other benefits in cash or in kind. It can only include future increases that are certain at balance sheet date. Variable benefits (bonuses, commissions etc.) are taken as an average over the past five years.
