Dutch (tax) resident, subject to Dutch personal income tax for his world wide income!

As soon as an expatriate starts living in the Netherlands, he (or she) becomes subject to Dutch personal income tax. In such a case his
(or her) worldwide income will be taxed in Box I (maximum rate 52%).

So if you live in the Netherlands and you perform services for not only your Dutch employer, but also for a foreign employer, the income generated in the other country needs to be reported in your Dutch personal income tax return. However, it is likely that the foreign tax authorities will also tax the income generated in their country. Consequently, that income will be taxed twice. Usually, the tax treaty between the Netherlands and the other country determines that in such a case, the Dutch tax authorities have to grant you avoidance of double taxation (this avoidance depends on certain circumstances). So in the end, the income generated abroad will only be taxed with foreign (personal) income tax.

If you are not a (tax) resident of the Netherlands, you will only be taxed for the income generated in the Netherlands. For tax purposes you than become a foreign tax resident.

Under circumstances foreign tax residents can request the Dutch
tax authorities to have them treated as (domiciled) tax residents
(this could be interesting for deduction of mortgage). On the other hand, (domestic) expatriates can request the Dutch tax authorities to have them treated as foreign tax residents. It goes without saying that such requests need to meet many requirements.

It is not easy to say whether an expatriate will be treated as (domestic) tax resident or foreign tax resident. It depends on the place where such a person’s centre of economic life is. Even if it is clear where a person’s centre is, it is under certain conditions possible to change this status in another one. This could, of course, give you some advantages with tax planning…

We at BDO have much experience with expatriates and their fiscal residency. In case you have any questions or remarks, please do not hesitate to contact Alexander Knijnenburg (Alexander.knijnenburg@bdo.nl) (+31 (0)70 338 08 08).