In the Netherlands, most individuals receive their income as employees, with taxes automatically deducted through payroll by their employers. However, the situation changes when you earn income from a foreign employer or occasionally work outside of the Netherlands for a Dutch employer. In this article, Taxsight will outline several scenarios that may apply to Dutch residents in these cases.
Working abroad for a foreign employer
If a Dutch resident works for a foreign employer, such as a company based in France, the income is generally subject to taxation in the country where the work is performed, according to the relevant tax treaty. However, this income must still be reported on the Dutch tax return, and a double taxation relief can be claimed to avoid being taxed twice on the same income.
Working partially in the Netherlands for a foreign employer
Many employees working for foreign employers also perform some of their duties within the Netherlands. In these cases, the tax situation becomes more complex. When a Dutch resident works part-time for a foreign employer within the Netherlands, the income is subject to Dutch tax laws. This is because the income is allocated to the Netherlands as per the bilateral tax treaty, which means it will be taxed from the very first day worked in the country.
Dutch employees with foreign workdays
If a Dutch employee works for a Dutch employer but spends part of their workdays abroad, questions often arise about how to handle double taxation. In these cases, there are two scenarios to consider.
No foreign office for the Dutch employer
Sometimes a Dutch employer sends an employee to another country without having an office there. For example, the employee might visit a client in France. In these situations, the tax treaty determines that the income from workdays outside of the Netherlands remains taxable in the Netherlands, as the work is not linked to any office abroad.
However, if the employee spends over 183 days in the foreign country (e.g., France) during a calendar year, the tax treaty will allocate the taxation to that country. The Netherlands would then offer a double taxation relief for the workdays taxed in the foreign country.
For the 183-day rule, the “days of physical presence” method is used, which means both the arrival and departure days count towards the total, regardless of whether work was done on those days.
Foreign office for the Dutch employer
When a Dutch employer has an office in the foreign country (e.g., France), and the employee is assigned to work there, the workdays may be taxed in that foreign country. Whether this happens depends on whether the Dutch employer charges a portion of the employee’s salary related to those workdays to the foreign office.
If the employer does charge for the employee’s workdays, the employee can claim a double taxation relief in the Netherlands for those days. This claim can be made in the employee’s personal tax return, provided the employer hasn’t already processed this on the Dutch salary slip.
If the employer doesn’t cross-charge the salary to the foreign office, the days remain taxable in the Netherlands. However, if the employee exceeds 183 days in the foreign country, the taxation will be allocated to that country. Double taxation relief can then be claimed in the Netherlands for these workdays as well.
Social security contributions and their jurisdiction
Social security contributions are governed by rules that differ from those outlined in tax treaties. In general, social security premiums are due in the country where the employer is located, not where the employee performs their work. However, this isn’t always the case.
If a Dutch resident works for a foreign employer and performs some of their work from their country of residence, the social security contributions could be due in the Netherlands, even though the employer is located abroad.
Need assistance with your taxes in the Netherlands?
If you’ve recently moved to the Netherlands or have been living and working here for a while and require professional tax assistance, Taxsight is here to help. With extensive experience in both local and international tax matters, Taxsight provides expert guidance and services at the highest level.
