Are you planning to work outside of the Netherlands for a short period of time? Then you might have questions regarding your tax residence. Tax is Exciting gives you this guide so you can figure out what your situation may be and if you can become a tax resident of another country.
The opportunity could come about that you are offered a job outside of the Netherlands. The job offer is a short-term appointment, but it is well-paid. The question is then: in which country will this foreign income be taxed? Well, that depends on a few factors.
Do you own property in the Netherlands?
If you are going to work abroad, and own property in the Netherlands as your main place of residence, then tax residence is more complicated.
In this case, the Belastingdienst (Tax and Customs Administration) will most likely consider you to be a Dutch tax resident, even if you work for a longer period abroad. The aforementioned is made stronger if your partner stays in the house. If you have a partner living on that property, then this tax situation is even more probable.
Rent out your property
A solution to this issue could be to rent out your property to other people. If you rent out the property, it will no longer be considered your main residence. Then it is possible that the Belastingdienst will determine that you are not a Dutch tax resident, especially if you are also no longer registered at your municipality.
Possible risks that aren't tax-related
If you own Dutch property, chances are you took out a mortgage and have a mortgage contract. In this contract, it probably states that you are not allowed to rent out your property. If you do rent it out, the bank is likely to demand repayment of the mortgage in 14 days’ time. Also, there would be no mortgage deduction during the rental period.
Another potential risk of wanting to have a tax residence outside of the Netherlands is that you will no longer have Dutch health insurance. When you deregister from your municipality, your insurance is automatically cancelled - almost instantly. Make sure you are covered for healthcare insurance during your stay abroad and be aware that travel insurance coverage is not the same thing.
Tax residence issue: court case
To better understand the potential issues of wanting to avoid foreign income from Dutch tax, it is good to look at an example. A Dutch resident received an offer to perform in a musical theatre in Austria from August 2017 to June 2018. The income she received from her employer abroad was taxed in Austria. To avoid this income to be taxed in the Netherlands as well, she claimed to the Belastingdienst that she left the Netherlands tax-wise.
However, the Belastingdienst denied her having left the Netherlands as a tax resident. As a result, the woman went to court, but the court agreed with the Belastingdienst. They ruled that she did, in fact, leave the Netherlands but did not deregister from her municipality.
Furthermore, she could not provide her Austrian residence certificate, tax forms and other normal paperwork for an Austrian tax residence on request. To make matters worse, the woman also could not share with the court an Austrian bank account - which would be a normal aspect of life as an Austrian tax resident. On top of that, the apartment she rented in Austria was made available by her Austrian employer. When her employment stopped in June 2018, the rental agreement expired.
All facts and circumstances point at the stay in Austria as temporary, hence the main residence had remained in the Netherlands. Thus, the woman's Austrian income was part of her Dutch tax return.
Be mindful of your tax situation
Understandably, some people who work abroad for a short time in a country - with a more attractive tax climate - try to prevent their foreign income to be part of the Dutch tax return. But if you claim to no longer be a tax resident of the Netherlands, then you need to have taken the necessary steps to properly deregister as a Dutch resident to avoid issues.
Do you have questions about your own tax situation in the Netherlands? The team at Tax is Exciting give specialised help to expats about all things tax-related. Email them at [email protected] or call their number +31 (0) 205 207 991.