Cross-border employment: Avoid double taxation!

Dutch Resident with a foreign employer

When a Dutch resident has a foreign employer a distinction should be made between the Dutch and foreign workdays.

Working outside of the Netherlands

If a Dutch resident has, for example, a French employer and performs their work in France, the income is allocated to France on the basis of the bilateral tax treaty. However, the income needs to be declared in the Dutch tax return, but a double taxation relief can be claimed for that same income.

Working (partly) in the Netherlands

Employees with a foreign employer often work in their residency country, the Netherlands, for at least for a couple of days a month. If the employee works also for the foreign employer (French employer) in the Netherlands, there will be a different tax situation. If this employee is a tax resident of the Netherlands and works from their home country, this income is allocated to the Netherlands on the basis of the bilateral tax treaty and therefore taxed in the Netherlands from the first workday.

Dutch resident with Dutch employer and foreign workdays

If the employee of the Dutch employer has foreign workdays, it is often the question whether a double taxation relief can be claimed in relation to those workdays. In this case, there are two scenarios:

• Dutch employer doesn’t have an office in the other country
• Dutch employer has an office in the other country

Dutch employer doesn’t have an office in the other country

Often it happens that a Dutch employer sends their employees for work in another country where they don’t have an office, for example, visiting a client in France. In this case, the workdays outside the Netherlands are, on the basis of the tax treaty, taxed in the Netherlands given the fact that these days are not linked to an office outside of the Netherlands.

This is different if the employee would spend more than 183 days in a calendar year in the other country, for example, France. In that case, the bilateral tax treaty allocates the taxation related to these workdays to France and the Netherlands should grant a double taxation relief for the workdays that are allocated to France.

When it comes to the counting of the days with regards to the 183-days rule, the “days of physical presence method” is used. This means that the date of leaving and arrival are also included for the day counting, regardless of whether you have worked this day.

Dutch employer has an office in the other country

If the Dutch employer has an office in the other country (France) and the employee was sent to work there, these days could probably be allocated for the taxation to France on the basis of the bilateral tax treaty.

This depends whether the employer cross charges a part of the salary, which is related to those workdays, to the office in France. If the employer cross charges the workdays, the employee could claim a double taxation relief for the same days in the Netherlands. This could be claimed in the personal tax return provided that the employer didn’t process this already on the Dutch salary slips.

If the employer doesn’t cross charge the salary to the Foreign (French) office, the days are taxed in the Netherlands. However, this could change if the employee exceeds the 183 days. In that case, all workdays in France are allocated to France regardless of whether these workdays are cross charged, and a double taxation relief could be claimed in the Netherlands for the same days.

Social security contributions

The social security rules are different from the rules given by the bilateral tax treaties. The social security premiums are generally due in the country where the employer is located, rather than the country where the work is performed. However, this is not always the case. If the employee has a foreign employer and works for a certain period from their residency country, the social security contributions could be levied in the residency country, despite the foreign employer.