Do you live and work in another country than The Netherlands? Then there are regulations that prevent you from having to pay taxes in two countries. It has been established in treaties whether you are obligated to pay taxes abroad or domestically* or not. The agreements can differ per country. However, a general and important principle to determine in which country you are obligated to pay taxes is the 183-days regulation. In this article we will explain how this regulation works.
The 183-days regulation
In principle, you are obligated to pay taxes in the country in which you gain income. However, if you are working in several countries in the same year, this can result in a cumbersome and double administration. To simplify this, the 183-days regulation has been created. This regulation has several conditions that allows you to pay taxes in The Netherlands entirely, even if you are partially working abroad.
Condition 1: Residence
It may not surprise you that the most important criterion of the 183-days regulation is that you reside less than 183 days abroad. However, not only the days you working count towards that total, but this includes the total of days you resided abroad. In the regulation the main focus is the axis tilting point regarding the activities of the employee. The regulation serves as a measuring tool to map this out. Any place where you resided for more than half a year (in a calendar year) is your primary residence. If this is The Netherlands, you are obligated to pay taxes in The Netherlands.
Condition 2: Employer not established in employment country
The second condition required for the 183-days regulation is that the employer, that pays you your salary, is not established in the employment country. So, for example, if you have worked for a German employer in Germany for four months, the 183-days regulation is not applicable to you. You are, most likely, obligated to pay taxes in Germany over the work you have done in Germany.
Condition 3: No permanent establishment
The last condition you need to meet to be entitled to the 183-days regulation Is that you are not working in a permanent establishment in the employment country of the employer. A permanent establishment is usually an office or office space with ‘sufficient facilities to function as an independent enterprise’. So, for example, if you are dispatched regularly as a mechanic residing in The Netherlands, to clients across the border, you are still obligated to pay taxes in The Netherlands for the entire fiscal year. However, if you work as a mechanic in a foreign independent establishment (such as a working place with office) of the Dutch employer, you cannot claim the 183-days regulation. Not even if you only worked abroad for a few months for these activities.
When you are (partially) going to work abroad, it is advisable to not only find out if you are entitled to the 183-days regulation. Check if you are also entitled to the so-called 30%-ruling. This ruling is a special compensation regulation in the payroll administration. This is a compensation of the Tax Authorities for the additional expenses that an employer will make by working abroad. This applies for Dutch employees that are dispatched abroad as well as for foreign employees that are dispatched to The Netherlands and are obligated to pay taxes here.
Want to find out more?
The Dutch website of the Tax Authorities** explains more about the 183-days regulation. If you gain an income from two different countries and want to learn more about paying taxes, you’ll find more information here. Would you like to know more about the domestic or foreign tax obligations? Click here*.
Lexlupa is a multidisciplinary effort of fiscal, legal and economic experts. We give advice and guidance to companies, institutions and private individuals at life events. Lexlupa helps you to make well-informed choices in business and personal affairs, and we support you in managing your business in the best possible way.
*Article currently only in Dutch
**Need help navigating the Dutch websites? Reach out to us.