The Netherlands has with a substantial number of countries a tax treaty to prevent double taxation. Also with the United States of America. We have to note, this is one of the more complex tax treaties. The next case is about this tax treaty.
US Dutch tax treaty example
A dual nationality person (USA and NL) works at the US embassy in The Hague as part of the administrative team. This person is on a US contract and paid by the US Government. In his 2009 and 2010 Dutch income tax return he reported his world wide income, being the income from the US embassy. At the same time he claimed a double taxation relief, as this income was only to be taxed in the USA.
The Dutch tax office disagreed and denied the double taxation relief. The US embassy employee objected based on the article 20 being Government employees of one state (USA in this situation) is only subject to income tax in that state (USA).
Double taxation relief granted
The Dutch tax office argued that this only applies to members of the diplomatic and consular staff and not regular administrative staff. The Dutch court noticed that the term members of the diplomatic and consular staff was not explained. Hence the members of this group were to be identified in the explanatory notes to the tax treaty. The explanatory notes were very clear on the subject and administrative staff is part of this group. Hence the administrative employee was entitled to a double taxation relief. The Dutch income taxed in USA only.
Tax treaty effect
Tax treaties are important to determine the correct starting point. In article 4 of the tax treaty is determined where a person is a tax resident. Being registered somewhere or stating you are a citizen of a certain country does not affect the fiscal residency. From this fiscal residence you can continue to build your fiscal structure. Needless to state, if you start with the wrong assumption, everything that follows will most likely be incorrect as well.
For example, being single implies your tax residency is already determined by the place where you work. If you are for more than three months in the Netherlands, then you have become a Dutch tax resident.
Orange Tax Services team
We are international orientated tax advisors. That does not imply we know the tax systems of many other countries, but it does imply that we take the contains of the tax treaties into account while we are determining your fiscal status. Being a Dutch tax resident implies you need to report your world wide income and assets. It does not imply that all of your world wide income and assets are necessarily taxed in the Netherlands.
We will be glad to assist you in your international tax aspects.