Tax is exciting, sometimes too exciting and this topic is one of those moments. Emigrating from the Netherlands and staying a Dutch tax resident. What is that about?
Emigrating from the Netherlands
You would assume that if you leave the Netherlands physically to live and work abroad, and you even deregister from the city hall in the process, that you have become no more Dutch tax resident or at the minimum a nonresident tax payer. Unfortunately that is not always the case.
We are experienced international tax advisors and we have a clear view on the situation.
You leave the Netherlands, you call the Dutch tax office and you ask “If I leave the Netherlands, will I remain subject to Dutch tax on my income while I live abroad? “ And the answer will be “Of course not” stated by the tax office. That is what we are told many times. But this is not the correct answer. Then we are in the situation where we inform the client differently from the Dutch tax office and the client thinks we are wrong. But we are not.
What is the case?
Emigrating from the Netherlands and remaining a Dutch resident tax payer sounds like a conflicted sentence, but it is not. Your fiscal position is determined based on y our central point of life. Yes, you can move away. Yes, you can have employment abroad, but if your partner stays in the house you and/or your partner own, you have not moved tax wise.
In the situation you are married and you deduct the mortgage interest of the house you own, then you are regarded tax partners. When one of the partners leaves the Netherlands, then the marriage in combination with the house makes you remain a Dutch resident tax payer. Regardsless who of you actually owns the house.
Case from our practice
A Scandinavian woman was married with a Dutch man, they purchased a house in Amsterdam and the marriage did not work. So without getting a divorce the Scandinavian woman moved away to Norway where she picked up university and worked for a Swedish airline.
You would assume that her central point of life clearly moved away from the Netherlands. The Dutch tax office disagreed. The marriage in combination with the house owned by the couple made her a Dutch resident tax payer. We had to redo the tax returns of the past couple of year. The standpoint of the Dutch tax office was so strong, they had no effort to convince the Norwegian tax office to withdraw their claim.
This is only one case of many we experienced with the same outcome.
Emigrate from the Netherlands – divorce
A divorce would make you disconnected from the partner you leave behind in the Netherlands. However, if you go for a divorce only for the reason to stop being a Dutch tax resident, does your partner trust you that is the true reason? No, of course not. Hence your partner agrees with the divorce but will fully use his or her rights to make a claim on alimony etc. Because the tax reason could be a smoke screen for the new love bird that is also living abroad?
Remaining a Dutch tax resident – is that a problem?
When you move abroad to work abroad while you stay a Dutch tax resident due to your marriage and the house you own in the Netherlands that is the main residence of your partner, is that a problem? We do not think so. Yes in the year you move and you have mixed Dutch and foreign income, you pay additional income tax. In the following years where you have only foreign income, you receive a 100% double taxation relief in the Netherlands and you are only socially insured in the country where your employer is situated.
Actually it is a positive thing, because you both are regarded a Dutch tax resident, the remaining partner, with income that is, can decide to fully deduct the mortgage interest. Whereas in case of the leaving partner no longer being a Dutch tax resident max 50% of the mortgage costs can be deducted.
Orange Tax Services – tax is exciting!
Before you run off to the desert to work in oil at no income tax at all, contact us to make sure you are not the fool that is thinking to work tax free, but will be hit with 49% income tax when the Dutch income tax is filed. Yes we disagree with the initial response the Dutch tax office gives you, yes we are right, but that does not need to be a problem.