Actually, I am not a Dutch citizen, so I pay no Dutch tax. That is how we are approached sometimes. Exciting times!
Not a Dutch citizen – I do not pay Dutch tax
Every few weeks we receive a message that has similarities with other messages. Persons claiming to be a resident of another country. As they are, no Dutch tax should be imposed on income earned in the Netherlands during their stay in the Netherlands.
I cannot help countering that I try to be a Dubai resident for years – no taxation – while living in the Netherlands. Unsuccessful that is.
We understand that global tax systems are not everybody’s daily business. The thought of paying tax in another country, as this person is a citizen of that other country, we can follow. Actually, the countries mentioned are not even tax heavens. People genuinely have the opinion that Dutch tax is not correct based on their foreign citizenship.
All Dutch would instantly give up their Dutch nationality, if nationality or citizenship would impact taxation. That is a given. The tax authorities around the world have experience in this field.
How does taxation work?
The first question that needs to be asked is: where are you a tax resident? Often we get a reply like this example: The United Kingdom obviously as we own properties in the UK, we are UK nationals and we still are registered in the UK.
To avoid such discussions, there are tax treaties in place. Every tax treaty touches this subject in Article 4. Your central point of life determines where you are a tax resident. Your central point of life is not made specific, as that opens again opportunities to find boundaries.
Where you life, work, have your partner, go to the doctor, dentist, own your cars. We say basically there where you purchase you daily groceries. There you are a tax resident.
Some try to trick the tax office by moving to Belgium (less tax). But if you are famous and spend every single day in an expensive shopping street in Amsterdam, the tax office uses article 4 to make you a Dutch tax resident. Not being famous is a plus in the Dutch tax system.
The Dutch tax office even checks your motor vehicle navigation system to check what you indicated as home address.
Is it possible you work and stay in the Netherlands and pay other nation taxation?
Yes that is possible. If you are a diplomat, you pay the income tax over the income earned in the country of which you are a diplomat of. Same for the military. If you have a specific certificate from the European Union, you pay no Dutch tax.
It is also possible you pay twice taxation over the same. If you are a US national, regardless where you stay in the world, you pay also US income tax over your worldwide income. The only way to avoid that is giving up your US nationality. Still you need to file a US tax return for the 5 years after you gave up your US nationality. So no instant effect. And entering the USA after giving up nationality is then problematic we have been told.
So tax is exciting, but not at every price!
Does a regular tax payer still pay tax in more than one country?
A regular tax payer basically only pays during a calendar year in two different countries tax in case of migration. That said, if people own property abroad, different rules apply.
For properties abroad the tax treaty basically states that the country where the property is located can tax the property. A double taxation relief is provided in the tax resident country of this tax payer.
This tax payer pays then local tax over worldwide income, and foreign tax over properties located abroad.
Tax is exciting
Sounds like international tax is complex? We understand for a regular person that international tax can be complex. For us at Tax is Exciting it is our daily business. We are aware of the tax treaties, the content, how to apply and process. We also understand you find it difficult to work the Dutch tax office. Hence we offer our service in English only at a fixed fee.