Be careful to choose your dentist wisely – tax residence

Tax residence

Being a tax resident in one or the other country can be of significant importance. Your dentist might play an important role in the matter of tax residence.

Tax residence

Tax residence determines in which country your worldwide income and assets are subject to tax. In the tax treaties the Netherlands has with other nations, article 4 is about tax residency. The article 4 is not a clean cut article. It is what we call a soft article. Facts and circumstances determine where a person is a tax resident.

Example

You life and work in the Netherlands. Then you pay tax in the Netherlands. However, your wife and children live abroad. Then you are not a tax resident of the Netherlands. That said, you life in the house in the Netherlands that you own. Now it gets debatable. The house often wins.

Court case

A Vietnamese national registered in Vietnam up to July 2014. Then he changed his registration to the house he owns in the Netherlands till February 2017. Changed his registration back to Vietnam till October 2019, and back to the Netherlands later on.

The Vietnamese national filed a non-resident tax return for the year 2016 in the Netherlands. The Dutch tax office disagreed and demanded he filed a Dutch domestic tax return, in which the world wide income and assets are reported.

It became a court case and in court it was only about article 4 of the Vietnamese Dutch Tax treaty. What are the facts and circumstance that makes this Vietnamese a tax resident in either country?

Tax residence determine by your dentist?

Tax residence facts

The Vietnamese national has children and grandchildren residing in the Netherlands. A very important fact. When he stays in the Netherlands, he stays in the apartment he owns in the Netherlands. That is an anchor of an argument to be a Dutch tax resident. A winner argument.

Not this time.

The Vietnamese rules make him a Vietnamese tax resident, as he stayed at least 183 days in Vietnam that year. Moreover, he is married and lives with his wife in an apartment in Vietnam. The Vietnamese national was a volunteer, registered a sport clubs in Vietnam and the dentist is in Vietnam.

The court ruled that both countries have even strong arguments, but the more soft facts of the dentist and sport clubs make that this person was a Vietnamese tax resident in 2016.

Tax is exciting

We think tax is exciting. We are excited to learn where your central point of life is. That is the start of the initial contact. Where are you from, where are you living, what are you doing. Are you married? Do you own your own home? Basic questions that need to be addressed to keep it simple and exciting!

Work in Dubai and live in the Netherlands, is that wise?

entrepreneur

Certainly not. Work in Dubai and live in the Netheralnds is not wise. Dubai is tax heaven, the Netherlands is not, even though we are still very much excited about the Dutch tax system.

Work in Dubai and live in the Netherlands

A frequently asked question and is that wise? It certainly is not. Dubai does have much better weather and an even better tax rate of roughly zero percent. This attracts Dutch tax residents to work in Dubai.

How to prevent working in Dubai at 49,5% Dutch tax  rate?

The thing about work in Dubai and live in the Netherlands, you are a tax resident in the country where you have your central point of life. Your central point of life is where is your family, your house, your car, where your navigation states home (really!), where you purchase your groceries. If you simply travel to Dubai without making changes and returning every other week, you pay Dutch tax over your Dubai income.

What acts like an anchor to the Netherlands?

An anchor to the Dutch tax system is both your tax partner and the house that is your main residence owned by you.  That is a lethal combination if you no longer want to pay Dutch tax over your Dubai income.

The Dutch tax office has the opinion that the Dutch house that is owned by you and still used by you in which your tax partners is living, makes you a Dutch tax resident regardless. That is our experience from many battles we have had with the Dutch tax office about fiscal residence. Every time the Dutch tax office won from the other nation in such a situation.

Work in Dubai and live in the Netherlands, is that wise?
Work in Dubai and live in the Netherlands, is that wise?

If you want to move to another country to pay less tax, move to that other country to pay less tax. That is the message. That implies you cannot use your house as your main residence. The house as main residence implies a mortgage deduction.

That also implies your tax partner needs to move with you. Our experience is that never every tax partner is not willing to spend time in the desert for no money or tax credits.

I divorce my tax partner for tax purposes

That is supported by some hardline tax advisors. By divorcing your Dutch tax partner for tax purposes only, you can work in Dubai, and pay the Dubai tax rate. Of course you travel to your former tax partner, as you only divorced for tax.

We are more practical tax advisors. Does your tax partner also understand this is for tax purposes only? Or a cheap way to divorce. And if all is done formal, what will your tax partner hold back from a true divorce once your pension capital is displayed.

We think a divorce is not a tax solution and it could back fire to you more than the tax advantage.

Tax-is-exciting

We think tax-is-exciting, we understand many find it not exciting. The rule is, when you want the other nation tax rates, you need to move to that other nation. Often there is a reason for low tax rates, as there is more to life than only tax. Which we ofcourse will deny when asked, as tax is exciting.

Pilot taxed in the Netherlands

One man company bookkeeping

Pilot taxed in the Netherlands if often an undesired outcome for the pilot it concerns. Tax treaties between countries can be different. This article is about the UK.

Pilot taxed in the Netherlands – court case

A Dutch national registered in the Netherlands who is considered a Dutch tax resident took up employment with an airline company in the United Kingdom.

In the year 2015 the pilot started in April and worked 136 days for the British airline and he flew 81 days international and the other days national.

In his Dutch income tax return the pilot reported his income and claimed a double taxation relief for roughly half the gross earned income. This double taxation relief the pilot based on the fact that there was a distinction in flights he has done locally in the United Kingdom and internationally.

The full double taxation relief was denied by the Dutch tax office. In appeal in court the pilot explained the distinction in flights. The court ruled that international traffic phrase in the tax treaty does not acknowledge a distinction, hence a distinction is not in place.

The second reason for appeal was that other tax treaties ruled differently where a pilot is being taxed. An unfair difference. The court is aware that other tax treaties have other agreements, but the tax treaty applicable in this case was the one with the United Kingdom.

Pilot taxed in the Netherlands

Pilot taxed in the Netherlands – tax treaty

Tax treaties are agreements made between countries which country and tax what. All agreements are as much as possible in line of each other. Sometimes there is an article that differs and the pilot article is one of them.

In article 14 sub 3 of the UK NL tax treaty the income of the pilot is taxed in the Netherlands.

Pilot not taxed in the Netherlands – opportunity

Pilots that are employed in the Netherlands often are not that amused by the Dutch tax rates. These pilots then move their fiscal residence to another country such as Cyprus or Malta. Then the Dutch airline no longer needs to withheld tax, but social premiums are to be paid in the Netherlands. This exception we can request for you, if you are a pilot that is. Feel free to contact us.

Tax-is-exciting

We think tax-is-exciting but not everybody is very much excited about the Dutch tax rates. This pilot became creative in his tax return. He claimed a double taxation relief in 2015 and only in 2020 and many consultancy costs further the claim is finally denied.

Creativity is a virtue, but tax wise a nightmare. So please before you become too creative, contact us and we share our excitement or not over your thoughts.

Sorry for the dashes in the middle of the word tax-is-exciting. Apparently Google has a dirty mind and sees only a three letter word that we refer to when we practice to reproduce ourselves. Anything related to that word is spam, hence this devout solution.