183 day rule

Belasting werken buitenland

Do you work abroad for part of the year while living in the Netherlands? The 183-day rule prevents you from paying tax on your salary in two countries and determines in which country your salary should be taxed. Would you like to know where your income will be taxed in order to prevent and/or anticipate on any tax problems? Please contact us to discuss your situation.

Consequences of COVID-19 coronavirus on 183-day scheme

Due to the measures regarding the corona virus your work situation may look different. For example if you normally work and reside in different countries you will now probably work more in one place during the corona crisis, in the Netherlands or abroad. Or if you are an international working fulltime in the Netherlands you may suddenly be working remote for your Dutch employer from your home country. These unexpected situations can have tax consequences, since the country where you reside while working is most relevant for the tax calculation. If The Netherlands is your usual country of residence and work location The Netherlands will have the exclusive right to levy income tax in 2020 instead of abroad. The Netherlands will tax your world income. But in case you unexpectedly work more than 183 days outside of the Netherlands this year it may be that the other country may levy tax. Or it could be the other way around.

When is the 183 rule relevant?

Most tax treaties with other countries stipulate that the country of employment may levy on the salary. However, part of these tax treaties is the 183-day rule. If applicable, the country of residence may levy tax. This applies if 3 conditions are met:

  • the recipient is present in the other State for a period or periods not exceeding in the aggregate 183 days in any twelve month period commencing or ending in the fiscal year concerned; and
  • the remuneration/ compensation is paid by, or on behalf of, an employer who is not a resident of the other State; and
  • the remuneration/ compensation is not borne by a permanent establishment which the employer has in the other State.

If this is the case, the salary is not taxable in the state of employment until more than 183 days have been spent there. If not, the entire salary is taxed in the country of residence.

Often the article in the tax treaty that includes the 183 day rule is misunderstood or misapplied.

Salary in the country of residence remains taxable

Incidentally, days worked in the state of residence or even a third country, are in any case taxable in the state of residence. This is often overlooked. If you live in a particular country, there is a resident tax liability there. Worldwide income and assets must then be stated in the tax return in that country. Subsequently, on the basis of the 183-day rule, a conclusion is arrived at for which part double taxation deduction can be requested.

Keep track of working days

In the context of the 183-day scheme, it is very important to keep a good record of where you spend each day during the year. A calendar specifying this is an important thing an inspector will request in an employment with more than one working country.

Examples of 183 day rule situations