183 day rule
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 any tax problems? Please contact us to discuss your situation.
Example situations 183 day rule
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 employment with more than one working country.