Centre of life crucial for taxes

21 March 2016

Living and working in more than one country can have quite some fiscal and financial consequences. The tax authorities of the country where your so called centre of life is are entitled to claim taxes. Your centre of life is the country in which you have most connections (such as partner, family, property, work, memberships). It is not simply a matter of the place where you are registered. In some cases the tax authorities can be very thorough if it comes to researching where your life centre is.

In one case a legal heir got a huge tax claim from the Dutch tax authorities when his father died during a visit to the Netherlands. His father was originally from Holland but was already working and living abroad for years. While he visited the Netherlands he got sick, was hospitalized and died. The Belastingdienst stated that he was living in Holland as an argument for their heritage tax claim. The heir lodged an appeal and won. This positive outcome (the inheritance amounted to 71 mln euros) was due also to detailed proof that he lived abroad. A watch and open book left behind beside his bed in his home in Puerto Rico, a recent contract for work in Puerto Rico and statements from friends convinced the court to judge that the tax claim was not valid since the man was apparently not living in Holland.

Although this case is pretty extreme it does indicate that one should not take clarity about the life centre too lightly. It is wise to seek advice about your financial and tax situation to prevent unpleasant tax claims.

On the other hand there are usually quite a lot of exemptions for internationals. If you seek advice even before you start working in or move to another country you will be prepared and can arrange matters so that you will have maximum tax benefit and pay less tax.

NB: Please note: the Dutch 30% ruling acts as a (tax) unmrella againts Dutch taxation on your wealth (worldwide: Dutch as wel as alle non-Dutch investments, bank accounts etc.).; but does NOT protect againts ley of inheritance tax and/or gift tax in case of death and gifts made.