What is the 183-day rule and what does it determine?

The 183-day rule is a tax-treaty rule that helps determine in which country your employment income should be taxed when you work in another country while living elsewhere, so you don’t end up taxed twice on the same salary.

When is the 183-day rule relevant?

It becomes relevant when you live in one country but perform employment work in another country during the year, and you need to determine which country may levy tax on (parts of) your salary under the tax treaty.

What are the three conditions for the 183-day rule to apply?

The rule applies if (1) you are present in the work country for no more than 183 days in any 12-month period linked to the fiscal year, (2) your pay is not paid by (or on behalf of) an employer resident in the work country, and (3) your pay is not borne by a permanent establishment the employer has in the work country.

If the 183-day rule applies, where is my salary taxed?

If the conditions are met, the work country does not tax your salary until you exceed 183 days there. Your country of residence taxes your salary and you can usually claim double-tax relief for the part that is taxable abroad under the treaty.

Why is it important to track your working days and where you are each day?

Because eligibility and the split of taxable salary depend on where you are physically present. Keeping a day-by-day calendar of workdays (and location) is essential evidence that tax authorities may request in multi-country work situations.

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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.

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.

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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.

Examples of 183 day rule situations

Pay attention!

With the 183-day rule, small nuances in situations can already lead to different outcomes whether or not the scheme is applicable. As a rule, you cannot simply apply the following example situations to your situation.

You will work far less than 183 days in the Netherlands for your new Dutch employer.

You are considering an employment offer from a Dutch company. Although you will be earning a salary from the Netherlands, you will still continue residing in Portugal and mostly working from there. Your new job would also involve frequent travelling to other countries worldwide. Consequently you expect not to be visiting the Netherlands for work (meetings etc.) for more than 183 days per year. You are wondering if you will need to pay taxes in the Netherlands anyway.

If you are on a Dutch pay roll and due to your domicile you are only taxable for days physically worked in NL. Any other days are taxable in Portugal. You will also need exemption in NL for social security contributions and health insurance as it seems to me these will continue in Portugal. It is possible to correct this afterwards via a tax return. But possibly your future NL employer has an idee how to address this issue. Being on a Dutch pay roll is not strictly necessary however. The NL company can probably run a Portuguese pay roll either through their NL company (if possible under Portuguese rule) or via an own to be established entity in Portugal or a third party pay roll. We would be happy to give you some further advice.

You have been working for 9 months in the Netherlands for a Spanish employer.

Last year you’ve worked for 9 months in the Netherlands, for a Spanish company. You paid taxes in Spain, but at the end of the year, in December, the Spanish company returned the taxes to you and told you that you had to pay taxes in Netherlands because you had exceeded the 183 day period. You are a Bulgarian national, with permanent residence in Bulgaria, and are working abroad as an electrical supervisor on different projects for your Spanish employer.

In principle, it is correct that tax is due in NL as well as social security contributions if you lived and worked here and if you did not live here but worked more than 183 days. Also important are the following questions: was there no fixed establishment of the employer in NL? Did you have Dutch health insurance? Did you register as living in NL? Have you received any correspondence from the tax office? We will be glad to help.

You will be working in Germany 14 days per 3 weeks but living and staying 1 week in the Netherlands.

You are an expat in the Netherlands since 2018 and now started working in Germany for your Dutch employer in January 2021. You are working in Germany for 14 days and 7 days in the Netherlands on a monthly basis. You are paying wages tax and social security and health insurance contributions in the Netherlands and you also receive mortgage interest deduction and childcare allowance here. However, you will be working over 183 days per year in Germany and are concerned about the tax consequences this has for your situation.

If you are physically present in Germany for more than 183 days during a 12-month period, Germany is entitled to levy on the salary earned there. In that case, the Netherlands must grant double taxation deduction. This may affect the mortgage relief refund that you receive. The social security contributions however remain due in the Netherlands because you also work more than 25% of your time in the Netherlands. It is consequently needed to submit both a Dutch and German tax return to make sure taxes are paid correctly. It may also be necessary to apply for an A1 statement to confirm social security contributions are due in The Netherlands.

You are partially living in NL and working and living in Tanzania.

You lived and worked in NL as an ex-pat. Beginning of this year you started working in Tanzania for a Tanzanian employer. The work schedule is 2 months in Tanzania and 1 month in the NL (plus holidays). You did not deregister from the Netherlands as your house and partner remain in NL. You would like to avoid being taxed on your salary in NL after being taxed already in Tanzania. And therefore if you need to watch out for the 183 days stay in NL to ensure your total stay remains less than that.

If you only work in Tanzania tax consequences should be minimal. If you however work remotely from NL for your Tanzanian employer there will indeed be tax consequences. We will be glad to look into further detail. Is your Dutch health insurance no longer active since your work in Tanzania?

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Businesses in the Netherlands are liable to various taxes with each having their own characteristics. The main ones are turnover tax (VAT), Wages Tax, Income Tax and Corporate Income Tax. We can provide business tax advice for entrepeneurs in the Netherlands.

(Corporate) Income Tax

A sole trader or partnership is liable to Income Tax, whereas a limited company is submitted to Corporate Income Tax. Both taxes have their own tax facilities and deduction possibilities.

Our office will complete the annual Dutch corporate tax return in the most advantageous way and we will identify further tax-saving opportunities. Our office is dedicated to reducing the tax burden of your enterprise as much as possible. The corporate tax return will be submitted through our accountants and tax software, which enables us to communicate efficiently with the Tax Office.

VAT

In the Netherlands, apart from the tax returns on the profit made within a business, also turnover tax returns will have to be submitted in order to declare the claimable and payable/due VAT (BTW in Dutch). Also depending on the size of the business, this can be done on monthly, quarterly or yearly basis. For international transactions within the EU, also an ICP form will have to be submitted similarly. Read more about VAT in the Netherlands here.

Wages tax/Payroll

If your business has got employees you will need to set up a payroll administration to make sure the correct amounts for Wages Tax and social security premiums are withheld and paid. The Wages Tax return will have to be submitted monthly. This is also required for the director/owner of a B.V. company, who is regarded as an employee of this business. We can take care of the payroll administration together with the tax requirements and also provide advice for your employment issues.

In your business a lot of international transactions take place and you would like to know how this affects the turnover tax (BTW). You are starting up a business and need tax advice on the available Dutch business structures. Your company based in another country does business in The Netherlands and you want to make sure whether it is liable to any Dutch taxation. You want to employ people from abroad and would like to confirm that they qualify for the 30% ruling. This is where our business tax advice can help you.

In the immensely complex international tax legislation often more questions come up than you care to recount. Whether you have a brief question or an extensive fiscal problem, our experts will provide you with an answer. Best results are obtained if you contact us for tax advice as early as possible when the situation still can be optimized.

For international companies not only Dutch tax law is relevant, but also tax laws in other nations and international tax treaties. This causes complicated situations, but at the same time opens up opportunities for international tax advice and tax planning. In order to avoid double taxation for example it is important that participation exemption applies to the income earned from the foreign subsidiaries.

Do you have a dispute with the Tax Office and do you need professional assistance? J.C. Suurmond & zn. Tax consultants does not hesitate to take over your case and defend your interests by appeal to the Tax Office and if necessary up to the High Court.

Example situations of business tax advice

Your plan is to commence an advisory business with international clients and keep working for your current UK employer in addition.

You are planning to move to the Netherlands from the UK. Your plan is to commence an advisory business with international clients and keep working for your current UK employer in addition. You are looking for some tax/legal advice in relation to your situation.

It is certainly possible to immigrate to NL, commence a business and work for a UK employer in addition. It may be easier to rule out double taxation by invoicing your UK employer from your business and consequently cease to be taxable in the UK. The UK employer may also prefer this rather than having to start running an NL payroll. If you have not lived in NL before you should consider the 30% ruling; it is however important to follow the procedure in the right order.

You are searching for tax consultants who could help you and your husband with your own companies in your upcoming relocation to the Netherlands.

You and your husband both run a company in France. Your husband issues only one or two invoices a month and you on average 15 per month to customers in the EU. You both have considerable savings. You are considering relocating to the Netherlands. You are looking for a tax consultant who could help you in choosing the best legal structures for your respective companies (also considering your savings), who could help you set them up in the Netherlands, and who could run your daily accounting too.

We would be happy to give you tax advice regarding your possible relocation to NL. Some initial questions would be: where do you live in France and have you lived in NL before? Would you both have EU nationality? If you have worldwide assets setting up a B.V. in The Netherlands could be a good step. since this might qualify you for the 30% ruling

What options do you have when moving your online US business to the Netherlands?

You are new to the Netherlands but have an online business established in the US. You want to know if it is possible to move your company to the Netherlands and what will be the best type of company to register.

It would be interesting to see if the 30% ruling is possible. In that case, it is important if, when, and how long you may have already lived in the Netherlands. Another important question is whether you have already registered with the municipality. We would also need to know whether your US company is a separate entity that can pay out dividends. In that case, are you currently receiving a salary from the company? What level of revenue would the company generate? If we have your answers we are happy to give you specific business tax advice.

If you are thinking of starting a business in The Netherlands many legal and fiscal aspects will have to be taken into account. Decisions taken when starting a business often have long-term consequences – either positively or negatively. International business structures need careful tax planning in order to design the most tax efficient structure. Therefore it is important to acquire professional advice. You can contact us for advice.

Our advisors can advise you on the best way of starting a business in the Netherlands and can support you with:

assisting with incorporation and registering with the Chamber of Commerce;
submitting the necessary forms to the Tax Office and other authorities;
drafting a business plan and organising the accounts;
deciding which business type you want to use, for example sole trader, partnership or limited liability company, which each have their own legal characteristics and tax facilities.

Corporate tax rates

The business investment climate is very favourable in The Netherlands. The corporate tax income rate for example is only 20 to 25%. Research & development projects profit from the innovation box, with a corporate tax rate down to 5%. The Netherlands has got one of the largest tax treaty networks, thus avoiding double taxation with many countries. The Dutch participation exemption causes dividends from qualifying shareholdings to be enjoyed tax free and the fiscal unity regime makes it possible to freely offset profits and losses among group members. Maybe yet more important is the beneficial fiscal climate towards international companies.

Corporate tax facilities

The corporate tax facilities together make international business structures very tax efficient. On top of all this there is the 30% tax ruling for expatriates recruited from abroad, which makes 30% of their income tax free along with other advantages.

Correct financials start with keeping good financial accounts. Therefore it is important that your daily financial transactions are processed correctly. Our office can support you with this or take over the complete accounting.

Annual reports

In the annual financial report all the accounting details are assembled. The information from the annual accounts has to be processed in the (corporate) income tax return. The results also give useful accounting information to the management of the business. The figures can be analysed and compared with previous years, in view of making financial decisions for future projections and budgets. For B.V.’s in the Netherlands for example the financial report will also have to be submitted to the Chamber of Commerce for publication.

Interim accounting reports

Apart from the annual accounts, interim figures will help you to have an up to date financial insight in your business. Only with accurate financial information will you be able to take right important decisions. If you only find out your performance after the year, you may be too late to change the course. With better accounting and financial management you will achieve better results. We can help you to analyse both opportunities and bottlenecks.