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The 183 days rule in tax treaties for employees working in the Netherlands

The 183 days rule

Standard rule in tax treaties is that a foreign employee pays tax on his salary in the Netherlands if the actual work is done in the Netherlands. This is different if the so called 183 days rule is applicable. This rule states that the employee will be taxed in his home country if the following conditions are satisfied:

  1. the stay in the Netherlands does not exceed 183 days (in a calendar year or a 12-month period, this differs per tax treaty) and
  2. the salary is not paid by or on behalf of a Dutch employer during that period and
  3. the employment costs are not borne by a Dutch permanent establishment of the foreign employer during the assignment.

The term employer

There can be discussion about the term employer as mentioned under 2. The Netherlands has adopted the economic employer approach in interpreting the term employer for the 183 days rule instead of the formal employer approach.
According to the Dutch Supreme Court the (economic) employer is the company that:

  • has the authority to instruct the assignee
  • bears the risk and expense of the duties performed, including a specific and individually traceable recharge of the employment expenses.

So if the employee is working according to the instructions of the Dutch client or the Dutch client bears all the risks and expenses then the Dutch client is seen as the economic employer and thus will the employee be taxable in the Netherlands from day 1. This means that a payroll administration will have to be set up and the formal foreign employer must be registered with the Dutch tax authorities for wage tax purposes. 
There is, in principle, no threshold/minimum number of days that exempts the employee from the requirements to file and pay tax in the Netherlands. An exception is made for employees of foreign companies who are assigned to the Netherlands within an international group as part of an exchange program, for career development, or on the grounds of specific expertise. They are exempt from Dutch income tax on their employment income if they work in the Netherlands for a period of no longer than 60 days in any 12-month period. The exemption does not
apply if the Netherlands has the right of taxation based on the tax treaty.
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