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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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Comments (7)
Comment by Svetlana on Wed, Oct 19th, 2016 at 9:22 PM
Hi, I moved to Holland in June due to husband job and I continue working for my Russian employer. Shall I submit Dutch tax return and pay tax from my Russian income? My Russian employer pays all taxes and social contributions in Russia. Overall I spend as resident in Holland 179 days ( also I came on vacation 3 times in the beginning of the year but as tourist). I read about 183 days rule and I can‘t understand if this apply to my case.
Comment by Arjan Enneman on Mon, Nov 7th, 2016 at 3:39 PM
From the day an employee starts working in the Netherlands a Dutch payroll administration must (in principle) be set up. If applicable the 183 days ruling can be taken into consideration. The 183 days ruling however is only applicable with respect to wage tax. To determine the number of days in the Netherlands also non work days are counted, including holidays. So in your situation you are formally more then 183 days in the Netherlands in 2016. Premiums social security have to be paid in the Netherlands from day 1. There is no social security treaty between the Netherlands and Russia which would make it possible to continue to pay premiums in Russia. So if I look at the formal rules then you have to pay tax and premiums social security in the Netherlands starting June 2016. Your Russian employer should register as foreign employer with the Dutch tax authorities so that correct amounts can be withheld from your salary. See also www.expatax.nl/payrolling.php.
Comment by Jeremy on Wed, Nov 9th, 2016 at 4:12 AM
Hi, I am a US citizen and have been on a Dutch employment agreement and paying taxes in the Netherlands since Jan 1 of this year. For a variety of reasons I have worked outside of the Netherlands for more than 183 days this year, but not in any one particular country. Since the US taxes on worldwide income, would I be able to take advantage of the 183 day ruling by paying US taxes? If so, would that mean that I am only liable for the Dutch taxes for the days I was on the ground?
Comment by Arjan Enneman on Wed, Nov 30th, 2016 at 2:08 PM
SInce you live in the Netherlands you will pay tax on your world wide income in the Netherlands. You will also have to declare your world wide income in the US since you are a US citizen. Double taxation is prevented in the tax treaty between the Netherlands and the US. You pay tax on your salary in the country where you work. If there is no payroll in the other countries you worked then everything is taxed in the Dutch payroll. An exemption for foreign work days can be claimed if you have the 30% ruling. Then only the Dutch work days are taxed in the Netherlands and all other work days in the US.
Comment by Nicholas on Tue, Dec 6th, 2016 at 12:50 PM
Hi All, I am a UK Citizen and have a Limited company in the UK. My Limited company work a UK company based in London & thats how the invoice looks. I am posted in the Netherland midweek so Arrive Monday leave Friday. I am counting that as 4 nights in the Netherlands according to the HMRC‘s ‘which country I‘m in at midnight‘ rule. Is this correct or is it days clocked into work using my sign in at the gate? If the midnight rule then I have been 174 days in the Netherlands for this year Jan-Dec, is it correct to count from Jan-Dec, I came last Nov 2015? My company have a Netherlands company but I am neither employed by them or have any knowledge of how they set up, my agreement is with the UK HQ. They are now being investigated for Tax and would like me to cooperate in the investigation but I have no dealings in the Netherlands as and far as I am aware I stay 183 days or less then I pay all taxes in the UK as normal? Help!
Comment by yudhveer sheoran on Mon, Dec 26th, 2016 at 2:05 PM
Hello! I am working for an Indian company. In netherlands, a shipyard(dutch company) is building a ship for indian owners, so they requested my company to send a person who could help them in understanding and following indian rules and regulations. I was designated for this job and the shipyard sponsored my work visa for 1 year. I arrived here on 13-Nov.2016 and an allowance to meet the local expenses is being paid by my indian company to my account in netherlands. I have following questions: 1. In year 2016, I have lived in netherlands for only 47 days, am I liable to pay taxes? also for year 2017, I will be staying here for more than 183 days, do I have to pay tax? if yes, how do I declare and pay tax? because my company is based in india and they can‘t withhold and pay my taxes here
Comment by Arjan Enneman on Tue, Jan 3rd, 2017 at 1:12 PM
@Nicholas: the tax treaty between the Netherlands and the UK states that the 183 days are calculated over a period which ends or starts in the applicable tax year. So it is not the same as a calendar year. So counting starts from your first working day in the Netherlands and then for a year. Relevant are the days in the Netherlands, the nights are not relevant. If you reach 183 days you are liable for tax in the Netherlands for the whole period. Another question is whether the Dutch tax authorities would not look thourgh your one man limited company and see the company in the Netherlands as your employer for the 183 days ruling. In that case you would already be liable for tax in the Netherlands without counting the working days.
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