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Where should I pay tax on my salary? In Spain where my employer is based or in the Netherlands where I work?


Question:

I am looking for somebody who can assist me with some tax-related matters.

I am working for a Spanish company, with a Spanish contract, but my company has moved me to the Netherlands to work for another company inside the same holding since I started with them last August. Where should I pay my income taxes? Physically I am working in the Netherlands, but the contract and the company are both Spanish and it is the Spanish company who is paying for my services. Is there any tax that I should pay in the Netherlands?

Answer:

Since you are actually working in the Netherlands you will have to pay tax in the Netherlands on the income you receive from your Spanish employer. Being a resident of the Netherlands you are already taxed here on your world wide income, which is only different based on a higher right of another country based for example on an applicable tax treaty. Like the standard tax treaty the tax treaty between the Netherlands and Spain divides the right to tax your salary to the Netherlands based on the place of work.

Being an employee it is the responsibility of your employer to arrange the withholding of wage tax on the salary which is paid to you. This means that your employer must register with the Dutch tax authorities as a foreign employer and set up a payroll administration in the Netherlands. If your employer has arranged an A1 statement it is possible to keep the payment of social security contributions in Spain.

Expatax can arrange the registration and take care of the payroll administration. See also www.expatax.nl/payroll-administration for more information about the legal requirements and our services.

It is also possible that you are put on the payroll of the company to which you are seconded but this will require additional work with respect to the applicable employment contract, reimbursement of costs etc.

Since you are seconded within the same group of companies the so called 183 days ruling will not be applicable either. So the fact that you work less than 183 days in a year in the Netherlands will not affect the obligation to set up a payroll administration in the Netherlands.

The above means that you will also have to file an income tax return in the Netherlands. Expatax can assist with that too.
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Comments (6)
Comment by bozhidar bozhanov on Fri, Jan 24th, 2014 at 7:43 AM
The answer mentions that the person is a resident of NL. But that might not be the case - he may still be resident of Spain. How does that change the tax situation?
Comment by Árjan Enneman on Wed, Apr 8th, 2015 at 4:41 PM
Relevant is where the work is done. If the person is working in NL but living in Spain, the standard situation based on the tax treaty is that the related income from employment in NL is taxed in NL. This depends on the actual work days. So if he is living in Spain he won‘t have to declare his world wide income in the Dutch tax return but only the income related to Dutch work days. For this the employer should put him on a Dutch payroll (unless there are only a few Dutch work days). If someone is working in NL for a couple of months then he will have to pay tax in NL on this income. But every case is different and requires investigation upfront.
Comment by alexander diamandidis on Fri, Feb 2nd, 2018 at 1:55 PM
so if this principle is the other way around, if I then work outside the netherlands and i am a resident of the netherlands, is should then also pay the tax in the country where i work, so not in the Netherlands.
Comment by Jay Xu on Thu, Jun 14th, 2018 at 6:35 AM
Hi, I have question about the income tax of employees working in other country. I works for Netherland Company but I am not living and working in Netherlands. Do I need to pay the income tax in Netherlands?
Comment by Arjan Enneman on Thu, Sep 27th, 2018 at 12:40 PM
Yes, it also works the other way around. Tax treaties in general mention that tax needs to be paid in the country where the work is done. For short periods exemptions are made, but if you work in a country more than a month it is good to determine whether a payroll will have to be set up in that other country for you.
Comment by Arjan Enneman on Thu, Sep 27th, 2018 at 12:42 PM
If you don‘t live and work in the Netherlands then you should not have to pay tax in the Netherlands with respect to the salary you receive (other rules may apply if you work on a ship or plane).
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