This question is not always easy to answer. The application of international tax law for natural persons depends on the determination of the domicile for tax purposes. In international tax law the starting point is always the place of residence. This means the State of residence has the authority to tax worldwide income and assets.

The next step is to determine whether another country is competent with regard to specific sources of income. Art. 4 in the Dutch General Tax Act (AWR) stipulates: ‘Where someone lives, is assessed on the basis of general circumstances.’ In practice the tax authorities use the registration of persons in the key register as a starting point. Is someone registered in the Netherlands, he or she lives there as well. This is the principle of the tax authorities, but on further consideration, this does not have to be the case at all.

In recent years, more and more case law has been published on Art. 4 (AWR). The determination of the place of residence is therefore an important topic for the tax authorities. Questionnaires and residence researches are becoming common. The fact that the Dutch tax authorities can go far, shows the recent ruling on the use of the Museumjaarkaart. Experience teaches that the tax authorities increasingly adopt the position that the taxpayer lives in the Netherlands, and that no attention is paid to the personal foreign situation.

In order to gain access to a treaty, the taxpayer must at least be subject to taxation in the other country of residence. The treaty then determines the taxpayer’s place of residence and which country is authorized to tax (tie-breaker clause) with regard to the sources of income mentioned in the tax treaty. A taxpayer who is not subject to taxation in the other country of residence does not have access to the tax treaty. There will therefore be no double taxation, as the taxpayer is not subject to tax.

The case law to be discussed also shows that the judgment of the Supreme Court of 12 April 2013 is still leading in the question of where a person lives under Dutch tax law (Art. 4 AWR). In summary: someone lives in the Netherlands if he or she has a permanent employment of a personal nature with the Netherlands. In this respect it is decisive, based on external circumstances, whether these ties are strong enough to assume that the center of a person’s social life could be in the Netherlands. The Supreme Court has stated that this durable relationship does not have to be stronger than the relationship with another country, so that it is not necessary for having a place of residence that the center of one’s social life is located in the country concerned.

Residence determination Dutch tax authorities

It appears from published policy that the Dutch tax authorities believe that the following facts indicate a lasting relationship with the Netherlands:

• the availability of a sustainable (furnished) home;
• the residence (place of residence, place of work) of family or relatives;
• the place where work is performed;
• the place where cash withdrawals or credit card payments are made;
• the consumption of gas, electricity and water;
• the place where bank accounts or investments are held;
• the place where insurances are taken out;
• the place where medical treatments are undergone, such as at a general practitioner, dentist or physiotherapist;
• a membership of (sports) clubs, charities, church, etc;
• the license plate car;
• the place where subscriptions are held;
• the location and use of the telephone connection;
• whether the natural person is a tax resident of another state.

The judge will consider these circumstances as a whole and in relation to each other. Moreover, only an economic connection with a place is usually insufficient to conclude that the place of domicile is located there. Social factors usually carry more weight. In particular, the location of a residence used by the taxpayer is an important starting point for determining the place of residence, especially if this serves as the main residence. The location of the family’s residence is also usually of great importance, especially when the taxable person often visits his family.

A public presentation of the Coordination Group for Construction Control (CCB) moreover stated that foreign circumstances do not play a role and that important is only what binds the person in question to the Netherlands.

In its ruling of 12 April 2013, the Supreme Court noted that the Central Board of Appeal ((CRvB), was right to take the foreign facts and circumstances into account. In the relevant literature it is noted that this means that in the ruling the foreign facts and circumstances also play an important role in the assessment of whether there is a lasting personal connection with the Netherlands.

When assessing whether someone has a lasting personal relationship with the Netherlands, it is (of course) also important what kind of relationship someone has with another country. If a home is permanently available in another country and social activities take place there and work is performed, this may be an important indication for the lack of a lasting personal relationship with the Netherlands. After all, the sustainability of the bond is important, it does not only consist of having the Dutch nationality and family living in the Netherlands. If that were the case, in fiscal terms no one would be able to leave the Netherlands.

What does this mean for you?

Do you have a dispute with the tax authorities about your country of tax residence? As described above, the tax authorities are often a bit short-sighted in determining this. It may well be that foreign facts and circumstances also need to be taken into account when assessing whether there is a lasting personal relationship with the Netherlands. Do not agree too quickly on this, so the tax authorities will charge your world income. It may very well be that you are not a tax resident of the Netherlands after all, and you only have to pay tax on a limited part of your income. It’s important to check this with a tax lawyer who has cross-border experience.

More information about tax residency in the Netherlands?