Double Tax Treaty Belgium – the Netherlands: application of the 183-days rule

Written by Nicolas de Limbourg 8 August 2017

When a tax resident of Belgium is physically carrying out (a part of) his or her employment activities abroad, it should be determined if and to what extent the work state may levy income taxes. Based on article 15 of The Belgian-Dutch double tax treaty, employment income derived by a tax resident of Belgium will be taxable in Belgium only, unless he or she is present in the Netherlands for a period or periods exceeding in the aggregate 183 days during any twelve-month period commencing or ending in the fiscal year concerned.

In this respect, on 19 July 2017, the Dutch Supreme Court (Hoge Raad der Nederlanden) gave its decision regarding the days to be taken into account for the application of the 183 days rule. The Dutch lower court first decided that any days that were of a private character and were not employment related should not be taken into account for the calculation of the 183-days rule and concluded – in the case at hand – that the Netherlands had no taxation power. The Supreme Court ruled however, in accordance with the general principle of article 15 (employment income) of the OECD model treaty, that the 183 days rule should be determined taking into account both the days on which an actual employment is exercised in the Netherlands (working days), as well as any other (non-working) days during which the taxpayer is present in the Netherlands and which are related to some extent to the employment exercised. Consequently, Saturdays, Sundays, national holidays, holidays and free days before, during and after the employment activities and short breaks, should also be taken into account.

Furthermore, irrespective of the 183 days threshold, foreign working days in combination with a (foreign) economic employer or (foreign) permanent establishment or fixed base, may also trigger taxation of the employment income abroad.

Last but not least, if based on the provisions the double tax treaty, the work state has received the taxation rights, it should also be determined what portion of the employment income will actually become taxable in the working state, taking into account the number of working days during which the employee was physically present in the work state.