Pro rata Dutch tax deduction for foreign tax residents. Due to European case law originating from February 2017, new rules are applicable regarding the entitlement to deductible items, tax credits and tax-free allowance for qualified non-resident taxpayers.
An important condition to be met was the condition to pay tax here in the Netherlands on at least 90% of your worldwide income, otherwise opting for deductible items, tax credits and tax-free allowance was impossible.
From now on the Netherlands must also (pro rata) take into account the above mentioned deductible items for cases in which foreign taxpayers do not earn 90% or more of their income in the Netherlands. The conditions to be met are:
1) The foreign taxpayer is, as a resident of another Member State of the European Union, another State party to the Agreement on the European Economic Area, Switzerland or the BES islands (the circle of countries) involved in the taxation of that other Member State or State, or the BES islands;
2) The (world) income of the taxpayer determined by Dutch standards is fully or almost entirely (for 90% or more) subject to wage tax or income tax in two or more other states (including the Netherlands) than the state of residence.
3) The (world) income of a taxpayer determined by Dutch standards is not fully or almost entirely (for 90% or more) subject to a wage tax or income tax in a state other than the Netherlands.
A further condition is that the taxpayer must provide an income statement from the tax authority of the state of residence.
If the taxpayer meets the above conditions, then the right to deduct is according to the extent to which the income to be taxed in the Netherlands is part of the world income. We can assist with preparing the correct processing in the Dutch personal income tax return.
