Tax relief in avoidance of double taxation

When a Dutch resident works abroad, he or she may be entitled to tax relief in avoidance of double taxation where his or her income too is taxed abroad. Where the foreign country in question is one of the countries with which the Netherlands entertains double taxation conventions, the tax jurisdiction as regards the remuneration earned overseas will be dictated by the tax treaty in question. Where tax jurisdiction rests with the country of work, this will call for the country of residence – in avoidance of double taxation – to award tax relief in connection with the remuneration earned abroad. According to a Supreme Court ruling, the value of the overseas remuneration is to be proportionately derived from the annual wage where it cannot be determined using pay slips. This is done using the “day-based fraction”, the numerator of which is formed by the number of days spent working in the country of work whereas the denominator represents the number of calendar days exclusive of Saturdays and Sundays, days off, public holidays and other leisure days.

A District Court case revolved around the method used to calculate the tax relief in avoidance of double taxation. The case in question concerned a Dutch-resident employee who carried out part of his work in French Guiana. The question at the heart of the matter was whether the days spent travelling to and from French Guiana should (partially) be included in the calculation as days worked abroad. According to the employee, it followed from the double taxation convention between the Netherlands and France that his travel days should be allocated to the country of work in their entirety. The tax authorities’ take on the matter was rather different, in that they argued that only the days actually spent working on French Guianese soil (and not also the days spent to-ing and fro-ing) should be taken into consideration in calculating the tax relief.

The District Court came to the conclusion that the travel days – as the days on which the employee in question had arrived in or departed from French Guiana – should be taken into consideration in their entirety in determining the number of days worked. What clinched the matter was that the employee’s remuneration included his being paid for any days spent travelling and that these travel days invariably dovetailed with the days he spent working in situ.

Dutch version: Reisdagen naar werk in buitenland tellen mee voor aftrek elders belast