Dutch employee not required to pay Dutch tax for money earned in Germany

Posted on 9th January, 2014

Estimated reading time 3 minutes

Following a ruling by the Dutch Court in May 2014, a Dutch employee has been granted tax relief for income he earned in Germany.

Germany was the 'economic employer'

In 2011, an employee of a Dutch company was seconded to a German group company for a period of 55 days, due to a shortage of personnel within the German company.  The employee applied for tax relief in his Dutch income tax return against the income he earned in Germany to avoid paying double tax on the amount.

Although the employee did not satisfy the conditions of the German-Dutch tax treaty (that he was working in Germany for more than 183 days during the tax year, or was paid by an employer resident in Germany), he was entitled to relief for double taxation because the German company was deemed to be his ‘economic’ employer for the 55 day period.

Despite the Dutch company continuing to be the employee’s ‘formal’ employer and to pay his salary, the German company was seen to be the economic employer on a number of grounds: there was a relationship of authority with the German company, the work performed was part of the German company’s normal activities and the activities were performed for the risk and on account of the German company.  In addition, all the employee’s costs were recharged to the German company by the Dutch employer.


Whilst the application for tax relief remains the responsibility of the individual employee, HR departments should be made aware of this ruling, which could impact other Dutch employees who work in Germany.


Judgement of the Court of Zeeland West Brabant dated 21.05.2014 (in Dutch language)

For further information or to discuss the consequences of the above, please contact Rina Driece, on +31 10 224 6 424 at Loyens & Loeff Rotterdam – www.loyensloeff.com


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