Rules on mortgage interest tightened for Dutch expatriates
The Dutch Supreme Court has tightened the rules for tax deduction on mortgage interest payments for Dutch tax residents who are temporarily working abroad.
In the Netherlands interest paid on a mortgage for property that is used as principal place of residence is tax deductible. When a person is temporarily assigned abroad, the interest payments can, under certain conditions, continue to be tax deductible during the non-resident period. However, should the property be rented out, the interest payments will no longer be tax deductible.
Previously, if a house were to become empty after a period of renting out, it was not clear whether the owner could once again claim the tax back on his mortgage interest payments. However, following a ruling by the Dutch Supreme Court on 20 February 2015, only the interest paid prior to the period of renting out is tax deductible.
This ruling could have a significant financial impact on Dutch tax residents who are assigned abroad, and will also affect expatriate employees who buy a house in the Netherlands and are temporarily assigned to another country (provided their Dutch house has been their principal place of residence for at least 12 months and all further conditions are met). Whilst renting out their property may appear to be financially attractive, the benefits will need to be weighed against the possible subsequent loss of tax deductibility on their mortgage interest payments during the assignment period. ‘Temporary’ is not defined under Dutch law.
For further information or to discuss any of the issues raised, please contact Rina Driece on +31 10 224 6 424.
Content is for general information purposes only. The information provided is not intended to be comprehensive and it does not constitute or contain legal or other advice. If you require assistance in relation to any issue please seek specific advice relevant to your particular circumstances. In particular, no responsibility shall be accepted by the authors or by Abbiss Cadres LLP for any losses occasioned by reliance on any content appearing on or accessible from this article. For further legal information see our legal page.
Circular 230 disclosure
To ensure compliance with requirements imposed by the IRS and other taxing authorities, we inform you that any tax advice contained in this article (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties that may be imposed on any taxpayer or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein.
If you would like to copy or otherwise reproduce this article then you may do so provided that: (1) any such copy or reproduction is for your own personal use or if it is made available to any third party it is done so on a free of charge basis; and (2) the article is reproduced in full together with the contact details, disclaimer and any logos as they appear on each article.