Dutch tax relief on mortgage interest payments for non-Dutch resident?
The Supreme Court of the Netherlands has recently applied for a ruling by the European Court of Justice in connection with proceedings brought by a Dutch national who has his regular abode in Spain and who has been claiming tax relief in the Netherlands on his Spanish mortgage interest payments. Rather than having an income in Spain, the individual in question has a controlling interest each in, and is on the payroll of, a Dutch-based and a Swiss-based private limited-liability company.
The questions the Supreme Court has submitted for the scrutiny of the European Court of Justice are as follows:
1. Is the Treaty on the Functioning of the European Union inconsistent with a national regime that prevents a Spanish-based resident whose income from work is liable for tax in the Netherlands for 60% and in Switzerland for the residual 40% deducting the negative income he derives from his Spanish-based property from the portion of his income for which he has tax liability in the Netherlands where his Spanish-earned income is sufficiently low as to preclude tax relief coming about in the country of residence during the relevant fiscal year?
2. In so far as the above question is to be answered in the affirmative, would it then have to be the aggregate negative income of a particular EU citizen deriving part of his or her income from a particular Member State which the Member State in question ought to take into consideration or, rather, should the obligation in question be confined to just one of the Member States of employment and if so, to which Member State, or should each of the Member States of employment allow partial tax relief for the negative income and if so, what would be the proper way of calculating what portion of the negative income should be deemed to qualify for tax relief? Would the Member State where the work was effectively being performed count as the overriding criterion or would it depend on which of the Member States was in a position to levy taxes on the earned income?
3. Would the answer to the second question turn out any different if the scenario involved a country that former part neither of the European Union nor of the European Economic Area?
4. To what extent would it matter whether the (national) legislation of the tax payer’s Member State of residence offered a tax relief option for owner-occupied mortgage interest payments and an option to set off tax losses incurred during a particular year against income derived from the Member State in question in subsequent years?
The Supreme Court will stay its further decisions until such time as it has been presented with the European Court of Justice’s ruling.