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Written by:
Herman Ruijter


Owner-occupied home abroad

The option used to be available until year-end 2014 for foreign tax payers to adopt domestic tax liability in the Netherlands, as an optional scheme which in 2015 came to be replaced by a measure involving a distinction being made between qualifying and non-qualifying foreign tax payers.

Only qualifying foreign tax payers have been allowed since 2015 to reduce their work cum own home generated income by the negative income from the home they own outside the Netherlands. The upshot of this has been that any non-Dutch resident couple one of whom has qualifying foreign tax payer status while the other is defined as a non-qualifying foreign tax payer will only be able to dock the qualifying spouse’s share of the negative income from the home the couple own outside the Netherlands for income tax purposes in the Netherlands, with the non-qualifying spouse being dismissed as a fiscal partner in a Netherlands Income Tax Act 2001 context so that his or her negative income from the couple’s foreign-based own home is not taken into account as a shared income component.

Case in point

The Supreme Court of the Netherlands was presented with a case involving a Belgian-based Dutch couple. As an employee of a Dutch-based business, the wife had held qualifying foreign tax payer status since 2015. Her husband by contrast had been a non-qualifying foreign tax payer since his retirement. The wife had been able until 2015 to dock the full amount in interest on the couple’s mortgage loan from her taxable work and home generated income. A tax relief cap of 50 percent (the husband and wife being equal owners of the property) was imposed in 2015, in a move which according to the Bois-le-Duc Court of Appeal was not at odds with EU regulations given that the husband’s taxable income in Belgium accounted for more than ten percent of the family income. According to the Court of Appeal, the mere fact that the Belgian system did not provide for tax relief for the husband’s share of interest payments in connection with the couple’s mortgage loan did not warrant the Netherlands having to allow the relevant tax relief instead.

The Supreme Court’s Advocate General concluded that a preliminary ruling by the European Court of Justice was called for as to whether the dismissal of the husband as his wife’s fiscal partner was inconsistent with EU law, given that the upshot of the decision in question has been that unlike other tax-payer couples, the wife as a foreign tax payer having qualifying status had been denied the option together with her husband as a foreign tax payer not having qualifying status to account for the negative income from their co-owned home as part of her income for tax purposes.

Dutch version: Eigen woning in het buitenland

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