Residence status

This test tends to be invasive because an individual is expected to provide a great deal of personal information. We feel it is important in this context to guard the thin line between privacy and the tax interest requirement.

Facts and circumstances test

It is not uncommon for the Dutch Tax and Customs Administration to argue that an individual has remained a Dutch tax resident for personal income tax purposes even after they have emigrated. This will prompt them to initiate a facts and circumstances test (link to page in Dutch). The facts and circumstances test allows the tax authorities to establish whether or not an individual is a resident of the Netherlands (Section 4, Dutch State Taxes Act). This concerns an open standard that has been fleshed out by the Supreme Court. The legal rule laid down by the Supreme Court is that an individual can be considered to reside in the Netherlands if they have permanent personal ties to the Netherlands.

Because of this test, highly private facts and circumstances may have to be shared. The fact that an individual works and stays abroad, for instance, may be relevant to the review of their permanent personal ties to the Netherlands.

Burden of proof on tax authorities

It is up to the tax authorities to prove where an individual resides. In practice, the tax authorities tend to set a low bar for tax residency in the Netherlands, meaning that they readily or all too easily assume that an individual resides in the Netherlands. However, to qualify as a Dutch tax resident, an individual actually has to have permanent personal ties to the Netherlands. An individual may be a Dutch citizen, which creates a certain bond, or have parents who live in the Netherlands, but that does not automatically mean that they are (or have remained) a Dutch resident. Those are circumstances that are due to having been born in the Netherlands and subsequently living in this country. If this were decisive criteria, it would be virtually impossible for individuals to emigrate.

The fact that an individual has a home in the Netherlands does not necessarily point to permanent personal ties either. By extension, it is argued that having a home in the Netherlands constitutes a minimum requirement for qualifying as a Dutch resident (link to page in Dutch).To sum up, the key criteria are where an individual works, where they spend most of their time on a day-to-day basis and where they have their private life. Allowance should also be made for circumstances outside the Netherlands (link to page in Dutch). If an individual has many ties to or in a foreign country, their ties to the Netherlands may be weaker.

No reversal of burden of proof

In our opinion, the tax authorities cannot reverse or strengthen the burden of proof (for instance by issuing a decision requiring information or by arguing that the required tax return has not been filed). As it happens, the question of where an individual has a home is a preliminary one, as is the review of whether the requirements for an additional tax assessment have been met, so that, having regard to the Supreme Court judgment of 16 March 2018 , the burden of proof cannot be reversed and strengthened.

Please do not hesitate to contact us if you are involved in or foresee a debate with the Dutch Tax and Customs Administration about your tax residency. We are here to help.

[1] Advocate-General Niessen recommended imposing having a home as a minimum condition (Opinion, Advocate-General Niessen, 17 December 2019, ECLI:NL:PHR:2019:1350).).
[2] Supreme Court, 16 March 2018, ECLI:NL:HR:2018:303, BNB 2018/87.