All the days of a stay in the Netherlands count for the purposes of applying the 183-day rule

The Supreme Court adheres to the ‘days of physical presence’ method in the OECD Model Convention.

For the purposes of allocating the right to tax salary from employment, a 183-day rule has been included in tax treaties. If a resident of another State is employed by a foreign employer to work in the Netherlands and there is no economic employer or permanent establishment of the foreign employer in the Netherlands, then the Netherlands only has the power to tax if the employee spends at least 183 days in the Netherlands during a 12-month period (or calendar year, depending on the text of the treaty).

Proceedings before the Supreme Court

A resident of Belgium worked less than 183 days in the Netherlands. However, he also stayed in the Netherlands for personal reasons. In total, he stayed more than 183 days in the Netherlands. The question on which the Supreme Court had to rule, was how ‘stay’ as it appears in the 183-day rule should be interpreted. Is this limited to working days or do all the days of the stay have to be taken into account?

Easy-to-apply benchmark

The Commentary to the OECD Model Convention is important for the interpretation of tax treaties. It contains guidelines for the interpretation of tax treaties. With regard to the interpretation of ‘stay’ for the purposes of the 183-day rule, the Supreme Court refers to the ‘days of physical presence’ method. This means that each day (or part thereof) that an employee stays in the State of employment must be taken into account. It is irrelevant whether the employee’s stay is for business or personal reasons. For this reason the salary of the Belgian employee who worked less than 183 days in the Netherlands, but whose stay in the Netherlands amounted to more than 183 days, was subject to Dutch personal income tax (if and to the extent that the activities were performed in the Netherlands). This benchmark is easy to apply in practice.