Dutch Supreme Court clarifies the allocation of travel days

Half of a travel day must be allocated to the country of departure and half to the (final) country of arrival. That is what the Dutch Supreme Court ruled in a judgment rendered on the business trips made by a goalkeeper coach. At issue was whether a travel day had to be allocated as a working day to the country of departure, the country of arrival or to both.

This is an important judgment on the allocation of salary for tax purposes of an employee who makes business trips and is subject to tax in more than one country. 

Avoidance of double taxation

Employees who work in more than one country and are subject to tax in more than one country  should keep a record of how many days they work in the relevant countries. Based on that record, the salary can then be correctly allocated to the countries that are allowed to tax the salary. 

The case in question concerned a goalkeeper coach residing in the Netherlands who worked in Saudi Arabia and made business trips to other countries. The Dutch Supreme Court ruled that:

• the travel time of a business trip counts as time spent on the performance of the employment, regardless of which activities are performed during the travel time;
• this time must be ‘equally’ divided between the countries from which and to which is traveled; 
• no account has to be taken of where any activities − not including the travel time − are performed on that day.

This means that travel days on which the employee has only spent part of the day in the country of employment, cannot be fully allocated to that country. The Supreme Court thus rejected the earlier judgment rendered by the Court of Appeals Amsterdam, which had ruled that travel days could be fully allocated to the country of employment.

How this applies to other tax treaties

The Supreme Court recognized the importance of a straightforward and practical application of the tax treaty. Dividing travel days equally between the country of departure and the country of arrival provides a workable method that takes the actual circumstances into account without making this unnecessarily complex. 

Although the case specifically concerned the tax treaty between the Netherlands and Saudi Arabia, the Supreme Court’s reasoning can also be applied to tax treaties the Netherlands has concluded with other countries. The judgment can likewise be relevant in non-treaty situations. This means that taxpayers who work and travel in more than one country may be confronted with these same principles for the purposes of the allocation of their income. 

In rendering this judgment, the Supreme Court has provided clarity on the treatment of travel days. Although the judgment contributes to a straightforward allocation of (business) travel days, it also raises questions about the practical implementation of this. For example, what about the employee who makes a short one-hour trip early in the morning and spends the rest of the day in the other country? It is now up to taxpayers and the Dutch tax authorities to apply these rules in practice. We would like to emphasize once again how important it is to carefully document the time spent traveling and working.

If you would like to know more about the allocation of salary when working internationally, feel free to contact us or your usual Meijburg advisor.