Earlier this year a new tax treaty was signed between the Netherlands and Germany. The envisaged effective starting date is January 1, 2014.
One of the most significant changes compared to the old tax treaty, is the introduction of a compensation for Dutch residents who perform activities in Germany. Currently working in Germany is often not advantageous, because Dutch tax deductions, like mortgage interest deduction, cannot or not in full be effected immidiately. Moreover, the employer’s contribution in a Dutch pensionplan may be taxable for German tax purposes.
The compensation is available for natural persons who reside in the Netherlands and who derive labour income from Germany, whereas Germany is allowed to tax this income under the provisions of the tax treaty. If the activities in Germany result in higher taxation compared to working in the Netherlands only, the Netherlands will compensate for the balance. Practically this means that Dutch tax deductions can still be taken into account and that the employer’s contribution in a Dutch pensionplan remains tax exempt. Please note that for this compensation, German social security premiums will only be taken into account as far as they are comparable to Dutch general social security premiums.
For further information, do not hesitate to contact LIMES international.
