Tax Treaty Case Law around the Globe 2015

S. 301Netherlands: Dutch Supreme Court 31 January 2014, BNB 2014/77: Worldwide Taxation of Non-Resident Taxpayers for Purposes of Calculating the Average Tax Rate: Tax Treaty Override?

Daniël Smit

I. S. 302Introduction

Traditionally, the Netherlands Personal Income Tax Act makes a distinction between resident and non-resident taxpayers. Whereas the income of Dutch resident taxpayers is taxable wherever incurred (unlimited tax liability), non-resident taxpayers are taxed only on their income derived from sources located in the Netherlands (limited tax liability). The Netherlands Personal Income Tax Act also makes a distinction between resident and non-resident taxpayers in so far as it concerns allowances for personal circumstances that seek to take the taxpayer’s ability to pay tax into account. As a main rule, these allowances are automatically granted to Dutch resident taxpayers whereas non-resident taxpayers are only entitled to such allowances if they meet certain requirements. More specifically, based on the so-called “optional regime” as laid down in Article 2.5 of the Dutch Personal Income Tax Act 2001 (PITA) as it was in force between 2001 and 2015, a non-resident taxpayer could opt to be...