ECJ – Recent Developments in Direct Taxation 2014

I. S. 170Introduction

Traditionally, the Netherlands Personal Income Tax Act makes a distinction between resident and non-resident taxpayers. Whereas Dutch resident taxpayers are taxable for their income wherever incurred (unlimited tax liability), non-resident taxpayers are taxable only for their income derived from sources of income located in the Netherlands (limited tax liability). The Netherlands Personal Income Ttax 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.

In the context of cross-border employment, the ECJ has repeatedly ruled that the situations of resident and non-resident workers are, from the perspective of the state of employment, not generally comparable. There is, however, one exception to this rule. In so far as it concerns allowances relating to personal and family circumstances, it follows from the Schumacker case that comparabil...