Mortgage interest deduction limited to share in debt of qualifying non-resident taxpayer | Deloitte Nederland

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Mortgage interest deduction limited to share in debt of qualifying non-resident taxpayer

A spouse's share in the home acquisition debt relating to a foreign owner-occupied home does not lead to deduction of interest. The Supreme Court argues that this non-deductibility is not contrary to EU law.

14 October 2021

Facts and circumstances

The interested party lives in Belgium with her husband. According to Dutch standards the house qualifies as an owner-occupied home and is financed with a mortgage loan. Both spouses have an equal share in the home ownership.

The interested party earned EUR 71,605 in wages from Dutch employment in 2015. Her husband was paid a total of EUR 21,601 in wages from previous employment and a state pension benefit (‘AOW’) in that year. As the interested party is a qualifying non-resident taxpayer, she wished to deduct the entire mortgage interest from her Dutch income. The inspector refused to do so for half the amount, because this part of the interest was attributable to her husband. The taxpayer considered this to be an infringement of the free movement of workers.

Supreme Court

The Supreme Court disagreed though, because according to the Schumacker judgment it is the state of residence that must initially take account of the taxpayer’s personal circumstances. Only if the taxpayer earns almost all of her income in the state of employment and the income in the state of residence is insufficient, the obligation to take account of the personal circumstances shifts to the state of employment (or states of employment).

Since the taxpayer and her partner also had taxable income in Belgium, they failed to jointly meet the Schumacker conditions. So technically, the partner's mortgage interest could be taken into account in Belgium. The fact that Belgium does not grant mortgage interest relief does not change this, because that is due to a difference between the Dutch and Belgian tax systems. Because the interested party was independently considered to be a qualified non-resident taxpayer in the Netherlands, her share of the mortgage interest could be deducted from the Dutch tax base.

No requests for a preliminary ruling

A-G Niessen had advised earlier on to submit a preliminary ruling to the Court of Justice of the European Union in this matter. However, instead of the Supreme Court following this suggestion, it decided to settle the case itself.


Source: Supreme Court, 8 October 2021, no. 20/02890, ECLI:NL:HR:2021:1472

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