The Netherlands must apply proportionate allocation of personal deductible items | Deloitte


The Netherlands must apply proportionate allocation of personal deductible items

In view of their personal and family situation taxpayers who earn income in several countries except in their country of residence must also be proportionally eligible for deductible items in several countries.

16 May 2017

Dutch version

On February 9, 2017 the Court of Justice of the European Union (CJEU) ruled that the Netherlands must apply a proportional allocation of the mortgage interest relief for non-resident taxpayers who earn part of their family income in the Netherlands. The Supreme Court has adopted this judgment in its ruling of May 12, 2017 and referred the case to the The Hague Court of Appeal for a more detailed calculation of the income tax due.

Facts and circumstances

A taxpayer with Dutch nationality lived in Spain in 2007. He had an owner-occupied property there. The taxpayer earned 60% of his worldwide income in the Netherlands and 40% in Switzerland. He did not earn any taxable income in Spain.


A taxpayer’s country of residence is basically the one best capable of taking account of the taxpayer’s personal circumstances. Hence, Spain should actually have taken into account the mortgage interest relief. When, though, a taxpayer earns most of his worldwide income (for the Netherlands: at least 90%) in the country of employment and fails to earn sufficient income in his country of residence, the country of employment needs to take account of the taxpayer’s personal situation. The CJEU had already ruled on this in the Schumacker judgment, which case regarded the clear situation of a single country of residence and a single country of employment.

Schumacker and two employment relationships abroad

The question to be answered in these proceedings was how the Schumacker judgment should be interpreted if two or more countries of employment are involved. The CJEU considers it particularly relevant that the country of residence, if no income is earned there, is not in a position to take account of the taxpayer’s personal circumstances and family situation. This influences the taxpayer’s ability to pay tax. This reason alone would justify the country of employment, or countries of employment, proportionally taking account of the personal deductible items. In the present case it means the Netherlands should allow 60% of the mortgage interest relief to be deducted. Because Switzerland is not an EU Member State, this country need not proportionally take account of personal deductible items under EU law. Hence, the outcome would most likely have been different had the remaining 40% of the income been earned in another EU Member State.

Consequences of the judgment

So, if non-resident taxpayers have no significant income in the EU Member State where they reside, the Netherlands must at least proportionally take account of the personal deductible items of those taxpayers. The Supreme Court has now confirmed this formally, too. The Supreme Court has referred the issue back to the The Hague Court of Appeal for effective settlement. This Court of Appeal is now tasked with recalculating the taxpayer’s income tax due over 2007, in line with the judgment and based on the principle of proportionality.

On a more general note, Dutch legislation is not yet equipped to apply the principle of proportionality right now. This may cause practical problems when being implemented. Taxpayers who are currently eligible for a partial deduction will need to act as fast as they can. Because under the judgment by the CJEU (and the Supreme Court ruling) as referred to above, they are already proportionally eligible for personal deductions prior to the expected amendment of the law coming into force.


  • CJEU February 9, 2017 C-283/15 (X)
  • HR May 12, 2017, 13/03468, ECLI:NL:HR:2017:848
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