Supreme Court clarifies application of 183-day period
As regards application of the 183-day period in the tax treaty between Belgium and the Netherlands physical presence, too, should be taken into account, in addition to working days.
26 july 2017
As regards the 183-day period physical presence, too, is relevant
A Belgian resident is the director and sole shareholder of her own company (“BVBA”). The company is also registered in Belgium. She worked in the Netherlands for this company for 181 days in 2009. According to the Court of Appeal the Netherlands was not entitled to levy income tax on her remuneration since she had worked in the Netherlands for less than 183 days. According to the Court of Appeal, days of stay solely for private purposes should not be taken into account.
The Supreme Court disagrees, since the article on income from employment in the tax treaty between Belgium and the Netherlands refers to “the recipient is present in the other State”. This article is similar to the article in the OECD model treaty. Hence, the OECD Comment on the OECD model treaty must be interpreted. The comment clearly stipulates that the 183 day period must be calculated using the ‘days of physical presence’ method. The Supreme Court refers this case to the Court of Appeal again, to determine whether or not this director was physically present in the Netherlands for more than 183 days.
If the director was indeed physically present in the Netherlands for more than 183 days – which has to be ascertained by the Court of Appeal -, then the question is whether the so-called fictitious wage rule also applies. Anticipating the Court of Appeal’s decision, the Supreme Court already answers this question. As the director is the sole shareholder, she holds a substantial interest in her own company. In determining whether or not there is a substantial interest, it is irrelevant that her company is registered in Belgium. Thus, the fictitious wage rule applies.
Source: Supreme Court 14 July 2017, no. 16/03578, ECLI:NL:HR:2017:1326