Taxation of US nationals in the Netherlands

As a US national you are always considered a US resident taxpayer and as such you are taxable on your worldwide income, even if you live abroad. This may cause double taxation, as the country where you reside, in this situation the Netherlands, will also consider you as a resident taxpayer. As a resident taxpayer you are taxable on your worldwide income. To avoid double taxation, the US and the Netherlands have concluded a tax treaty. The tax treaty first clarifies the residency status. The first test to establish residency is to determine the permanent home. If you have a permanent home in two states, the second test needs to be analyzed; where is the center of vital interest. If this is undeterminable or if it is split between both states, the habitual abode has to be determined, e.g. the place where you intend to stay for a longer period. It this cannot be determined, you are a resident of the country of your nationality if this is one of the two states.

Assume you will be regarded as a resident for Dutch tax purposes. You are then taxable in the Netherlands on your worldwide income.

US national who benefits from the 30%-ruling

As a US national who benefits from the 30%-ruling you can opt to be treated as a partial non-resident taxpayer. As a partial non-resident taxpayer you are taxable in the Netherlands as a non-resident taxpayer. As such you are only taxable on your employment income as far as the employment is performed inside the Netherlands. Income relating to foreign working days can be excluded from taxation. These days will however, have to be declared in the US tax return.

Furthermore, you are regarded as a non-resident taxpayer for income from substantial interest (box 2 income) and for income from savings and investments (box 3 income). As such, you are only taxable on substantial interest from a Dutch company and on real estate located in the Netherlands (not being the principal residence).

US national without 30%-ruling

As a US national who does not benefit from the 30%-ruling you cannot opt to be treated as a partial non-resident taxpayer. You are therefore taxable on your worldwide income. In the tax treaty is determined who has the right to levy tax on certain items of income. If you for example receive a US state pension, the income needs to be declared in box 1 in your Dutch income tax return. The right to levy tax on the state pension is, based on the tax treaty, allocated to the US. The Netherlands will give a relief for double taxation for the US pension income.

A 401K benefit is also taxable in the Netherlands in box 1. The right to levy tax on the 401K income is, however, allocated to the Netherlands.

The tax position of US nationals is complicated and needs to be determined carefully.

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