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The 183 days rule

What exactly is the 183 days rule?

Almost everyone who has temporarily worked abroad or sometimes posts employees abroad has heard of the 183 days rule. This name “arose” in the course of time, but does in fact not fully reflect the purport of the rule, and therefore often leads to misunderstandings.

The 183 days rule is a fixed part of the tax treaties that were mutually concluded by countries to prevent double taxation of income. In Europe, the tax treaties are based on the OESO model treaty (the framework of which is identical), but countries can make specific mutual arrangements. For example, there is a compensation scheme between the Netherlands and Belgium as well as between the Netherlands and Germany.

This scheme can be found in the article on “income from employed labour”.

Main rule = taxes are paid in the country of employment (country of employment principle)

This means that income from employed labour is taxed in the country in which the work is carried out (country of employment).

Exception = taxes are paid in the country of residence (3 conditions!)

This income is taxed in the employee’s country of residence, if three cumulative conditions are met:
  • the employee stays in the country of employment for less than 183 days; and
  • the remuneration is not paid by or on behalf of a resident (read: employer) of the country of employment; and
  • the remuneration is not charged to a fixed establishment in the country of employment.

How do I calculate those 183 days?

The period within which the 183 days should be calculated varies per treaty: sometimes the calculation must be made per calendar year, per tax year, or per period of 12 months.

Please note that this always concerns days of stay!

What can go wrong?

If not all three conditions are met, taxes will have to be paid in the country of employment. Sometimes even from the first working day! Failure to do so may result in additional tax assessments and penalties, and of course the necessary corrections in the payroll administration and tax assessments in the countries involved.

For the sake of convenience, many businesses assume that, when their employees work abroad for less than 183 days, they do not have to pay any taxes in that country. Below you can see two examples of situations in which not all 3 conditions were met, resulting in payment of taxes abroad:

  • A German company says that its employees work in the Netherlands for four months at most, and therefore are not taxed in that country (as they work there for less than 183 days). However, in the case of hiring or supplying staff, the Dutch hirer often receives an invoice for the hours worked for each foreign employee who is mentioned by name. Therefore it can be said that the remuneration is paid on behalf of a resident of the country of employment. As a result, the second condition is not met and the main rule applies: the work is taxed in the country of employment.
  • A Belgian construction company expects to be working on a project in the Netherlands for two years. The Belgian-Dutch tax treaty stipulates that if the duration of the building of a structure exceeds a period of 12 months, this constitutes a fixed establishment. The remuneration will therefore be chargeable to a fixed establishment in the Netherlands, with payment of taxes in the Netherlands as a result. It should be noted that the aforementioned period of 12 months may be longer or shorter in certain cases.

What do you have to remember? That it is by no means always the case that you will only have to pay taxes abroad after 183 days of working abroad! Check in advance whether an exception applies.

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Since 1972, Interfisc has offered international HR & Payroll solutions in the Netherlands, Belgium, Germany, France, the United Kingdom, and Italy. We do this from our offices in the Netherlands and Belgium, and with an international team of around 45 committed and caring employees. 

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