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The Netherlands and Germany amend their tax treaty

The Netherlands and Germany have signed a protocol amending the tax treaty. Agreements have been made about the right to levy taxes on (short-term) social security benefits and about combating tax avoidance.

German desk

The amendment protocol

The amendment protocol was signed on Wednesday 24 March 2021 in The Hague. A tax treaty contains agreements that must prevent double taxation or non-taxation on the one hand for companies or citizens. With this protocol, the distribution of taxing rights on certain social security benefits is adjusted. This concerns, among others, the so-called Krankengeld (sickness benefit) and Elterngeld (benefit for parents with young children). This ensures that in all cases the country granting the social security benefit may also tax it. This rule ensures among others that German net social security benefits are not taxed in the Netherlands while they would be exempt in Germany.

In addition, Germany and the Netherlands have made arrangements to prevent the benefits of the treaty from being used solely to avoid taxation. This has been done by including anti-abuse provisions of the so-called BEPS project against tax avoidance, through which the tax treaty between the Netherlands and Germany also meets the minimum standard of this project.

Independently of this amendment protocol, the Netherlands and Germany are still exploring the possibility of agreeing on a specific arrangement in the tax treaty for frontier workers’ homeworking days. The Netherlands has already made temporary agreements with Germany on the tax treatment of homeworking days in coronary time.

In the Netherlands and Germany, the amendment protocol is now being submitted to both parliaments for approval. After approval in both countries, the treaty will apply.

Source: https://www.rijksoverheid.nl/actueel/nieuws/2021/03/24/nederland-en-duitsland-wijzigingen-het-belastingverdrag