United Tax Network – The smarter choice

United Tax Network – The Smarter Choice

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183 days rule & the economic employer principle

Based on article 15 of the OECD Model Convention, the remuneration of a seconded employee is in principle taxed in the country where the work is actually exercised. However, the right of taxation remains with the country of residence if the employee:


  • is not present in the working state more than 183 days; and
  • the salary is not borne by a PE of the employer in the working country; and
  • the salary is paid by an employer, or on behalf of an employer, who is not resident in the working country.


Even if the above conditions are met, the employee’s remuneration may still be taxed in the working country if the company in the working country qualifies as the “economic employer”. Under the economic approach, important criteria for assuming an economic employment are:


  • the employee is integrated into the business of the host entity;
  • the employee is under the control of that entity;
  • the activities of the employee form part of the business of the host entity;
  • the risks of the activities are borne by this employer.


With regard to the economic employer principle, the Netherlands particular focus on the authority to instruct the employee and the company that is bearing the risks for the result and the costs of the employment activities. From a practical point of view, no economic employer is assumed in the Netherlands if an employee is seconded for less than 60 days in a 12-months-period.


It should be noted, however, that an employee seconded to the Netherlands for less than 60 days may still be subject to Dutch taxation based on the so-called 183 days rule of article 15 of the applicable tax treaty.