The tax treaty with Germany

Do you live in the Netherlands and derive income from Germany? Or do you live in Germany and derive income from the Netherlands? The tax treaty concluded between the Netherlands and Germany provides the rules and agreements on the taxes you will have to pay in your situation. The agreements made in the tax treaty have binding force and always prevail over Dutch or German national legislation.

Not only does the treaty ensure that you do not have to pay taxes twice, it also prevents a situation where you pay taxes in neither country. So your income is taxed in either Germany or the Netherlands. The core rule is that you pay tax on your wages in the country where you work (your country of employment). The exceptions to this rule are presented in the below.

On this page:

You temporarily work in salaried employment in the Netherlands or Germany

If you reside in the Netherlands, pay taxes on your wages in the Netherlands, and will temporarily work in Germany for your Dutch employer, you will continue paying taxes in the Netherlands.

You do have to meet the following conditions:

  • You will stay in the country of employment for work purposes for no more than 183 days in the span of 12 months.
    This period of 12 months does not have to coincide with 1 calendar year. Nor does the maximum number of days of stay have to be consecutive. Your stay in the country of employment during normal interruptions of work, such as days absent sick, weekends, and national holidays, also count towards the maximum of 183 days.
  • You do not work for the account of a permanent facility of your employer in the country of employment.
    Your employer has a permanent facility if he has the long-term use of commercial premises, such as a factory, workshop, warehouse, or sales room, in the country where you temporarily work.

Should you stay in Germany for more than 183 days, or should the German permanent facility pay your wage costs, you must pay taxes on your wages in Germany. If you pay taxes on your wages in Germany, you may be entitled to financial compensation. More information is available under Compensation scheme when you pay taxes in Germany.

This scheme also applies the other way round, if you reside in Germany, pay taxes on your wages in Germany, and come to temporarily work in the Netherlands for your German employer. In that case, you will continue to pay taxes in Germany.

You work for the government

If you work for the government, you pay tax on the income you earn from that work in the country where the government is based. It doesn't matter which country you live in.

You work in education

Do you reside in the Netherlands and start teaching or conducting academic research in Germany while being paid from the Netherlands (for example, by a Dutch educational institution)? Or do you reside in Germany and start teaching or conducting academic research in the Netherlands while being paid from Germany (for example, by a German educational institution)? In this case, you pay taxes in your country of residence for a period not exceeding 2 years from the day you start work.

You do have to meet all the following conditions:

  • You stay in the country of employment in connection with your work as professor, teacher, or lecturer.
  • You have a teaching position in the country of employment or conduct academic research at a university or another officially recognised educational institution.
  • The academic research must be conducted for the public interest and not primarily for the personal benefit of a specific person.
  • You do not reside in the country of employment during the period you work there.

This scheme applies to educational institutions of the government and to all private educational institutions officially recognised by the Netherlands, at any level (primary schools, secondary schools, and tertiary education). Ask your educational institution whether it is officially recognised by the Netherlands.

Should you be paid in the country of employment, the rules listed under 'You temporarily work in salaried employment' or, should you work for a government institution, under 'You work for the government', apply.

You work on an international business park

If you work in salaried employment for a company established on a business park located on the Dutch-German border, you pay taxes on your wages in the country of your mandatory social insurance scheme. If you are covered by the Dutch social insurance scheme, you pay taxes in the Netherlands. If you are covered by the German social insurance scheme, you pay taxes in Germany.

Verify your country of social insurance on grensinfopunt.nl.

You work for a foreign employer

If you reside in the Netherlands and work in Germany for an employer established outside of Germany, or if you reside in Germany and work in the Netherlands for an employer established outside of the Netherlands, you pay taxes on your wages in your country of employment. However, should you, in a period of 12 months, stay in the country of employment for no more than 183 days, you pay taxes in your country of residence, unless you have been placed in, or assigned or seconded to, your country of employment or unless you work for a permanent facility in your country of employment.

Pensions, annuities, or benefits

If you reside in Germany and receive a pension, annuity, or social security benefits from the Netherlands due to having worked there or vice versa, you will generally pay taxes in your country of residence.

Pensions or annuities are also deemed to originate from the country of employment if you accrued rights to them in your country of employment and then transferred them to an insurer in your country of residence.

You receive more than € 15,000 per year

If the total amount of pension, annuities, or benefits you annually receive exceeds € 15,000, you pay taxes in your country of employment. If you receive a state pension, this pension is not considered when calculating whether you exceed this € 15,000 limit.

You receive a state pension

Your nationality determines the country where you pay taxes on your state pension. Should you hold the nationality of your country of residence, you pay taxes on the state pension from your previous country of employment in your country of residence. Should you hold the nationality of another country, you pay taxes on the state pension in your previous country of employment.

You receive a lump-sum pension or annuity payment

You pay taxes on the lump-sum pension, annuity, or social insurance scheme payment from the Netherlands in your country of employment.

You will pay reduced taxes if certain conditions apply

If you reside in Germany and receive a pension or annuity from the Netherlands, you will temporarily pay reduced taxes should you meet these conditions. This scheme applies for a period of 6 years. Your benefits agency does not take account of this scheme. The excess amount in taxes withheld by it will therefore be returned to you after you file your tax return.

You do have to meet all the following conditions:

  • You have resided in Germany without interruptions since 12 April 2012.
    The lower tax rate no longer applies the moment you no longer reside in Germany.
  • You receive a pension or annuity from the Netherlands.
    The lower tax rate does not apply to social security benefits, state pensions, lump-sum pension or annuity payments, or other income derived from the Netherlands.
  • You paid taxes on this income in Germany in 2015 and prior years.
    The lower tax rate does not apply to benefits under the Dutch General Old Age Pensions Act, Work and Income (Capacity for Work) Act, Invalidity Insurance Act, or Disablement Assistance Act for Handicapped Young Persons.
  • You receive more than € 15,000 per year in pensions, annuities, or social security benefits from the Netherlands.
    Your benefits under the Dutch General Old Age Pensions Act, Work and Income (Capacity for Work) Act, Invalidity Insurance Act, or Disablement Assistance Act for Handicapped Young Persons are considered when calculating whether you exceed the € 15,000 limit.
  • You started receiving a pension or annuity before 1 January 2016.
    You must have received at least 1 pension or annuity payment before 1 January 2016.

The following table provide the maximum tax rate payable by you.

Maximum tax rate
Year
Your maximum payment
2016 10%
2017 10%
2018 15%
2019 20%
2020 25%
2021 30%

Transitional law

The current treaty between the Netherlands and Germany has been in force since 2016. The agreements laid down in this treaty can in your case be financially disadvantageous, compared to the agreements applicable under the old agreement that was in force through 2015. If such is the case, you can have the agreements under the old treaty apply for your 2016 tax return. This is called transitional law. Starting in 2017, the agreements under the new treaty will always apply. Should you decide to apply the transitional law, you will only start paying taxes on your pension or annuity payments in the Netherlands from 2017 onwards. Your taxes in 2017 are maximised at 10%.

Compensation scheme when you pay taxes in Germany

The amount of taxes you pay differs per country. Because you can deduct certain items (mortgage loan interest for your own house, personal allowance) from your taxes in the Netherlands, the amount of income tax and national insurance contributions payable in the Netherlands may be lower than that payable in Germany.

A compensation scheme was therefore agreed upon between the Netherlands and Germany. Should you work in salaried employment, you can compensate for this difference by applying for the compensation scheme in your tax return. The amount of compensation paid is shown on your final tax assessment. If you are an entrepreneur or pensioner, you can apply for the transfer facility in your tax return.

The amount of compensation awarded is equal to the difference between:

  • the German taxes (including 'Solidaritätszuschlag') on your income from employment, plus any taxes and social insurance contributions payable in the Netherlands, if any.
  • the taxes and social insurance contributions you would have to pay on your income from employment in the Netherlands

Transfer facility

You may also choose to have the transfer facility apply. In this case, the items you cannot, at this time, deduct from your Dutch tax return will be saved for a later time.

Converting German wages to Dutch wages

Should you receive German wages, you must first convert them to Dutch wages before filing your return. Use the Tool for converting Belgian or German wages to Dutch wages (Dutch) to do so. You must enter the Dutch wages calculated using this tool in your tax return.

The text of the tax treaty between Germany and the Netherlands

The full text of the tax treaty between Germany and the Netherlands is available here (Dutch).

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