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An analysis by Flick Gocke Schaumburg, Taxand Germany
Germany’s Federal Tax Court has recently ruled that the Dutch 30% rule – which allows a flat-rate deduction of 30% from taxable salary for qualifying foreign employees – does not lead to actual non-taxation under the Germany-Netherlands double taxation treaty.
The court confirmed that this rule is a flat-rate reimbursement of work-related expenses rather than a tax exemption. Therefore, salary payments remain treated as actually taxed in the Netherlands and are exempt from German taxation under the treaty’s subject-to-tax clause. This decision clarifies the treatment of the 30% rule for cross-border employees and limits Germany’s ability to tax such income under domestic switch-over provisions.
Dr. Christian Hick from our German firm Flick Gocke Schaumburg has published a more detailed examination of this ruling, which can be read here.
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Case Law | Cross border | Employee | Germany | Income Tax | International Tax | Netherlands | Tax | Tax Law | Tax Treaty