Residence
is determined in accordance with an individual's principal
place of residence and what the tax courts call "durable
ties of a personal nature". Durable in this case
means the closeness of the tie rather than the length
of the stay.
Whilst
Dutch personal tax rates are high non-residents receive
more favorable tax treatment.
Non-residents
are only taxed on certain sources of Netherlands income.
It should be noted that the following sources of Dutch
income are not taxed in the hands of the non-resident
individual :
Real
Estate: No
capital gains tax is levied on the profits realized
on the sale of Dutch real estate owned by a non-resident
individual unless the non-resident is engaged in a
trade or business in Holland and the real estate is
one of the capital assets of the business. (N.B. Rental
income is however taxable in the hands of the non-resident
individual).
Interest
on a Loan Secured on Dutch Real Estate: Interest
repayments on a loan provided by a non-resident individual
which is secured on Dutch real estate are tax free
in the hands of the recipient. Furthermore in Holland
there are no withholding taxes on interest payments.
Sale
of Shares: any capital gains realized by a non-resident
individual on the sale of shares in a Dutch registered
company are tax-free unless the non-resident individual
has a "substantial interest" in the company.
At the time of writing, to have a "substantial
interest" in a Dutch company an individual must
alone or together with his wife have held 7% of the
issued nominal share capital of the company for a
period of at least 5 years prior to sale, or together
with his close family members have held at least 33%
of the issued nominal share capital of the company
for a period of at least 5 years prior to sale. (N.B.
Furthermore under the provisions of some tax treaties
a non resident individual who has a "substantial
interest" in the shares of a Dutch registered
company will only be assessed on profits from capital
gains arising on the sale of his shares if at some
stage in the last 5 years he was resident in the Netherlands).
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