Changes cross-border workers tax treaty Germany–Netherlands

Cross-border workers

Under the current tax treaty between Germany and the Netherlands, cross-border workers are generally taxed in the country where they physically work. This means that if Dutch residents work in Germany for a German employer, their employment income for those workdays is taxed in Germany. However, if they work from home in the Netherlands (which is different from the employer’s country and their usual work country), the income for those home working days is taxed in the Netherlands. 

An important change in the treaty concerns cross-border workers. According to the new treaty text, home working days of cross-border workers between the Netherlands and Germany will only be taxed in the usual country of work (and not allocated to the country of residence) if the cross-border worker works not more than 34 days in the country of residence. 

This also applies to workdays in another third country. The third country workdays will be taxed in the usual country of work and not in the residence country. For a third country, this only does not apply if, based on a treaty to prevent double taxation between the country of residence and the third country, the remuneration for workdays in the third country may be taxed in that third country.

How to count working days

To calculate the 34-day threshold, a day only counts if the employee works for at least 30 minutes in their country of residence or in a third country and receives remuneration for that day. Both the Netherlands and Germany define “working days” as days on which the employee performs work and is paid for it. Standby or on-call services, even if the employee is called in to perform work, are not included when determining a working day. If an employee receives remuneration for days on which no actual work is performed, such as during notice leave after termination of employment, or when required to stay at home by order of the employer or government, those days are considered as worked in the country where the work would normally have been performed. 

Government employees

A comparable approach, as for cross-border workers, has been taken for government employees. Salaries and similar payments by a state are in general only taxable in the paying state. The protocol introduces a 34-day limit to prevent "split taxation" when less than 34 days are worked outside the usual location, and it clarifies how taxing rights may be divided between states based on where services are performed when work spans multiple countries. The counting method for working days aligns with the cross-border workers. This resolves practical double-tax issues that previously arose from differing interpretations.