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Robin D.
Robin D., Senior Tax Advisor 4
Category: Tax
Satisfied Customers: 7426
Experience:  15years with H & R Block. Divisional leader, Instructor
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I have US and dutch passports, I am retired from the dutch

Resolved Question:

I have US and dutch passports, I am retired from the dutch civil service and receive a civil service pension (ABP). I now live part time and work partime in the US. As I read the tax treaty, My pension is NOT taxable in the us, in fact my salary, being for government service in NL was not taxable in the US. correct? Does this also apply to state taxes (eg to Virginia)?
Submitted: 1 year ago.
Category: Tax
Expert:  Robin D. replied 1 year ago.

Robin D :

Hello and thank you for using Just Answer,
I know you said you read the treaty between the US and the Netherlands but did you see this portion when it relates to pensions:
a) Any pension paid by, or out of funds created by, one of the States or a political
subdivision or a local authority thereof to an individual in respect of services rendered to that
State or subdivision or authority shall be taxable only in that State.
b) However, such pension shall be taxable only in the other State if the individual is a
resident of, and a national of, that State.
If you are resident in the US you will be required to add that income to your US income.

Customer:

please cite the article and paragraph for (b). I spend more than 183 nights outside Washington dc and claim residency in NL.

Robin D :

Article 20

Robin D :

It really would not be the defining test that you spend 183 days outside. To see if you are setting residency in the US as opposed to NL you would ned to look to the following.



  1. 31 days during the current year, and

  2. 183 days during the 3-year period that includes the current year and the 2 years immediately before that, counting:

    • All the days you were present in the current year, and

    • 1/3 of the days you were present in the first year before the current year, and

    • 1/6 of the days you were present in the second year before the current year.



Robin D :

The 183 days is a standard but when someone is present for more than 1 year and it will be a constant, they need to count their time in the US based on the above formula.

Robin D :

What you are are for federal is going to have a play on the state where you work in the US and live.

Robin D :

If you are working in Virginia then of course your income is taxable to Virginia. If you are resident of Virginia then they will tax you on all income. Federal law provides for the designation of resident aliens and nonresident aliens as special statuses for tax filing purposes. Virginia law does not make a similar provision. Therefore, a resident or nonresident alien is subject to the same Virginia residency provisions as all other filers. If you are a resident or nonresident alien required to file a federal income tax return, and you meet the definition of a Virginia resident, part-year resident or nonresident and other filing requirements, you must file a Virginia return

Robin D :

Individuals who are physically present in Virginia, or who maintain a place of abode here for more than 183 days during the taxable year are actual residents. The period of residency does not have to be consecutive days. Most Virginia residents are actual residents of Virginia.

Customer:

Actually Im in DC - wasnt sure if if DC would be meaningful (eg if you're dutch). Ive been working partime since 2005, after 30 years full time in NL. I file a DC return. My dutch pension is taxed in NL. I am currently being taxed twice. I can dial back my DC presence. How small should it be so that they dont double tax my dutch pension? thanks.

Robin D :

You do not need to dial back you are afforded the Foreign Tax Credit in the US for taxes you pay in another country on the same income taxed in the US. You would just need to file Form 1116.

Robin D :

For DC, the DC Official Code describes a statutory resident as any individual who maintains a place of abode within the District for an aggregate of 183 days or more during the taxable year, whether or not such individual is domiciled in the District. If you are in DC less than 183 days then you would be a nonresident and only taxed on DC source income.

Robin D :

DC would look to total income to see what percentage of deductions and exemption you would be allowed but you would only be taxed on the true DC sourced income.

Customer:

I get a credit on my US federal tax equal to what I WOULD pay to IRS if that money were paid in the US. That is LESS, in fact substantially less than what I already pay in NL, because the the provincial and municipal taxes are all rolled up. Then, DC takes approx 10 % of the dutch pension.

Robin D :

The states do not recognize any tax paid to a federal government (US or other)for credit purpses

Robin D :

They do recognize state taxes paid on same income (other US states) and offer a credit to residents.

Robin D :

Your best thing for DC would be to make sure you are not a resident for tax purposes.

Customer:

I like the idea of being taxed only on DC source income - that seems fair. Thanks, XXXXX XXXXX to use this conversation, is that possible?

Robin D :

I do not know what you mean by use, you can save it certainly. In fact it is not erased and can be found in your "My Questions" when you return

Robin D :

Your positive rating is always thanks enough.

If you could also participate in the very short survey that Just Answer will send you by e-mail I would appreciate that very much.
I really enjoyed working with you – please feel free to request me again when you come back to ask another question.

Customer:

Now, how EXACTLTY are 183 days counted. Ive been counting "nights in DC" and come to less than less than 183. I've found no unambiguous procedure for calculating. Any procedure must not lead to double counting when applied by the other destinations, eg if I fly to Chicago in the morning sleep there and return the next day to DC, have I spent one day in Chicago or not???

Customer:

Youve been very helpful, can I refer to you in communication with DC tax office?

Robin D :

Yes, you have spent a day in Chicago. It is also important how you are staying in DC. Are you renting a place, staying with someone or (hope not) do you own the place you stay while in DC?

Customer:

I own a condo. I have a larger house in The Hague and a vacation house in France.

Robin D :

can I refer to you in communication with DC tax office You can but you must understand, I am not representing you nor would the DC tax office accept our conversation as authority. Our conversation is to assist you to know the way your situation is effected by taxation.

Robin D :

You would only want to have personal representation by a tax professional in DC should you nneed to fight them on any issue.

Robin D :

The condo in DC may make you closer to a residence in DC . One sec while I double check

Robin D :

An individual is a resident of the District if the individual is domiciled within the District at any time during the taxable year. DC Official Code, 2001 Ed. §47-1801.04(17).

Customer:

A saudi prince owns a whole apt building and visits sporadically. I bet DC doesnt get 10% of his income.

Robin D :

DC could apply the above if you have no other residency in another US state.

Robin D :

I bet they get theri share of his DC sources

Robin D :

their

Robin D :

sorry

Customer:

Yes, but not 10% of his saudi income.

Robin D :

Correct, but again you have muddied the waters in the fact that you are working in DC, have a resdience in DC, and are a US person.

Robin D :

You can not apply your residency in the US and DC in the same light. Being dual is one thing for feds but the states do not follow that thought. In fact states contend the treaties are with the US not the individual states.

Robin D :

Some do not even allow the Foreign Income Exclusion for their state residents that work abroad.

Robin D :

The individual states write and enforce their own tax codes.

Customer:

....and an NL person, and a residence in NL and working (or retired ) in NL .... So NL should make separate treaties with Ohio, Iowa DC etc. that must have been adjudicated in court?

Robin D :

That would be helpful but I do not see it happening in my lifetime.

Customer:

nor mine... DC Official Code, 2001 Ed. §47-1801.04(17) seems very strange, if you stay for a month in DC, they can take 10% of your world income? Or is there a precise definition of "domiciled"?

Robin D :

Domicile would be what they would refer to because you own a residence in DC. As far as they would look at it is you are a US person and you do not live in any other US state. You are working in DC own a condo in DC so ergo, DC resident

Customer:

I know they think like that, but the same premises also ergo that Im a Dutch resident. And the treaty is supposed to prevent double taxation.

Robin D :

The treaty prevents that double taxation for NL and the Federal US tax.

Robin D :

The treaty does that by allowing a credit in the US federal return for the income taxed by both.

Customer:

AH!! you say that the treaty does NOT prevent double taxation by DC. Casus belli. NL declares war on DC.

Robin D :

DC is not the same as the Federal Taxation. The District of Columbia is nothing more (for tax purposes) any more than Alabama

Customer:

But surely they are bound by US treaties with Foreign powers? Even Alabama.

Robin D :

No, the states will decide for themselves if they will tax income. Most will conform to federal but if someone is in their state and earning income they will tax. Unless the income is exempt by law (not treaty) it is fair game.

Robin D :

It was really only a few years back that federal law had to be passed to keep some states from claiming pensions paid to people that had moved but earned their wages in the state before they moved. Now states cannot tax nonresidents on pensions just because they earned the pension money in the state before retirement.

Robin D :

Some states wanted to claim that the pension was a source form their state so taxable.

Robin D :

It took federal law to be passed.

Customer:

yes, income form the state. But not my dutch pension, I should think. I appreciate your answers, if you want to sign off, I'll rate the service excellent, but if you care to answer I'd be very interested.

Robin D :

If you are in DC living there and get this pension it is taxable to DC now. You are a resident of the state and states tax their residents on all income they deem is taxable.

Robin D :

The same thing would happen if you had earned that income in Florida and are now no longer living in Florida.

Robin D :

Of course if you kept your house in Florida did not buy a house in DC and were only there for short periods then DC would not have a right to tax your pension.

Robin D :

It is the residency.

Robin D :

I just had a conversation like this yesterday with a man who sold a business in NY

Robin D :

Ny still makes him pay tax on the sale of the business (installment sale over years) even though he now lives in anothe rstate and they changed that law the year after the sale occurred.

Robin D :

I do not even know what else to say, except I wish I could advise they have no right to tax you.

Customer:

The tax treaty says that if the sequence of tests do not yield a decision, then it is decided by mutual consent between the competent authorities (Art. 4 par 2)

Robin D :

You are correct

Robin D :

Those authorities being NL and The Federal US Treasury

Robin D :

DC would not be allowed to sit in so would have no say about the 2 countries deciding what they think they should do about their taxes.

Robin D :

DC taxation also would not be decided in the sit down.

Customer:

Right! so DC should abide by the decision of the consenting adults.

Robin D :

They are

Robin D :

They do not look to what the other 2 have decided for their taxes

Robin D :

The DC tax is not a part of that

Customer:

But they are part of the US. Well, we've been over this already. You've been great. I paid $450 yesterday for an hr tax lawyer and didn't get such good answers. I think I will still try the 183 criterion.

Robin D., Senior Tax Advisor 4
Category: Tax
Satisfied Customers: 7426
Experience: 15years with H & R Block. Divisional leader, Instructor
Robin D. and 2 other Tax Specialists are ready to help you

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