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I plan on moving to the Netherlands (my wife has recieved an

offer to relocate) but I...
I plan on moving to the Netherlands (my wife has recieved an offer to relocate) but I am concerned about the tax implications for this move.

I own an online business that is registered in the US, operated out of the US, and all events and clients are US based. I currently have no employees and am the sole owner.

what are the tax implications considering i will be residing in the Netherlands? I would like to continue to only pay taxes to the US- is this possible?
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Answered in 2 minutes by:
9/27/2013
Robin D.
Robin D., Senior Tax Advisor 4
Category: Tax
Satisfied Customers: 15,874
Experience: 15years with H & R Block. Divisional leader, Instructor
Verified

Robin D. :

Hello and thanks for trusting me to help you today. I am a tax adviser with over 15 years of experience.
You are correct in that you will continue to report your income in the US. You will also continue to pay self employment tax in the US on the business profits.
You will be allowed to use the foreign earned income exclusion or the foreign tax credit for the income you earn while in another country.

Robin D. :

I am going to need a sec to look at the tax treaty between the 2 countries to advise on any relief based on that.

Robin D. :

One sec.............

Robin D. :

Article & of the tax treaty deals with business profits. You will be taxed in the Netherlands on income you receive from a fixed place of business in that country. Your relief will be on your US return for the income you receive that is taxed in the Netherlands by either excluding or the foreign tax credit.

Customer:

The business will not be in the Netherlands

Customer:

however you are saying that i will have to pay taxes to the netherlands on my US business, is that correct?

Robin D. :

You will be in the Netherlands and working on this US business, correct?

Customer:

As is - yes. However i am considering hiring a US employee to the run the business- so in this case I will not be invovled in the business while in the Netherlands

Robin D. :

If your business has no fixed place or employees in the Netherlands then you would not be tax on business profits.
I need to check on the Netherlands residency requirements for taxation now.

Customer:

great- thank you

Robin D. :

You could be taxed on your profits paid to you while in the netherlands once you are there long enough for residency

Robin D. :

One sec

Customer:

I would not take a salary- does this matter? what do you mean by profits paid to me?

Robin D. :

If yo are a sole prop then all the income is yours

Robin D. :

you do not pay yourself a salary as a sole prop

Customer:

so based on your comment above my company's profits would be taxed in the NL once i am a resident ?

Robin D. :

Yes, Netherlands income includes employment income, business profits and income from a primary residence.


Profits received from personal business operations, from independent personal services and from
certain shares of partnership income are taxed as business profits.

Customer:

even though it will not be operated in the NL nor have aany NL employees

Robin D. :

Generally there are 183 days to decide tax residency

Robin D. :

correct

Customer:

do you know the rate it will be taxed

Robin D. :

I am checking on the netherlands days to count as resident, I will check on rate 2

Customer:

ok

Robin D. :



































































Combined rates in Box 1 for persons younger than 65
Taxable income Tax per bracket

Premium National Insurance


Total rateTotal per bracketCumulative
Of more thanBut less than
€ 0€ 19,6455.85 %31.15 %37 %€ 7,268€ 7,268
€ 19,645€ 33,36310.85 %31.15 %42 %€ 5,761€ 13,029
€ 33,363€ 55,99142 % 42 %€ 9,504€ 22,533
€ 55,991 52 % 52 %
Robin D. :

I did not convert to US dollar

Robin D. :

Those rates are after expenses so you would be allowed to claim your business expenses.

Customer:

and this would be based on my total business profit

Robin D. :

Net

Customer:

ok

Robin D. :

I was correct

Robin D. :

183 days

Robin D. :

tax resident

Robin D. :

If you and your spouse are going for extended time

Robin D. :

you will be allowed the exclusion from US tax that is your relief from double taxation.

Robin D. :

Generally, to meet the physical presence test, you must be physically present in a foreign country or countries for at least 330 full days during the 12-month period. You can count days you spent abroad for any reason. You do not have to be in a foreign country only for employment purposes. You can be on vacation time.

Robin D. :

Then you can each exclude the maximum

Robin D. :

$97,600 for 2013

Robin D. :

for each of you. If you earn over that amount, the overage is taxable in the US

Robin D. :

Your self employment tax for US is still applicable though.

Robin D. :

You will also want to see if your spouse will be offered a tax equalization agreement with her employment.

Customer:

yes she does

Robin D. :

Then ask about the hypothetical and if your income is in the equation

Customer:

my concern is that if i move to the netherlands my tax rate increases by a sig amount and so was looking into ways around it

Robin D. :

Well, if you are conducting business there then you will be taxed, if you are not then when you are a resident you will be taxed on your income from the profits.

Robin D. :

The US would allow you to still exclude so I would keep my activity in the Netherlands to nothing. You will still be taxed when you become a resident.

Robin D. :

The US does the same thing for resident aliens here.

Robin D. :

As you are a sole prop then it would be difficult to show that you are not conducting business from yoru home in teh Netherlands.

Customer:

im sorry i keep asking for clarification - but if i, as you say, do nothing business wise while im in the nl- i would still be taxed at the 52% rate on all profits

Customer:

which is why i am thinking about adding an employee

Robin D. :

When yo are resident yes.

Robin D. :

You also have to look to your VISA and the importance of that (I am not an immigrant legal advisor). You would want to see if you can have a business (http://www.expatica.com/nl/finance_business/business/Starting-a-business-in-the-Netherlands_17042.html)

Robin D. :

When you are a tax resident you will be taxed there.

Robin D. :

All your profits even from a business that is not in the Netherlands

Customer:

ok, thank you

Robin D. :

You are most welcome.
Your positive rating is always thanks enough.


 

Robin D.
Robin D., Senior Tax Advisor 4
Category: Tax
Satisfied Customers: 15,874
Experience: 15years with H & R Block. Divisional leader, Instructor
Verified
Robin D. and 87 other Tax Specialists are ready to help you
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Robin D.
Robin D.
Robin D., Senior Tax Advisor 4
Category: Tax
Satisfied Customers: 15,874
15,874 Satisfied Customers
Experience: 15years with H & R Block. Divisional leader, Instructor

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