Non domiciliation and tax exempt salary split United Kingdom – The Netherlands

Under the United Kingdom (UK) tax laws a difference in fiscal treatment of individuals is made between being domiciled and non domiciled. In short domicileds are residents who have their roots in the UK, or have chosen to become domiciled. Non domicileds are e.g. expats with temporary stays or with permanent stay without the aim to become domiciled. Being domiciled is more than just being a tax resident of the UK. For non domicileds the tax regime can be beneficial as foreign earnings can be kept outside of the UK tax scope as long as these foreign earnings are not brought to the UK. Foreign earnings would be brought to the UK e.g. when put on a UK bank account.

The tax benefit for non domicileds who have foreign (e.g. Dutch) earnings could lie in the UK progressive rate not being applicable on Dutch income, also there would be no tax on foreign bank accounts/ interest there upon.

If the income earned whilst living in the UK and working in the Netherlands (NL), would be taxed in NL whilst being insured in the UK, there could be a tax benefit of appr. 10,000 EURO if a person earns appr. 33,000 EURO in NL. This is because of the lower two tax brackets in comparison to 40% tax in the UK. This should be achieved without much effort.

An even more interesting tax benefit would be that the work under UK contract is partially not performed in the UK, but in NL, without this leading to taxation in NL. The tax treaty NL/UK allocates which country may levy tax. Even if you work outside the UK, still under conditions (salary not paid by NL company, not under Dutch contract, less than 183 days in NL) the UK is allowed to levy taxes. The UK however applies the Overseas Workday Relief, which may lead to a full tax exemption of this foreign income. In cooperation with a well established local UK tax specialist we can optimize the tax position of non domicileds with Dutch income.

Please feel free to contact us for further information on this subject.
Contact person:
Jan-Hein van Leeuwen
Jan-Hein@okxvanleeuwen.com