Netherlands: Different method to relieve double taxation may increase Dutch income tax burden for Dutch-resident statutory directors of non-Dutch entities

In brief

In 2020, the Dutch government announced a major policy change concerning Dutch-resident statutory directors (“bestuurders” and “commissarissen”) who receive directors’ fees from foreign (non-Dutch) entities. It has recently been announced that this policy change will become effective as of 1 January 2023.


In 2020, the Dutch government published a Fiscal Treaty Policy Memorandum, in which it announced that a major policy change would be made to its 2008 Decree on the Relief of Double Taxation. This change concerned Dutch-resident statutory directors (“bestuurders” and “commissarissen”) who receive directors’ fees from foreign (non-Dutch) entities.

With the revised Decree, the Dutch government intended to repeal its previous approval to apply (under certain conditions) the so-called exemption relief method to those directors’ fees, so that the often less tax-beneficial credit method will apply in many cases instead. It has recently been announced that this policy change will become effective as of 1 January 2023.

Below, we elaborate on this development, and specifically on its consequences for Dutch-resident statutory directors who receive remuneration from entities based outside The Netherlands.

Tax treatment Dutch-resident directors

Dutch resident taxpayers are obliged by Dutch tax law to report their world-wide income in The Netherlands, irrespective of where it is earned. In case other jurisdictions also claim the right to taxation on (parts of) their income and wealth, relief of double taxation may be claimed via the Dutch tax treaty network, or (in the absence of a treaty) the Dutch unilateral rule for the prevention of double taxation.

Many (but not all) tax treaties are based on the so-called OECD model tax treaty. With respect to the remuneration of statutory directors (i.e., executive and supervisory board members), this model treaty states that: “Directors’ fees and other similar payments derived by a resident of a Contracting State in his capacity as a member of the board of directors of a company which is a resident of the other Contracting State, may be taxed in that other State”. As such, the right to levy tax on the remuneration of a Dutch tax resident who performs activities as a statutory director for an entity that is a resident of another country, typically lies with the country of residence of the entity to which the director is appointed.1

Credit method

Most (but again, not all) tax treaties concluded by The Netherlands apply the so-called credit method to determine the relief that The Netherlands should provide to prevent taxation from occurring in both countries involved. This relief method generally implies that the Dutch income tax due is reduced by either (1) the income tax levied on the directors’ fee in the other country, or alternatively (2) the Dutch tax levied on the directors’ fee, in case this amount is lower.

Exemption method

However, the current Dutch government’s policy (which stands to be withdrawn as of 2023) under certain conditions allows application of the exemption method to determine the Dutch relief of double taxation, in case this method turns out to be more tax beneficial. According to the latter calculation method, the relief of double taxation is calculated as follows:

Foreign income (determined according to Dutch tax law)
________________________________________________________________        *      Dutch tax on world-wide   =   Relief of double taxation
World Wide income

This relief method is often more beneficial than the credit method, as it frequently leads to a larger relief of double taxation than just the income tax that was levied on the directors’ fee in the other country.

The current approval to apply the exemption method only applies if there is (1) no tax avoidance and (2) no preferential tax regime for directors’ fees compared to employees’ remuneration in the other country. This means that the exemption method is currently only allowed if the director concerned can demonstrate that the other country levies tax on his directors’ fees, and that this income is not treated more tax-favourably than employment income.

With the revised Decree, the beneficial policy outlined above will be repealed as of 1 January 2023. The Dutch government had already announced this repeal in its 2020 Fiscal Treaty Policy Memorandum. The reason given for the repeal was that the activities of statutory directors usually do not have to be performed in the relevant entity’s country of residence, but can also be carried out in e.g., The Netherlands. As such, the Dutch government concluded that there is no reason to exempt this income any longer. According to the government, the income of a Dutch-resident director of a foreign entity should therefore be taxed on the same basis as the income of a Dutch-resident director of a Netherlands-based entity from now on. 

Potential consequences

The policy change can have important consequences. After all, Dutch-resident statutory directors who currently apply the exemption method, may be confronted with a considerably higher overall income tax burden if the relevant tax treaty prescribes the credit method, and this method must actually be applied to relieve double taxation as of 2023.

Another point of attention concerns the (treaty) qualification of individuals who hold a dual role within the company: i.e., as both employee and statutory director. For employees’ remuneration, the relief method is normally provided according to the exemption method, but for directors’ fees it will generally be provided according to the credit method as of 2023. Therefore, it becomes even more important than before that companies review the agreements they have with individuals in such dual roles, to ensure that their different roles are documented clearly and separately.

Finally, when implementing cross-border corporate structures where Dutch-resident individuals are appointed as statutory directors of group entities outside The Netherlands, it will be crucial to review the Dutch income tax position of such directors following implementation of the structure. More so than before, any tax benefits achieved from e.g., a corporate income tax perspective, may be reduced by an increased tax burden for the directors in question from a personal income tax perspective.

How we can assist

If you currently benefit from the beneficial policy that stands to be withdrawn as of 2023, you may well be impacted by the policy change from a personal income tax perspective. The level of such impact will however depend on your personal situation, as well as on the exact tax treaty (if any) that applies in your case. Baker McKenzie will be pleased to assess your situation, with a view to determining the extent to which the policy change may affect you or your organization and, if possible, identifying ways to mitigate any negative impact. Please feel free to contact us if we can be of any assistance in this respect.


1.  Notable exceptions to this rule include the tax treaties that The Netherlands has concluded with i.a. the United States and the United Kingdom, where the determining factor is the number of workdays physically spent in the country of residence of the entity to which the individual is appointed.

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