Netherlands: Revised government position concerning taxation of severance payments, cross-border workers

Severance payment is to be sourced over the period of employment on which the severance is based

Revised government position

The Dutch Ministry of Finance issued new guidance regarding the allocation of the taxation of severance payments of cross-border workers.

With the new position, a severance payment is to be sourced over the period of employment on which the severance is based. In most situations, this will be the entire period of employment (instead of the last 12 months of employment), with a time-spent apportionment method then to be applied—that is, Dutch period employment / total period of employment.

The new guidance will be applicable to severance payments made after 4 February 2022 (the date of publication). Taxpayers may request the Dutch tax authorities to apply this new guidance on all assessments that were not final as of 5 February 2022, but taxpayers will need to provide proof that this treatment would not result in a (partial) non-taxation of the severance payment.  

Previously, the position of the Dutch tax authorities regarding the allocation of severance payments for cross-border workers resulted in double taxation because of the way the severance payment was sourced.

Read a February 2022 report prepared by the KPMG member firm in the Netherlands 

 

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