Reader question: Request for avoidance of double taxation rejected
Dear readers,
I emigrated to Thailand in 2006 and live in Chiang Mai. Had me deregistered from the Netherlands and then I am liable to tax in Thailand. In 2005 I received state pension.
From 2006, I had that payment sent directly to my bank in Chiang Mai every month. In the Netherlands I did not have to pay tax during that time because of the exemption. But that changed in 2019. There was € 140 wage tax per month at approximately € 1.600 annually with my tax return for that year, I could not state any deductions.
Submitted my income tax returns to the tax authorities in Chiang Mai in 2019. My bank has made a printout of income from the AOW and I had to pay income tax on it. Fortunately, they have many deductions in Thailand
The Netherlands and Thailand both have the right to levy tax on the benefit amount of the AOW. Now I have the problem that I pay tax on the same thing in two countries. So I have a request for a refund of wage tax for 2019, and that has been rejected
Both requests I have attached all documents needed incl. Residence RO 22.
Subsequently, I submitted a request to the Ministry of Finance in The Hague for the prevention of double taxation, which was also rejected.
Answer from Ministry of Finance:
Based on the NL-Th. can both the Netherlands and Thailand levy on this benefit. There is no question of double taxation that is contrary to the NL- Th. The substantive assessment of your request therefore gives no reason to waive the levying of Dutch tax on the basis of a treaty.
Who can help me to get an exemption from wage tax from the Netherlands?
Regards,
Henk
Henk, why do you think the Netherlands should withdraw? And not Thailand?
I leave the legal side to the experts, but I think you will end up with Article 25 of the treaty because AOW and similar benefits are NOT mentioned in the treaty and there is no double taxation scheme on the AOW in the treaty. See here https://wetten.overheid.nl/BWBV0003872/1976-06-09
A much easier solution is NOT to transfer your AOW to Thailand for a whole year, but to leave it in the bank in the Netherlands and only transfer it in the first half of January. Then it is not an income in Thailand, although it may take you some effort to convince the official of this. The problem is then solved.
By the way, you say that you only have to pay wage tax in 2019. That is already effective 1-1-2015.
Henk, a whole year may be a bit rigorous. I think a few months is enough for your income to be so high/low that the levy is zero. You transfer those months the first week of January and are then no longer income but savings.
Erik, what you yourself in the Netherlands you have no deductions and in Thailand many
Stop sending your income to Thailand. Transferring money yourself 3 to 5 times a year via a Money Service, for example TransferWise, will save you a lot of misery.
Martin, if the money you transfer to Thailand via TransferWise is income you earned in that year, it will still be taxed in Thailand (to the extent Thailand is allowed to levy on it under the Treaty).
The method of transfer is not leading. Even if you withdraw money in Thailand with your bank card or pay to your Dutch bank account and it concerns income, we are still talking about income to be taxed by Thailand.
PLEASE NOTE: I do not promote means to keep income as far as possible out of the sight of the Thai tax authorities in order to evade tax!
The motto is therefore to keep 2 separate NL current accounts, one for your income, the other fed from your savings. And the transfers to Thailand always from the payment account that is fed from savings flows, being savings or securities accounts.
The Netherlands and Thailand have agreements on private pensions. With regard to AOW or other pensions of civil servants, etc., tax is ALWAYS deducted in the Netherlands. Pensions from private pensions, benefits from non-government agencies, assets, etc. are covered by the agreement. So you can choose in which country you want to pay tax. The Netherlands may require proof that you have actually paid tax in Thailand. Without proof or acceptance from the tax authorities, tax is withheld in the Netherlands at the source of the payment. With regard to the deduction of wage tax from AOW from 2017, this is due to a change in the tax law with retroactive effect. From 2017, people living outside Europe may no longer deduct anything from their state pension, etc., but receive a fixed percentage deduction (I deduct 6%). I never paid tax on my AOW until 2019. At the beginning of this year I had assessments for 2017 and 2018 on my AOW (around €3.000). My assessment for 2019 was zero because wage tax was withheld for 2019. I also have a number of private pensions from the Netherlands and have chosen (without any problems from the tax authorities) to pay tax on this in Thailand.
Peter, contrary to what you say, you don't get to choose where you pay taxes. After all, the Treaty for the avoidance of double taxation that has been concluded between the Netherlands and Thailand applies to this.
Your claim that the Netherlands may demand proof that you really paid tax in Thailand is also incorrect. If, for whatever reason (such as the many and high exemptions, deductions and the tax-free sum), you do not owe a Personal Income Tax, the right to levy will not return to the Netherlands.
To obtain an exemption for payroll tax withholding, you only need to prove that you are a tax resident of Thailand. How to prove that has been discussed many times in Thailand Blog.
You don't even have to prove that to receive a refund of the wage tax not owed in the Netherlands on a tax return. In that case, the Tax and Customs Administration flawlessly follows the information as included in the Register of Non-Residents.
With regard to the change in tax legislation in the Netherlands with effect from 2015 (and therefore not, as you write, with effect from 2017), I refer to my response addressed to Henk (asker of this reader's question).
Hi Henk,
With regard to your AOW benefit, you write:
“In the Netherlands I didn't have to pay tax during that time because of the exemption. But that changed in 2019.”
However, you have never been exempt from wage tax/income tax in connection with your state pension. Wage tax was calculated on each AOW benefit. The fact that no withholding was subsequently made is due to the fact that you apparently opted for resident taxpayer status and as a result of which you were entitled to tax credits, just as if you lived in the Netherlands. In your case, the general tax credit, the elderly person's tax credit and the single elderly person's tax credit were higher than the calculated wage tax, so that no deduction was made. But that is fundamentally different from “exemption”.
As of 2015, the right to choose whether to be treated as a resident or non-resident taxpayer has lapsed and the Income Tax Act 2001 made a distinction between qualifying and non-qualifying non-resident taxpayers. If you live in Thailand, for example, you are regarded as a non-qualifying non-resident taxpayer, as a result of which you lost the right to tax credits, among other things. As of 2015, the SVB should have withheld the wage tax from you and therefore without deducting the tax credits. However, the SVB has ignored this amendment to the law for thousands of benefit recipients, as it has for you.
This created a dichotomy within the non-qualifying foreign taxpayers. In order to put an end to this undesirable unequal treatment, an amendment to the law took effect on 1 January 2019, which means that no benefit agency may deduct the tax credits from the wage tax when living abroad.
For the years 2015 to 2018, you were lucky that the Tax and Customs Administration did not send you an invitation to file a tax return. I hope it stays that way for you. With the request you made for exemption from wage tax due to your AOW benefit, you could have shot yourself in the foot when discovered!
You only talk about an AOW benefit. This, in combination with the fact that you have not received an invitation to file a tax return, makes me suspect that your income is limited to this AOW benefit. Based on the amounts you stated, I conclude that your Personal Income Tax amounted to around € 220 to € 225, so there is hardly any double taxation.
But be that as it may: the answer you have received from the Ministry of Finance is more or less correct. Both the Netherlands and Thailand are allowed to levy on a social security benefit, such as an AOW, WAO, WIA or WW benefit. However, this is not based on a treaty provision in the Treaty concluded by the Netherlands with Thailand for the avoidance of double taxation, but on the basis of the lack of such a provision and as a result of which national law applies to both countries. The Netherlands then taxes your AOW benefit as the source country and Thailand does the same as the country of residence (insofar as you contributed this benefit in the year you enjoyed it).
The same situation also arises with regard to the double taxation treaties concluded with Pakistan, Sri Lanka and the Philippines.
Dear Lambert,
Thank you for your professional advice to me.!
G
My idea was to ask the readers who have the same problem as me. Namely to find out the way to get an exemption from payroll tax for the year 2019
.
I am a tax resident of Thailand and have income tax in Thailand for 2019 I think I have the right to apply for exemption ??
Thailand has the right to tax the state pension from the Netherlands as worldwide income of a tax resident.
If that's not possible, I'll put it down.
Lammert do you have customers who only have state pension and yet have had an exemption??
Greetings Henk
Hi Henk,
With regard to the deduction of wage tax from an AOW benefit when living in Thailand, there is no legal possibility to obtain an exemption for this.
None of my Thai clients have such an exemption.
Henk O, you have read the advice and it is clear that you cannot do anything about the double taxation of your state pension. Neither the treaty nor the Dutch national legislation can help you with this and I am not afraid of Thai legislation either.
What remains for you is article 25 of the treaty, the consultation article, but whether you can get two departments moving for a few hundred euros or say 10 k baht is a question to which you can answer yourself. Moreover, you must submit that request in your country of residence; you need a well-established Thai tax advisor for that and he doesn't work for nothing.
Can I help you with your very last question?
1. It may concern less than one month of net state pension per year; think about that. See my first comment to your question.
2. In about 3-4-5 years there may be a new treaty and I count on the gaps in the existing treaty (1975) being closed.
Success!
Thank you Eric
I'll sort everything out and see what I'm going to do.
Greetings Hank
Erik,
Contrary to what you state, Henk O must not submit his request pursuant to Article 25, paragraph 3, of the Treaty for the avoidance of double taxation concluded by the Netherlands with Thailand in his country of residence Thailand, but, as a Dutch taxpayer, to the Minister of Finance in the Netherlands . In principle, there are no costs associated with this.
On November 26, 2019, I paid ample attention to this case in Thailand Blog and thus made the offer to take this on on behalf of a group of Dutch people. At that time you were quite skeptical about this initiative.
See:
https://www.thailandblog.nl/lezersvraag/lezersvraag-aow-en-belasting-betalen-in-thailand/
In a slightly slimmed-down form, this message includes the following text:
"THE TREATY
What possibility does the Treaty offer to prevent double taxation of your AOW or WAO benefit?
The Netherlands has concluded double taxation treaties with more than 100 countries. All these treaties contain a provision for mutual agreement. In the Treaty for the avoidance of double taxation concluded between the Netherlands and Thailand, this is regulated in Article 25 of this Treaty, insofar as relevant, reading as follows:
“Article 25. Arrangement for mutual agreement
3. The competent authorities of the States shall endeavor to resolve by mutual agreement any difficulties or doubts arising as to the interpretation or application of this Agreement. They may also consult with each other for the elimination of double taxation in cases not provided for in this Agreement.
4 The competent authorities of the States may communicate directly with each other for the purpose of reaching an agreement as referred to in the preceding paragraphs.”
• The “competent authority” in both cases is the Minister of Finance or his representative.
• The purpose of the agreement concluded between the Netherlands and Thailand is to avoid double taxation.
• No provision has been made in the Treaty with regard to social security benefits, including AOW and WAO benefits. Reversing double taxation with regard to these benefits is pre-eminently a matter for both ministers.
There is clearly double taxation of social security benefits because no provision has been made for this in the Treaty (see last sentence of paragraph 3). In order to induce the competent authorities to consult each other about this, you could therefore request one of these authorities to do so. And then it is obvious to address a request to that effect to the Minister of Finance of the Netherlands. In doing so, refer to the last sentence of paragraph 25 of Article XNUMX of the Treaty. This way you avoid the involvement of a Thai lawyer, especially because of the language problem and the associated costs.
Incidentally, it seems sensible to me not to address such a request to the Minister of Finance of the Netherlands as a single person, but to do this as a collective, ie with several taxpayers who are actually dealing with this problem. Thailand Blog may play a coordinating role in this.
I am also prepared to take on this coordinating role and then to contact one of the organizations that represent the interests of Dutch people living abroad or to contact the Ministry of Finance myself to ask for the levying of taxes. double taxation on an AOW or WAO benefit, to be discussed there. Please contact me via email: [email protected].
However, if you cannot demonstrate by means of, for example, the declaration form PND 91, pages 1 and 2, that you actually owe Personal Income Tax or by means of the declaration of tax liability in your country of residence (form RO 22), then it makes no sense to participate in this promotion. to take.
Lammert de Haan, tax specialist (specialized in international tax law and social insurance)”
And what was the result of my offer? A DDos attack on my computer!
Inbox flooded with signups. In total even TWO, of which one person lived in the Netherlands and the other did not yet receive state pension (what do you mean: double taxation!).
Well, Lammert, you did your best and you get a DDOS attack! Thank you…. But you survived.
Coming back to the matter, and to our call tonight, I don't think a loner has a chance to run two departments on a few hundred dollars. In that sense there is little hope for Henk now.