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Summary Full solutions to all meetings Cross-Border Taxation of Human Capital TAX4009
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TAX 4009 Cross-Border Taxation of Human CapitalAll Meetings
2021
1
,Table of Contents
Meeting 1: Introduction international taxation cross-border employment ........................................ 3
Meeting 2: Introduction International and European Social Security and Cross-Border Employment
.............................................................................................................................................................. 10
Meeting 3: Cross-Border Employment ................................................................................................ 19
Meeting 4: Cross-Border Employment ................................................................................................ 30
Meeting 5: Cross-Border Employment & Cross-Border Employment and Special Arrangements .... 37
Meeting 6: Directors............................................................................................................................. 46
Meeting 7: Artists and sportsmen, pension and students .................................................................. 54
2
,Meeting 1: Introduction international taxation cross-border employment
Case 1 – Employment Abroad
I.
a. Jan, an American citizen, is living in France and is an employee in the United Kingdom. He earns
€ 60,000 a year. He also gets a bonus of € 10,000 and a free holiday (market value € 4,000).
First of all, it must be determined of which country Jan is a resident as dealt with in art. 4 OECD MTC.
On the basis of art. 4 para 1 OECD MTC, Jan is a resident of the Unites States as he is an American
citizen and therefore liable to tax therein. France would also want to tax as he resides there,
Furthermore, the UK will want to tax as he is employed there.
Salaries, wages and other similar remuneration derived by a resident of a contracting state (France)
in respect of an employment (Jan is an employee) shall be taxable only in that State (France) unless
the employment is exercised in the other state. In the case, the employment is carried out in the
United Kingdom. If the employment is so exercised, such remuneration as is derived therefrom may
be taxed in that other state (United Kingdom) on the basis of art. 15 para 1 OECD MTC. However, art.
15 para 2 OECD MTC forms an exception to this. Art. 15 para 2 OECD MTC states that remuneration
derived by a resident of a contracting state (France) in respect of an employment exercised in the
other contracting state (United Kingdom) shall be taxable only in the first mentioned state if a couple
of criteria are satisfied.
Art. 15 OECD MTC also includes incidental and one-time payments, such as the bonus of 10,000 and
the free holiday of 4,000. Paragraph 2.1 OECD Commentary on art. 15 OECD MTC.
The usual method to prevent double taxation for art. 15 OECD MTC is the exemption method as
dealt with in art. 23A OECD MTC.
b. Jan is living in France and is a non-executive director of ‘Snowy Business BV’ in the Netherlands.
He earns € 60,000 a year.
First of all, it must be determined of which country Jan is a resident as dealt with in art. 4 OECD MTC.
On the basis of art. 4 para 1 OECD MTC, Jan is a resident of the France as he lives there (domicile).
However, the Netherlands would probably also want to tax as he is the director of a firm there and
enjoys remunerations.
Art. 16 OECD MTC states that director’s fees and other similar payments derived by a resident of a
contracting state (France) in his capacity as a member of the board of directors of a company which
is a resident of the other contracting state (the Netherlands) may be taxed in that other state (the
Netherlands). So, the Netherlands may tax.
The usual method to prevent double taxation for art. 16 OECD MTC is the credit method as dealt
with in art. 23B OECD MTC.
3
, c. Jan is an artist and is living in France and he will perform in the Netherlands for one work. He
will earn € 5,000.
First of all, it must be determined of which country Jan is a resident as dealt with in art. 4 OECD MTC.
On the basis of art. 4 para 1 OECD MTC, Jan is a resident of the France as he lives there (domicile).
However, the Netherlands would probably also want to tax as he enjoys income there.
On the basis of art. 17 para 1 OECD MTC, income derived by a resident of a contracting state
(France) as an artist, from that resident’s personal activities as such exercised in the other
contracting state (the Netherlands), may be taxed in that other state (the Netherlands). However,
para 2 OECD Commentary on art. 17 OECD MTC states that states may limit the scope to business
activities. So, the states concerned may, by common agreement, limit the application of art. 17 para
1 OECD MTC to business activities.
Credit method as dealt with in art. 23B OECD MTC.
d. Jan is living in France and he is a member of the supervisory board of ‘Mastermind BV’ in the
Netherlands. He earns € 50,000 a year.
First of all, it must be determined of which country Jan is a resident as dealt with in art. 4 OECD MTC.
On the basis of art. 4 para 1 OECD MTC, Jan is a resident of the France as he lives there (domicile).
However, the Netherlands would probably also want to tax as he is a member of the supervisory
board of a Dutch firm and enjoys remunerations thereof.
Art. 16 OECD MTC is applicable. Director’s fees and other similar payments derived by a resident of a
contracting state (France) in his capacity as a member of the board of directors of a company which
is a resident of the other contracting state (the Netherlands) may be taxed in that other state (the
Netherlands).
The usual method to prevent double taxation for art. 15 OECD MTC is the exemption method as
dealt with in art. 23A OECD MTC.
e. Jan is living in France and he receives a ‘pension’ (€ 30,000 a year) from Plastic BV (the
Netherlands) because of an accident which happened at the working place in the Netherlands,
where he was working. He will receive this pension for ten years.
First of all, it must be determined of which country Jan is a resident as dealt with in art. 4 OECD MTC.
On the basis of art. 4 para 1 OECD MTC, Jan is a resident of the France as he lives there (domicile).
However, the Netherlands would probably also want to tax as he derives pensions from an earlier
employment in the Netherlands.
In order for art. 18 OECD MTC to be applicable, the Netherlands requires three criteria to be fulfilled
derived from case law:
- Care requirement: the payment must be designed to meet the taxpayer’s needs after he
ceases working, i.e. the payment is intended for care during the old age or disability of the
employee and his family;
- Reasonableness requirement: the pension payments may not exceed what is considered
socially acceptable. This requirement aims at avoiding disguised remuneration elements in
the grant of a pension by the employer; and
4
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