On 23 April 2015, clarification on the impact of the changes of the OECD Model commentary on articles 15 and 17 was published in a special Decree (effective 2 May 2015). The Decree provides guidance with respect to termination payments and on the interpretation of the term 'personal activities' of artist and sportsmen.
- Termination payments
According to the Dutch Supreme Court, the allocation of taxing rights concerning termination payments in cross-border situations is based on the employment history (based on the year of termination and the foregoing four years of employment). Furthermore, the Dutch Supreme Court held that termination payments are only taxable in the employment state if a sufficient connection exists between the termination payment, and the employment exercised in the employment state. Such connection was not deemed to exist if the termination payment is not borne by an employer resident in the employment state or by a permanent establishment of a fixed base, which an employer has in that state.
The OECD approach
The new OECD Commentary includes that the allocation of taxing rights with respect to termination payments has to be based on the last 12 months during which the employment was carried out.
The Decree clarifies that the Netherlands will follow the approach of the OECD Commentary with effect from 15 July 2014.
- Personal Activities
According to the Dutch Supreme Court, whether a basic salary may be considered as a remuneration for personal activities of a sportsmen, depends on the intention of the contracting parties as expressed in the relevant employment contract. In the Court's view, if the employment contract obligates the artist / sportsman to perform in different countries, the basic salary should then in principle be allocated on a time spent basis, unless the contract indicates otherwise. In addition, the Court held that payments related to availability services, travels and necessary stay have to also be taken into account, as if those days were spent in the state of performance.
The OECD approach
The new OECD Model Commentary to article 17 clarifies that rehearsals and trainings may also be considered as a ‘personal activity’. In this respect, it is not required that the rehearsals and trainings are related to performances in front of an audience.
The Decree clarifies that this new OECD Model Commentary to article 17 will be applied to tax assessments, which were not yet final on 15 July 2014.