German mortgage interest deductible in the Netherlands

The Court of Appeal in Den Bosch recently ruled in a case about a German resident who worked in the Netherlands from the beginning of the tax year and emigrated to the US during the tax year. The question was whether he was allowed to deduct the mortgage interest on his German dwelling from his Dutch income, without opting to be treated as a resident taxpayer for Dutch tax purposes. Based on European jurisprudence, this would be possible if he had earned 90% of his income in the Netherlands. However, this was not the case, as he generated most of his income in the US in that specific tax year.

The Court ruled that the interest was deductible after all, as the taxpayer had moved out of the EU. During the period of residence in the EU, 90% of his income had been earned in the Netherlands and the Netherlands should therefore grant him deductions for personal allowances.

The taxpayer in this court case didn’t want to opt to be treated as a resident taxpayer for Dutch tax purposes, as there are quite a few downsides to this option (eg. the claw back rule). In a previous newsletter we mentioned that a resolution was announced, taking away most of these downsides. We are still awaiting this resolution and will inform you as soon as there is any news.