Germany–Netherlands Tax Treaty Update: What Employers Should Know

On 14 April 2025, Germany and the Netherlands signed a new protocol updating their income tax treaty. The agreement modernises the rules that determine how income, dividends, and cross-border employment are taxed between the two countries.

The change introduces practical updates for employers with cross-border staff, reflecting today’s reality of hybrid and remote work. It also refines how dividends, government salaries, and double taxation are treated, making tax positions clearer for both companies and individuals.

Remote and Cross-Border Work

One of the most relevant updates in the new protocol is the 34-day home-working rule for cross-border employees. Workers who live in one country but are employed in the other can now work from home for up to 34 days per year without triggering double taxation. A home-working day counts if more than 30 minutes of work are performed in the employee’s country of residence.

Under the current system, income earned on home-working days is typically taxed in the employee’s country of residence, while income from days worked on-site is taxed where the employer is based.

This creates complexity for both payroll and compliance. The new rule aims to simplify that process and limit dual taxation risks for employees who only occasionally work from home. However, the measure does not cover everyone. Employees who exceed the 34-day limit will therefore fall outside this exemption.

Dividends, Withholding, and Collective Investments

The protocol also revises the dividend withholding tax framework. Companies that hold at least 10 percent of another company’s shares for a continuous 365-day period will qualify for a reduced 5 percent withholding rate.

Real estate investment trusts and comparable investment funds will continue to be subject to the 15 percent rate.

To ensure fair application, the update includes anti-abuse provisions and clearer definitions of what qualifies as a collective investment undertaking.

Preventing Double Taxation & Government Salaries

The amendment maintains the principle that income should not be taxed twice. Germany will continue to exempt income that is already taxed in the Netherlands, while the Netherlands will apply the exemption with the progression method, ensuring that cross-border income remains fairly treated under both systems.

The protocol also clarifies how government salaries are taxed. In most cases, salaries paid by one state remain taxable only in that state, except when the employee is a resident and national of the other country. The 34-day home-working allowance introduced for cross-border workers will also apply to government employees, bringing consistency and flexibility to public sector roles.

What Employers Should Consider

The new protocol reflects how work patterns have evolved since the pandemic. The introduction of the 34-day rule and clearer taxation rules for remote and cross-border work provide more certainty for both employers and employees. However, they also bring new administrative demands and strategic decisions.

Employers with staff working between Germany and the Netherlands should now review employment contracts, payroll processes, and time-tracking systems. Preparing early will help ensure compliance and avoid unnecessary complexity once the new rules take effect.

What Happens Next

The protocol still requires approval by the Bundestag and Bundesrat in Germany, and by the Parliament in the Netherlands. Once ratified, the new provisions are expected to take effect from 1 January of the year following ratification.

At EMG, we help employers make sense of change and adapt their mobility strategies accordingly. Our team supports HR and finance leaders with scenario planning, payroll alignment, and cross-border compliance. Keep your organisation ready for what’s next.