A resident taxpayer of the Netherlands is in principle taxable in the Netherlands on his worldwide income. This also includes employment income connected to activities performed in for example Oman or Bahrain. If certain conditions are met, a relief for double taxation can be applied on the basis of the applicable tax treaty. Based on the tax treaties Oman-The Netherlands and Bahrain-The Netherlands, a relief for double taxation is granted based on the credit method (for employment income). Based on the credit method, the foreign taxes paid are deducted from the total Dutch tax due. Given that Oman and Bahrain do levy income tax on employment income, the credit method effectively still results in full taxation in the Netherlands.
Recently, however, the Dutch tax authorities approved to apply a relief for double taxation based on the exemption with progression method instead of the credit method for a specific case. This substantially reduced the Dutch tax liability.
If you have employees working in Oman or Bahrain, we recommend to take a moment to consider requesting a comparable approval with the Dutch tax authorities. This could result in significant cost savings. If you appreciate to exchange further thoughts on this subject with tax experts a voluntary basis, please feel free to contact Xuan Le (0031 88 792 3469 / firstname.lastname@example.org) or Ronnie van Meijl (0031 88 792 1471 / email@example.com) of PwC.