Box 2 on emigration and return: the step-up on remigration and the partial non-resident who leaves

The judgments

The question

Dutch income tax on a substantial interest – broadly, a holding of at least 5% of the issued capital of a company (Article 4.6) – is levied in box 2. Box 2 does not tax value growth year by year. It taxes when a benefit is derived: a dividend or a capital gain on a disposal. Because a shareholder can move abroad before he sells, the Income Tax Act 2001 treats emigration as a deemed disposal and secures the resulting tax with a protective assessment. On the way back in, the Act works the other way: a new resident’s acquisition price is stepped up to market value, so that growth from before arrival is not taxed. Both rules have exceptions, and the exceptions are where the disputes arise.

This review covers two such disputes. The first, decided by the Supreme Court on 20 September 2024, concerns a shareholder who emigrated, whose company later moved its effective management out of the Netherlands, and who then came back together with the company. The question was how much of the value growth during his years abroad he could add to his acquisition price. The second concerns a French national who worked in the Netherlands under the 30% ruling and opted for partial non-resident tax liability for boxes 2 and 3. When she left, the tax inspector imposed a protective assessment on a gain of €4,628,285. The District Court annulled it, the Amsterdam Court of Appeal upheld that judgment, and Advocate General Koopman has advised the Supreme Court to dismiss the State Secretary’s appeal. The issues matter to founders and shareholders of Dutch companies who move, to returning Dutch nationals, to expats who held shares in Dutch start-ups, and to the mobility teams who advise them.

The legal framework

Deemed disposal on emigration and the protective assessment

Income from a substantial interest consists of regular benefits and capital gains on disposal (Article 4.12). Article 4.16(1) lists acts that are also treated as a disposal. Point (h), at the heart of the second case, reads in our translation: “ceasing, otherwise than by death, to be a resident taxpayer, including the situation in which the taxpayer is deemed, for the purposes of the Tax Arrangement for the Kingdom …, the Tax Arrangement for the country of the Netherlands … or a convention for the avoidance of double taxation, no longer to be a resident of the Netherlands”. The gain is deemed to be derived immediately before resident tax liability ends (Article 4.46(2)) and equals the transfer price, here the market value, less the acquisition price (Article 4.19(1), Article 4.22(1)).

The tax on that gain is not collected at once. As the Advocate General explains (para. 4.7), a protective assessment (conserverende aanslag) is imposed with deferral of payment. Under Article 25(8) of the Collection of State Taxes Act 1990 the deferral ends, in whole or in part, at certain moments, including a real realisation through a sale of the shares or a dividend. Article 2.8 of the Income Tax Act 2001 designates the income to be preserved (te conserveren inkomen). Neither provision is in our translation. Article 4.25(5) allows rules by order in council on reducing such an assessment if the taxpayer returns before it has been paid in full.

Acquisition price on (re)immigration

Article 4.25 sets the rule for arrivals. Under paragraph 1, a taxpayer who comes to live in the Netherlands and holds shares at that time takes as his acquisition price the fair market value at that time. Paragraphs 2 and 3 switch this off: it “does not apply if the taxpayer previously ceased to live in the Netherlands”, nor “if the taxpayer was previously a non-resident taxpayer in respect of a substantial interest”. Paragraph 4 allows rules by order in council for those two cases. The historical acquisition price under Article 4.21(1) (the consideration plus costs) is then the starting point.

Those rules are in Article 16 of the Income Tax Implementing Decree 2001 (Uitvoeringsbesluit inkomstenbelasting 2001), which is outside our translation. The District Court quoted it in the 2017 wording (para. 18 of its 2021 judgment). Paragraph 1 provides that, where a taxpayer with a substantial interest comes to live in the Netherlands and previously lived there or was previously a non-resident taxpayer in respect of a substantial interest, the acquisition price is the price under Article 4.21, increased or reduced as the following paragraphs provide. Paragraphs 2 and 3 read, in our translation:

2. The acquisition price under Article 4.21 of the Act is increased by the growth in value … above that acquisition price in so far as it appears that the taxpayer, in connection with coming to live in the Netherlands, paid abroad a tax levied on income on it that is reasonable by Dutch standards. 3. [It] is increased by the growth in value … in so far as that growth appears to have arisen in a period in which the taxpayer was not liable to tax in the Netherlands in respect of those shares … and that growth has not already been included in the increase under paragraph 2.

The inspector may fix the acquisition price by a decision open to objection (Article 4.36). The first case is an appeal against such a decision.

Non-resident tax liability for a Dutch company and the deemed seat

A person who does not live in the Netherlands is a non-resident taxpayer if he derives Dutch income (Article 2.1(1)(b), outside our translation). That income includes “taxable income from a substantial interest in a company established in the Netherlands” (Article 7.1(b)), calculated under the rules of Chapter 4 (Article 7.5(1)). So a substantial interest in a Dutch company stays within the Dutch tax net after the holder emigrates, subject to treaties.

Article 7.5(7) treats a transfer of the effective management of a company out of the Netherlands as a disposal of the substantial interest. Article 7.5(6) then keeps the company deemed to be established in the Netherlands. In the period relevant to the first case it did so for ten years after the transfer, provided the company had been established in the Netherlands for at least five years (Supreme Court, para. 4.4.1). The Supreme Court refers to the text “as it read until 1 January 2016”; the District Court calls it the text applicable until 15 September 2015, 15:15 hours. Our current translation reads differently: the entity is deemed to be established in the Netherlands “for as long as a tax assessment in respect of income to be preserved from a substantial interest in that entity has not been paid in full”. The link to the current text is given with that caveat.

Partial non-resident tax liability

Article 2.6 of the Income Tax Act 2001 (2017 text, outside our translation) allowed rules by order in council under which employees recruited from abroad within the meaning of Article 31a(2)(e) of the Wage Tax Act 1964 could opt for “full or partial application of the rules of this Act for non-resident taxpayers”. Article 11(1) of the Implementing Decree made the option available, for the period of the 30% ruling, as an election for “application of the rules of Chapters 4 and 5 of the Income Tax Act 2001 as they apply under Chapter 7 of that Act to non-resident taxpayers (partial non-resident tax liability)”. In practice the election took boxes 2 and 3 out of worldwide taxation. Our translation of Article 31a of the Wage Tax Act 1964 gives the current text; the case concerned the 2017 wording. According to the Advocate General (para. 5.16), the partial non-resident regime was abolished with effect from 1 January 2025, following an amendment adopted by the House of Representatives during the passage of the 2024 Tax Plan.

District Court of North Holland, 19 October 2021, and Supreme Court, 20 September 2024: the returning shareholder and the deemed seat

Facts

The taxpayer had held all the shares in a Dutch BV since 22 March 1995. The acquisition price was €18,151 (Supreme Court, para. 2.1). In 2001 he emigrated to the United Kingdom. A protective assessment for 2001 was imposed on a deemed gain of €2,457,859, being the market value at emigration of €2,476,010 less €18,151, with deferral of payment (para. 2.2). The District Court adds that this assessment was dated 30 September 2004 (para. 3). In 2003 he moved from the United Kingdom to Belgium (para. 2.3). In 2004 – “early 2004”, according to the District Court – the effective management of the BV moved from the Netherlands to Curaçao. Because the shares were then worth less than in 2001, no further protective assessment was imposed (para. 2.4). In 2014 the 2001 protective assessment was remitted by decision (para. 2.5).

On 10 January 2017 the taxpayer moved from Belgium back to the Netherlands, and on the same day the BV’s effective management moved from Curaçao back to the Netherlands (para. 2.6). Belgium had not taxed the value growth between his move to Belgium and his return (para. 2.7). At his request, made on 15 May 2018 (District Court, para. 8), the inspector issued a decision under Article 4.36 fixing the acquisition price at €139,141: the historical price of €18,151 plus the growth between 31 December 2014 (€3,028,836) and 31 December 2016 (€3,149,826) (para. 2.8). In other words, the inspector gave a step-up only for the period after the ten-year deemed-seat period had ended.

The District Court

Before the District Court (case HAA 20/3508) the taxpayer asked primarily for an acquisition price of €856,121: €18,151 plus the growth from 1 January 2004 (€2,311,856) to 31 December 2016. In the alternative he asked for growth from 1 January 2011 (€2,771,688), arguing that the protective assessment had lapsed by operation of law in 2011. That gave €396,289 (para. 12; para. 8 gives €396,298). The inspector defended €139,141 and, in the alternative and on different reasoning, accepted the taxpayer’s alternative amount (para. 13). It was common ground that there was no step-up for the period before 2004 and that there was one from ten years after the 2004 transfer (para. 10). The dates and values were not in dispute (para. 14).

The District Court held, first, that both exceptions in Article 4.25(2) and (3) applied. The taxpayer had lived in the Netherlands until 2001, and afterwards he held a substantial interest in a company actually established in the Netherlands. The starting point was therefore the historical price, subject to Article 16 of the Implementing Decree (para. 17). There was no foreign tax on departure from Belgium, so Article 16(2) was out of the picture and only paragraph 3 was in dispute (para. 19).

On which law applies, the court sided with the inspector. The acquisition price is fixed at a single moment (10 January 2017), but paragraph 3 looks back over a period. Whether the taxpayer was liable to tax in the Netherlands must therefore be judged period by period under the text then in force (para. 20). So Article 4.25 and Article 16(3) apply in their wording at the date of return, and Article 7.5(6) in the wording applicable to the period being assessed (para. 21).

On the merits, the taxpayer argued that, because of the purpose of the rules and the fact that treaties prevented the Netherlands from taxing, he was only a “special taxpayer” by virtue of the fiction and not “liable to tax” for the purposes of Article 16(3) (para. 22). The court relied on the Supreme Court’s judgment of 22 September 2017 (ECLI:NL:HR:2017:2423), as cited in its judgment. On that basis, Article 16(3) does not increase the acquisition price for periods in which the holder was a non-resident taxpayer in respect of the shares. Neither the text nor the purpose shows that it matters whether that liability rested, wholly or partly, on the Article 7.5(6) fiction (paras 26–27). Passages from the legislative history of the fiction did not change this (para. 28), and the effect of the Netherlands–Belgium treaty played no role either (para. 29). Because Article 7.5(6) was not tied to the protective assessment, the court did not reach the alternative 2011 argument (para. 31). The appeal was dismissed, with no costs order (paras 32–33).

The grounds of appeal

The taxpayer appealed directly to the Supreme Court, bypassing the Court of Appeal: the open-data metadata list the case as a leapfrog appeal (sprongcassatie). The ground had two parts. First, his liability for 1 January 2004 to 31 December 2014 should be judged under Article 7.5(6) as it read on 10 January 2017 (para. 4.1.1). Second, the deemed-seat rule, even in its text before 2016, was meant only to allow collection of a substantial-interest claim that arose while the holder lived in the Netherlands, or while the company was actually established there. It was not meant to create a claim on growth after the company left, because the Act applies a territorial system to the emigration and remigration of substantial shareholders (para. 4.1.2).

The Supreme Court’s reasoning

The court began with the purpose of the rules, restating paragraph 2.4.3 of its 2017 judgment:

… the rules of Articles 4.21 and 4.25 of the Income Tax Act 2001, read together with Article 16 of the Implementing Decree, are intended to determine the acquisition price of shares forming part of a substantial interest in such a way that the Netherlands in principle taxes the growth in value of those shares to the extent that it arose in a period in which there was, under national law, resident or non-resident tax liability in the Netherlands in respect of the substantial interest.

It follows, the court said, that Article 16(3) does not increase the acquisition price where the holder was a non-resident taxpayer in respect of the substantial interest before coming to live in the Netherlands (para. 4.2).

On the first part of the ground, the court held:

Whether the holder of a substantial interest was a non-resident taxpayer in respect of it in the period before he comes to live in the Netherlands must be assessed by reference to the statutory rules on non-resident tax liability that applied in the period concerned.

The taxpayer’s reading, which applied the 2017 text, fitted neither the wording of Article 16(3) nor the purpose set out in para. 4.2 (para. 4.3).

On the second part, the court first set out the system. Under Article 2.1(1)(b) read with Article 7.1(b), a non-resident who derives taxable income from a substantial interest in a company established in the Netherlands is a non-resident taxpayer. Under Article 7.5(1) that is income from a substantial interest not held as a business asset in such a company. In the relevant period, Article 7.5(6) deemed a company that had been established in the Netherlands for at least five years to remain established there for ten years after its effective management moved abroad. Non-resident liability therefore covers both an actual and a deemed Dutch seat (para. 4.4.1).

The taxpayer’s reading of the pre-2016 deemed-seat rule could not be derived from its text or its legislative history. It also ran against the system of the Act (para. 4.4.2). When effective management moves out, the growth while the company was in the Netherlands is taxed by a protective assessment on the non-resident holder (Article 7.5(7)). Growth during the deemed-seat period is then taxed under Article 7.5(1) and (6), read with Article 7.6(1) and (2). The court added:

For the interpretation of this national-law system it is irrelevant whether or not Dutch treaty policy is aimed at ensuring that the Netherlands can give effect to the levy based on the deemed-seat rule in situations where a tax treaty applies.

So the view that only growth during non-resident liability based on an actual Dutch seat is excluded from the step-up was wrong (para. 4.4.3). The District Court’s judgments in its paras 20–21 and 26–27 (summarised by the Supreme Court in paras 3.2.2 and 3.2.3) were correct, and the ground failed (para. 4.5).

Outcome and costs

The appeal was dismissed. The acquisition price therefore stays at €139,141, and growth of €837,970 between 1 January 2004 and 31 December 2016 (on the taxpayer’s figures) received a step-up only for the last two years. The cassation appeal had been lodged on 27 November 2021, and the court found that the reasonable time had been exceeded by more than six but not more than twelve months. It awarded €1,000 in non-pecuniary damages against the State (the Minister of Justice and Security) (para. 5.2). Because of that award, the State was ordered to reimburse the €134 court fee and to pay €219 in costs for professional legal assistance. That figure is based on one procedural step at weighting factor 0.25 (paras 6.2–6.3 and the decision). No costs order was made against the State Secretary, since the appeal itself failed (para. 6.1).

District Court of North Holland, 30 November 2023, and Amsterdam Court of Appeal, 7 January 2025: the partial non-resident who leaves

Facts

The taxpayer, a French national, moved from France to the Netherlands on 1 January 2008 and emigrated back to France on 31 December 2017. Until 31 December 2017 she had the 30% ruling. The District Court’s findings refer to Article 31a(8) of the Wage Tax Act 1964; the Court of Appeal reads this as Article 31a(2)(e), 2017 text. Throughout her stay she used the election under Article 2.6 of the Income Tax Act 2001 for partial non-resident tax liability (Court of Appeal, facts 1–2). From 4 February 2015 she held a substantial interest in a Dutch-established company, [A] B.V. Her acquisition price was €2,609, and the market value at her emigration on 31 December 2017 was €4,630,894 (facts 3–4). In her 2017 emigration return she took the position that Article 4.16(1)(h) could not apply because of her election (fact 5). By an assessment dated 18 September 2021, the inspector nevertheless imposed a protective assessment for 2017 on income to be preserved of €4,628,285 (fact 6), and upheld it on objection.

The District Court

The case (HAA 22/3924) was heard by a single judge on 26 October 2023. The taxpayer argued that her election made her a non-resident taxpayer for box 2, through a fiction that taxed her “as if she lived abroad”, and that she had not been a treaty resident for box 2 either (para. 21). She relied on the explanatory note to the Implementing Decree (Stb. 2000, 641) and on the parliamentary history of the 1997 reform of the substantial-interest rules (Kamerstukken II 1996/97, 24761, no. 8, p. 11). That passage concerned the predecessor of Article 4.16(1)(h). It said that persons who come under the then 35% ruling “are treated as non-resident taxpayers under that ruling and therefore do not fall within the scope” of the deemed disposal on emigration (para. 20).

The inspector replied that the election leaves the person a resident taxpayer to whom some non-resident rules are applied. It does not deem her to live abroad within the meaning of Article 2.1 and Article 4 of the General State Taxes Act, and she remained a treaty resident until she left. The inspector relied on Senate papers (Kamerstukken I 1996/97, 24761, no. 62b, pp. 3–4) and on the State Secretary’s decree of 23 August 2013 (no. DGB 2013/70M) (para. 22). The taxpayer also argued that the objection officer had not been impartial, since internal emails showed officials involved in the original decision taking part in the discussion (facts, para. 7, and para. 9).

The court held that, before leaving, she lived in the Netherlands and was in principle a resident taxpayer; this was common ground (para. 23). But given the wording of Article 11 of the Implementing Decree, the explanatory note and the 1997 parliamentary passage, a partial non-resident taxpayer must be treated (fictitiously) as a non-resident taxpayer for box 2, “also according to the legislator’s intention”. Applying Article 4.16(1)(h) on her departure is incompatible with that (para. 24). The inspector’s reliance on the Supreme Court’s 2017 judgment did not help: the principle that the Netherlands taxes growth during periods of tax liability still requires a taxable event, and there was none (para. 25). The protective assessment was annulled, and the court did not need to deal with the alleged breach of the principles of good administration (para. 26). The inspector was ordered to pay costs of €2,722.50. That sum comprised €2,092.50 for professional assistance (2.5 points at €837) and €630 for travel and hotel, which the inspector had agreed to at the hearing. A claim for objection-phase costs was refused because it had not been made during the objection (Article 7:15(3) of the General Administrative Law Act). The inspector also had to refund the €50 court fee (paras 28–30).

The Court of Appeal’s reasoning

On the inspector’s appeal (case 24/164) the Court of Appeal decided without a hearing, with the parties’ consent (para. 1.5). It accepted that the taxpayer had been a resident taxpayer until she emigrated. But by her election she had chosen application of the rules of Chapter 4 as they apply to non-resident taxpayers under Chapter 7, which in the words of the explanatory note meant she was to be treated for box II “as if she were a non-resident taxpayer” (Stb. 2000, 641, p. 25) (para. 5.1). It framed the question as whether she must “consistently” be treated as a non-resident for box II, so that, like “real” non-residents, she cannot face a charge on emigration (para. 5.2).

The court was candid that the text and the intention of the legislator and of the authority issuing the decree gave no decisive answer. There were arguments for and against, and there was no Supreme Court case law on such a case (para. 5.3.1). It drew on two judgments on partial non-resident status. In HR 12 October 2007, ECLI:NL:HR:2007:BA6415, as quoted by the court, the restriction on crediting Dutch dividend tax for non-residents in Article 9.2(7) applied to an expat who had opted for non-resident rules for box 3 (para. 5.3.2). In HR 15 November 2024, ECLI:NL:HR:2024:1658, also as quoted, such an expat whose 30% ruling ended during the year was treated, for the time-apportionment rule in Article 5.2(3), as a taxpayer who was not yet a resident taxpayer at the start of the year. The Supreme Court said that this fitted the purpose of the partial non-resident regime (para. 5.3.3). The Court of Appeal concluded:

From this case law of the Supreme Court the Court of Appeal infers that a taxpayer who, for the levy on box II, opts for application of the rules of the Income Tax Act 2001 for non-resident taxpayers must be regarded in all respects as a non-resident taxpayer as regards the box II levy. This implies that in the present case the taxpayer cannot be confronted with a protective assessment on account of her emigration, since that is incompatible with taxing her as if she were a non-resident taxpayer. Had the legislator or the authority issuing the decree intended otherwise, it would, for reasons of legal certainty, have been appropriate to provide so expressly …

Outcome and costs

The inspector’s appeal was dismissed and the District Court’s judgment upheld (paras 5.5 and 7). The inspector was ordered to pay €907 in costs on appeal, and the registry was to levy a court fee of €559 from the inspector for lodging the appeal (paras 6 and 7). The State Secretary appealed in cassation (Supreme Court case number 25/00574).

Advocate General Koopman, 19 September 2025

The ground and the defence

The State Secretary argued that the election did not make the taxpayer a non-resident taxpayer. It only applied non-resident rules for Chapters 4 and 5, so on leaving for France she ceased, otherwise than by death, to be a resident taxpayer (para. 3.2). The purpose of Article 4.16(1)(h), he said, is to secure tax on value growth built up in the Netherlands (para. 7.2). The taxpayer replied that the election produces treatment that is in substance non-resident liability. Preventing loss of a tax claim is a valid aim, but it must be achieved within the statutory framework, and a taxpayer cannot be resident and non-resident at the same time in box 2 (para. 3.3).

No loss of claim for a Dutch substantial interest

The Advocate General first traced the purpose of the deemed disposal. It was introduced in the 1997 reform to stop shareholders escaping substantial-interest tax by temporary emigration (para. 4.8) and was carried over into the 2001 Act without substantive change (para. 4.9). Its function is that of an exit charge, a closing entry against loss of a claim (paras 4.10–4.11). The treaty-residence limb of point (h) covers a person who remains resident under national law but becomes resident of another state under a treaty (para. 4.16). Crucially, the explanatory memorandum quoted by the Advocate General (para. 4.12) said that for a substantial interest in a company established in the Netherlands there is always a tax link with the Netherlands, even after emigration. On that point no change was proposed, “of course” subject to treaties.

From this the Advocate General drew an interim conclusion (paras 4.20–4.23 and 4.30). For a Dutch substantial interest, national law loses nothing on emigration, whichever way the taxpayer is classified. If she is treated as resident for point (h), a protective assessment on €4,630,894 less €2,609 is possible. If she is treated as non-resident, she was already a non-resident taxpayer for the interest when she acquired it on 4 February 2015 and remains one afterwards, so a later dividend or sale can in principle be taxed under national law.

The treaty as the real obstacle

What stops Dutch tax is the treaty. Under the Netherlands–France convention, dividends fall under Article 10. Gains on shares fall under Article 13(4), which allocates them to the state of residence of the alienator. The substantial-interest exception in Article 13(5) applies only to an individual who has the nationality of the first state without that of the other, and the taxpayer is not Dutch (paras 4.24–4.25). The hearing record suggests that she sold the shares in 2019, possibly while living in Switzerland; Articles 10 and 13 of the Netherlands–Switzerland treaty would then also prevent Dutch tax (para. 4.26).

The Advocate General placed this alongside the Supreme Court’s judgments of 22 September 2017 and 20 September 2024. Both held that treaty allocation is irrelevant to the meaning of the national rules (paras 4.27–4.28). He noted that the 2024 judgment puts this on the more general basis that treaty policy is irrelevant “for the interpretation of this national-law system”, whereas in 2017 the point was derived from the text and purpose of the provision itself (para. 4.29).

Text, history and the earlier case law

On the text, Article 2.6 and Article 11(1) of the Implementing Decree require the rules for non-resident taxpayers to be applied, and:

For non-resident taxpayers it holds that they cannot ‘cease to be a resident taxpayer’. Judged by the wording of the Act, applying the rules that apply to non-resident taxpayers therefore cannot lead to a disposal within the meaning of Article 4.16(1)(h) of the Income Tax Act 2001.

On the history, the regime grew out of the fictitious non-resident status under the old 35% ruling. The resolution of 2 April 1986 said that an employee who opted was “regarded as” a non-resident and was not a treaty resident (para. 5.7). Later resolutions of 1992 and 1995 were to the same effect, the 1995 decree adding a qualified residence certificate (para. 5.8). The 2001 legislator said that Article 2.6 made a “corresponding arrangement” possible (para. 5.10). The explanatory note to Article 11 said that “the essence” of the fictitious non-resident regime was continued and that these employees are treated for boxes II and III “as if they were non-resident taxpayers” (paras 5.12–5.13). The explanatory memorandum to a 2001 amendment of the mirror-image election in the then Article 2.5 explained that the chosen rules determine the object of the levy (para. 5.11).

The State Secretary’s policy decree of 26 November 2001 states that a resident who makes the election does not thereby cease to be a resident taxpayer. That statement was repeated in decrees of 21 October 2005 and 23 August 2013, and the 2013 decree continued the practice of qualified residence certificates limited to box 1 (paras 5.14–5.15). But a policy decree is not a generally binding regulation, and neither taxpayers nor courts are bound by it (para. 7.6). In that light, the 1997 remark on the old short-stay exemption (the passantenregeling, whose current counterpart is Article 4.18) was unsurprising, even though it was made in another context (paras 4.14–4.15 and 7.7).

On the case law, the Advocate General read the 2007 and 2024 judgments as resting mainly on the purpose of the partial non-resident regime, not on the purpose of the provisions in issue, contrary to the State Secretary’s reading (para. 7.8). In the absence of any reservation in the Act or the Decree, a person who opted for partial non-resident liability does not cease to be a resident taxpayer when she leaves, so there is no deemed gain (para. 7.9). That also fits the purpose of point (h): the provision presupposes that the tax link is lost, which does not happen for a Dutch substantial interest (paras 7.10–7.11).

The treaty, the new state of residence and strict interpretation

The problem, the Advocate General said, is not one of national law. On national law the State Secretary could tax any later dividend or sale. The treaties with France and Switzerland allocate that right to the state of residence, and the fact that the Netherlands agreed to that allocation cannot be held against the taxpayer (para. 7.12). The legislator was aware that treaties can prevent tax on a Dutch substantial interest held by a non-resident. It wrote treaty effects into point (h) only for the treaty-residence limb, so treaty allocation is not relevant to the interpretation (para. 7.13, citing the 2017 and 2024 judgments).

It is also not a given that the new state of residence leaves the Dutch growth untaxed. Not every state grants a step-up on arrival – the Netherlands itself does not where the holder was liable to tax for the interest and there was no reasonable foreign tax on departure. And if the holder moves to a non-treaty state, such as Monaco, the Netherlands can in principle tax after emigration (para. 7.14).

More fundamentally, it is for the legislator to define tax liability precisely, a point the Advocate General linked to Article 104 of the Constitution. The Supreme Court is, rightly in his view, reluctant to stretch provisions that create tax liability. He cited its judgment of 14 June 2024 (ECLI:NL:HR:2024:862) on open mutual funds as an example, and said that a deemed disposal resting on a fiction is all the more reason for strict interpretation (para. 7.15). He ended on this note:

I can understand the State Secretary to the extent that in practice there may be a revenue interest in cases where the tax treaty prevents taxation and the other country grants a step-up on arrival. But while writing this opinion I regularly had the feeling that he is knocking on the wrong door. It is the legislator who could have ensured that partial non-resident tax liability does not carry through to Article 4.16(1)(h) …

He advised the Supreme Court to dismiss the appeal (paras 7.17 and 8).

Commentary reported in the opinion

The Advocate General summarised the published case notes (chapter 6). The editors of Vakstudie-Nieuws and annotator Van Arnhem approved of the District Court’s judgment. Annotator Van Mol criticised it for setting aside the literal text, under which partial non-residents are in principle resident. He read the 1997 remark as confined to the short-stay exemption and to companies established outside the Netherlands. Van Mol was milder on the Court of Appeal and fully endorsed its nuanced approach, but warned that non-taxation can result where a treaty blocks Dutch tax and the new state grants a step-up, which is exactly the leak the legislator wanted to close. Annotator Heldens considered the Court of Appeal’s result intuitively right (paras 6.2–6.5).

How the judgments fit together

The two lines start from the same premise: box 2 tracks the periods in which the Netherlands, under its own law, has resident or non-resident tax liability in respect of the substantial interest, and treaty allocation does not shape the national rules. In the remigration case that premise works against the taxpayer. Every year in which he was liable to Dutch non-resident tax – even through the deemed seat of a company actually managed in Curaçao, and even though the Netherlands–Belgium treaty would have blocked Dutch tax on a sale – counts as a Dutch period. Growth in those years therefore gets no step-up on return. The Supreme Court tests each period under the law then in force, so the old ten-year deemed-seat rule governs 2004 to 2014.

In the partial non-resident case the same premise works for the taxpayer. If she was a non-resident taxpayer for box 2 throughout, nothing changes on her departure in national-law terms: her Dutch substantial interest remains taxable as Dutch income under Article 7.1(b), and there is no cessation of resident tax liability to trigger Article 4.16(1)(h). The Advocate General uses the Supreme Court’s 2024 statement that treaty policy is irrelevant “for the interpretation of this national-law system” to reject the State Secretary’s reliance on the practical loss of revenue under the treaty with France.

The symmetry has a logical consequence that the sources do not address directly. If a partial non-resident is a non-resident taxpayer for box 2 in respect of a Dutch substantial interest, the period of her stay is a period of non-resident liability. If she later came back to the Netherlands, Article 4.25(3) and the reasoning of the 2024 judgment would arguably deny her a step-up for growth during that period. Neither the Court of Appeal nor the Advocate General had to consider that scenario.

The tension in the partial non-resident case is between text and system. The State Secretary’s case rests on the policy decree and on the fact that an electing expat still lives in the Netherlands. The taxpayer’s case rests on the wording “rules of this Act for non-resident taxpayers”, the history of the 35% ruling, and the Supreme Court’s readings in 2007 and 2024. The Court of Appeal admitted that the text and intention were inconclusive and decided on the case law and on legal certainty. The Advocate General went further and found that text, history and purpose all point the same way. Whether the Supreme Court agrees, and on which reasoning, is the open question.

What it means in practice

For shareholders returning to the Netherlands:

• The step-up on return is not a fresh start. Under Article 4.25(2) and (3) and Article 16 of the Implementing Decree, the historical acquisition price applies. It is increased only for growth in periods when there was no Dutch tax liability at all in respect of the shares, or for which a reasonable foreign exit tax was paid.
• A Dutch company keeps the holder within non-resident liability under Article 7.5(1). A company that has moved its effective management abroad may still be deemed Dutch under Article 7.5(6) – for ten years under the old text, and under our current text for as long as a protective assessment for that company has not been paid in full.
• Treaty protection during the years abroad does not create a step-up. Both the 2017 and the 2024 judgments say so.
• Liability in each earlier year is tested under the law of that year, so the history of the rules matters as well as the history of the facts.
• Documents worth keeping: valuations at emigration, at any transfer of the company’s effective management, at the end of any deemed-seat period and at return. Keep proof of any foreign exit tax and of its rate, the protective assessments and any remission decisions, and the request for and the decision under Article 4.36. Under our current translation of Article 4.37(3), the inspector can revise that decision within five years, or twelve years in certain cross-border cases.

For expats who held a Dutch substantial interest under the partial non-resident regime:

• The Court of Appeal and the Advocate General both reject a deemed disposal on departure, but the Supreme Court had not ruled when the Advocate General delivered his opinion, and no judgment is among the sources for this review.
• The regime was abolished from 1 January 2025 (Advocate General, para. 5.16), so the question concerns departures by persons who had the status under the old rules.
• Even if no deemed disposal applies, the Dutch claim under national law survives. Whether the Netherlands can actually tax a later sale or dividend depends on the treaty with the new state of residence. Under the treaty with France, Article 13(5) preserves Dutch taxation of substantial-interest gains only for Dutch nationals without French nationality who were resident in the Netherlands at any time during the five years preceding the alienation.
• Documents worth keeping: the annual elections under Article 2.6 and Article 11 of the Implementing Decree, the 30% ruling decision and its end date, any qualified residence certificates, the acquisition date and price of the shares, the value at departure, and evidence of the date and place of any later sale.

Where Article 4.16(1)(h) does apply, note that under our current translation Article 4.14d increases the deemed gain by any negative excessive-debt amount. This rule, from the excessive borrowing regime in force since 1 January 2023 (Advocate General, para. 4.4), is relevant to shareholders with large loans from their own company.

Status

The Supreme Court’s judgment of 20 September 2024 is final; the acquisition price decision stands.

In the partial non-resident case, the State Secretary’s appeal in cassation is registered under number 25/00574, and Advocate General Koopman delivered his opinion on 19 September 2025. The metadata of the opinion and of the Court of Appeal judgment list no later judgment, and no Supreme Court judgment in the case is among the sources for this review. On that basis the cassation appeal is treated here as pending.

Two legislative changes visible in the sources affect the provisions discussed. First, Article 7.5(6) no longer contains a fixed ten-year period: the deemed seat now lasts for as long as the protective assessment for that company has not been paid in full. Second, according to the Advocate General, partial non-resident tax liability under Article 2.6 of the Income Tax Act 2001 and Article 11 of the Implementing Decree was abolished with effect from 1 January 2025.

Provisions discussed

• Income Tax Act 2001: Art. 4.16, Art. 4.21, Art. 4.25, Art. 4.36, Art. 7.1, Art. 7.5
• Netherlands–France Double Taxation Convention: Art. 10, Art. 13

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How to cite

Case law review by BCA EU, for information. Quotations from the judgments are our translations; only the original texts published by the courts are authoritative. Judgments checked on the official sources on 30 October 2026. This page is not legal or tax advice.