Lucrative Interest Taxation In Cross-border Situations

Recently, the Court of Appeal of 's-Hertogenbosch ruled that income from shares qualifying as a directly held lucrative interest should be treated as dividend or capital gains income for tax treaty purposes, rather than employment income. This ruling deviates from the position often taken by the Dutch tax authorities and is thus relevant for holders of a lucrative interest in a cross-border setting.

Court case at hand

The case concerns an individual living in Germany but working in the Netherlands. The individual participated in a management investment plan, by holding an interest in the ordinary share capital of a Dutch company. These ordinary shares (as subordinated instruments to the preferred share capital) qualified as a lucrative interest.