The 183-Day Tax Residency Rule

Many entrepreneurs believe that staying under 183 days in a country means they escape tax residency there. That is largely incorrect.

The 183-day rule is a domestic threshold. It exists, but it’s more nuanced than most people realize. It becomes irrelevant the moment two countries both claim you as a resident under their local laws.

When that happens, the tax treaty takes over. And the treaty overrides day counts.

Most EU countries have bilateral tax treaties that follow the OECD model. These treaties include a provision commonly called “the 183-day rule.”

Here’s how it works:

Your employee’s salary is normally taxed only in their home country, let’s say Sweden. However, if they’re physically present in the work country for more than 183 days in any 12-month period, the work country gains the right to tax their income.

Once that threshold is crossed, you can no longer keep the person on “Swedish payroll only” without triggering tax non-compliance.

What the treaty actually looks at:

Under the OECD Model Tax Convention (Article 4), residency is determined by a strict “tie-breaker” hierarchy.

It starts with Permanent Home.

• If you have a permanent home available to you in only one country, you are a resident there. End of story.
• But if you have homes in both countries (or neither), the test moves to the real deciding factor: Centre of Vital Interests.

Centre of Vital Interests

This is where the battle is usually lost. The authorities look at where your personal and economic relations are closer:

• Where your family (spouse/children) lives
• Where you perform your work and generate income
• Where your assets are located
• Where your social, political, and cultural ties are

Not just where you sleep most nights.

Conclusion

Tax residency isn’t just about counting days; it’s about the depth of your roots. If your strategy relies solely on day counts while you maintain your life’s infrastructure in a high-tax country, you are vulnerable.

If you’re a European entrepreneur planning to send an employee or consultant to work in another EU country for several months, you’ve probably heard about the A1-certificate and posted worker rules. But there’s a critical tax issue that catches many businesses off guard: the 183-day rule.

This article explains what it is, how to count it correctly, and three strategies to structure your cross-border engagement compliantly.

???? Registration vs. Tax Residency: The Common Trap

Common question: “I’m moving abroad but keeping my Dutch registration (‘ingeschreven’) to maintain my mortgage deduction. Does this keep me a Dutch tax resident?”

The answer: No, and it creates significant risk

• Registration is not Residency: Municipal registration is an administrative fact, but tax residency is determined by where your life actually happens.
• The “Benefit” Trap: Staying registered to claim mortgage interest deductions or child allowances (kindertoeslag) while living abroad is considered non-compliance.
• Global Exposure: If the Dutch authorities determine you aren’t a resident, they will demand repayment of benefits. If they determine you *are* a resident, they will tax your global income.

⚠️ Critical Risks:

• Repayment Demands: The Belastingdienst can audit back several years and demand full repayment of on-site benefits with interest.
• Double Claims: Without a clear “exit,” both the Netherlands and your new country (e.g., South Africa or Norway) may claim tax rights over the same income.
• Business Residency: If you are the sole director of a BV, your personal residency can accidentally shift your company’s tax residency as well.

???? Our advice: Never rely on registration as a “safety net.” If your life’s infrastructure has moved, your tax strategy must follow. We recommend a formal residency review before you move to align your BRP registration with your actual tax liability.

— Thomas Jaques, NordicHQ
Need to clarify your residency status or manage a cross-border transition? See our Netherlands Tax & Residency Guide or Contact us for a confidential review.

Case example

Let’s say you run a Swedish IT consulting company. A Dutch client needs your expertise for a 6-12 month project. Your consultant will work on-site in the Netherlands while remaining employed by your Swedish company.

You’ve sorted the basics:

• ✓ A1 certificate from Försäkringskassan (covers social security)
• ✓ WagwEU notification (Dutch posted worker compliance)
• ✓ B2B service agreement with the Dutch client

Everything looks good, right?

Not quite. There’s a tax compliance issue that most entrepreneurs miss until it’s too late.

The Critical Mistake: Counting “Work Days”

Here’s where many entrepreneurs get it wrong.

You might think: “My consultant works 5 days per week, so 183 work days = about 37 weeks = roughly 9 months. We’re safe!”

This is incorrect.

The Dutch tax authority (Belastingdienst) — like most EU tax authorities — counts days of physical presence, not working days.

What counts as a day?

• Any day where your employee is physically in the Netherlands at midnight
• This includes weekends
• This includes public holidays
• This includes sick days
• Even brief stopovers can count

Practical examples:

So your “6-12 month project” might breach the threshold sooner than you think.

What Happens If You Breach It?

If your employee crosses 183 days, two things happen:

1. Tax liability shifts – The Netherlands gains the right to tax their salary (for work done in NL)
2. You’re suddenly non-compliant – Your “Swedish payroll only” setup no longer works

The Dutch tax authority can:

• Demand back payment of income tax
• Issue penalties for non-compliance
• In severe cases, trigger a Permanent Establishment (PE) investigation for your company

Three Compliant Strategies

The good news: there are legitimate ways to structure this. Choose based on your project timeline and business needs.

Strategy 1: Stay Under the Threshold

Best for: Projects naturally under 9 months, or where flexibility exists.

How it works:

• Keep physical presence under 183 days through:
  • Remote work from home country (e.g., 3 days/week on-site)
  • Natural project breaks
  • Shorter assignment duration
• Employee stays on home country payroll
• Simple compliance (A1 + WagwEU notification)

Pros: Simplest, lowest cost, no tax complexity
Cons: Requires discipline to track days accurately

Strategy 2: Consultant Rotation

Best for: Multi-year projects with multiple qualified consultants available.

How it works:

• Swap consultants every 6-8 months
• Each individual stays under 183 days
• Project continues seamlessly with institutional knowledge transfer

Example: Year 1 = Consultant A (8 months), Year 2 = Consultant B (8 months), Year 3 = Consultant A returns (8 months)

Pros: Supports long-term engagements without tax complexity
Cons: Requires resource depth and strong knowledge management

Strategy 3: Shadow Payroll

Best for: Long-term single consultant where rotation isn’t practical.

How it works:

• Your company continues to employ and pay the consultant
• A Dutch payroll/compliance provider runs a parallel “shadow payroll”
• They calculate monthly Dutch wage tax and remit it to the Belastingdienst
• Your company adjusts pricing to the end-client to cover the tax cost
• Consultant files annual Dutch tax return

Pros: Fully compliant for unlimited duration
Cons: More expensive, more administrative overhead

Typical costs: €1,500-2,500 setup + €300-500 monthly per person

What About Permanent Establishment (PE)?

You might have heard that having an employee work abroad creates “Permanent Establishment” risk – meaning your company could owe corporate tax in the work country.

Good news: For standard consulting work (where your employee follows the client’s instructions and doesn’t sign contracts on behalf of your company), PE risk is typically low.

However, if your employee:

• Makes binding decisions for your company
• Negotiates and signs contracts with third parties
• Acts as your company’s representative with broad authority

…then PE risk increases and you should get professional advice on contract structuring.

Practical Action Steps

Before starting a cross-border project:

1. Calculate realistic physical presence – Don’t guess. Map out the actual work pattern (days per week on-site, holidays, travel).
2. Choose your strategy early – Don’t wait until month 6 to figure this out. Shadow payroll setup takes 4-6 weeks.
3. Track days meticulously – Keep records of:
   • Entry/exit dates (passport stamps, travel bookings)
   • Accommodation receipts
   • Work location logs
4. Build it into your pricing – If you’ll need shadow payroll, factor an extra 15-20% into your service fee to cover the tax and admin costs.
5. Review your B2B contract – Make sure it clearly states:
   • Your employee works under client direction
   • Your company doesn’t have authority to bind the client
   • Services are performed as an independent contractor relationship

When to Get Professional Help

Consider engaging a cross-border compliance specialist if:

• Project duration is 8+ months with daily on-site presence
• You’re unclear whether you’ll breach 183 days
• The client is pushing for “just stay on Swedish payroll” beyond the threshold
• You want to request a formal tax ruling for certainty (costs ~€2,500, takes 3-4 months, but provides binding confirmation)

Final Thoughts

Cross-border work in the EU is relatively straightforward – if you plan ahead. The 183-day rule isn’t a barrier; it’s just a decision point.

The entrepreneurs who get caught out are those who assume “EU freedom of movement” means “no tax consequences.” It doesn’t.

The entrepreneurs who succeed are those who:

• Understand the rules
• Choose an appropriate structure
• Track compliance carefully
• Build the costs into their pricing from day one

With proper planning, you can support multi-year international projects compliantly and profitably.

Disclaimer: This article provides general information and does not constitute legal or tax advice. Tax treaties vary by country pair, and individual circumstances differ. Always consult a qualified professional for your specific situation.

Need Help?

If you’re setting up a cross-border engagement and want to ensure you are choosing the right structure, we can help out. Contact us below