As of 1 January 2019, the tax part of the tax credit will no longer be automatically granted to frontier workers who work in the Netherlands but do not reside in the Netherlands. This constitutes an obstacle for frontier workers. ITEM has already questioned this before. Recently, the European Court of Justice (ECJ) issued an interesting ruling[1] regarding the other part of the tax credit, the premium part: in this case, the Netherlands may proportionally reduce this part over time.


The case concerns Zyla, a Polish national who worked and lived in the Netherlands from 1 January to 21 June 2013. After ending her job, she moved back to Poland. There she remained unemployed for the rest of 2013.

The European basic regulation[2] for social security stipulates that Zyla, through her activities in the Netherlands, had been socially insured in the Netherlands in the period 1 January – 21 June 2013. Because of her activities, she was also liable to pay taxes in the Netherlands. Furthermore, she is entitled to the general tax credit, which consists of a tax part (for taxes) and a premium part (for social contributions). At the time, Zyla chose to be treated as a domestic taxpayer for the entire calendar year, with which the full tax credit can be obtained. However, in assessing income tax and social contributions, the Dutch Tax Authority reduced the premium part of the tax credit proportionally in time with the period that she did not live and work in the Netherlands.

In Europe, the free movement of workers applies, which means that foreign workers are entitled to the same social and fiscal advantages as domestic workers. Also, according to European case law, Member States must take into account the personal and family situation of foreign persons, who have earned the largest part of their income in the Member State concerned and who cannot make use of tax or social advantages in the Member State of residence. According to Zyla, the reduction made by the Tax Authority violates this European case law, resulting in discrimination based on the place of residence. Because Zyla’s entire annual income is earned in the Netherlands and she has no income in Poland, she cannot get a similar benefit in Poland.


Ultimately, the ECJ did not agree with Zyla. The Netherlands has opted for a social security system in which contributions must be paid. A number of other Member States finance social security from general tax revenues. The contribution part of the tax credit is designed to motivate people to continue working. To this end, the rebate is linked to the size of the premiums paid. Because Zyla no longer paid contributions, the ECJ initially ruled that there was no disadvantage. Even if there was a disadvantage, Zyla’s situation, in which she was only socially insured in the Netherlands until 21 June 2013, is not the same as and comparable to the situation of someone who is socially insured in the Netherlands throughout the year. In conclusion, there is no question of unequal treatment.

The reduction of the premium part of the tax credit was applied on a time-proportional basis. In this way, the reduction was in line with the insured period. According to the ECJ, due to the different financing methods of social security systems within the EU, EU law cannot prevent movements between Member States in the social field from being neutral and benefits from being lost. EU law only ensures equal treatment of foreign workers who pursue an activity in a Member State other than their State of residence compared to resident workers.


It is, therefore, not only the tax part of the general tax credit that is the subject of discussion. In the case of the premium part of the general tax credit, this judgment shows that the Dutch Tax Authority may reduce it proportionately in time to the period insured. The different national systems and the national powers with regard to social security mean that cross-border activities do not have to be neutral. These do not constitute unjustified border obstacles.


[1] HvJ EU 23 januari 2019, zaak C-272/17

[2]  Regulation (EG) 883/2004