This is a chapter from the book: "Taxes Crossing Borders (and Tax Professors Too) - Liber Amicorum Prof Dr R.G. Prokisch".
Prof.dr. F.P.G. Pötgens1
Rainer Prokisch was a member of the Thesis Committee of my PhD entitled “Income from International Private Employment”. 2 I am still very honored that Rainer was willing and able to take up this membership. Rainer is the author of Art. 15 of the OECD Model Tax Convention (MTC) in the standard work of Klaus Vogel on Double Taxation Conventions.3 Together with Klaus Vogel he wrote the General Report for the IFA on interpretation of tax treaties.4 The topic of this contribution is, therefore, the Fictitious Wage Decisions of the Dutch Supreme Court because they touch on interpretation of tax treaties and to a certain extent on Art. 15 of some Dutch tax treaties styled on the OECD MTC.
In this contribution the author will give an outline and analysis of the Fictitious Wage Decisions of the Dutch Supreme Court (section 3). They involve several decisions of the Dutch Supreme Court (Hoge Raad or ‘HR’). These decisions are relevant because they give an important insight in the approach of the Hoge Raad as to when domestic deeming provisions affect the interpretation and application of a tax treaty. More, there are situations, according to the Hoge Raad, that the good faith that should be observed vis-à-vis the other contracting when interpreting a tax treaty provision such as Art. 15 and 16 of the OECD MTC entails that a domestic deeming provision has no effect thereon. In section 3 the author will give his view on the impact of these key decisions of the Hoge Raad. The Dutch government’s Memorandum on Tax Treaty Policy 2020 [‘Notitie Fiscaal Verdragsbeleid 2020’]5 took account of the approach that the Hoge Raad adopted towards the effect of fictions on tax treaties.6 This will be discussed in section 4. In section 2 some background on the functioning of the Dutch fictitious wage concept will be outlined. Section 5 contains a short summary.
The Hoge Raad attached significant relevance to the deeming character of the concept at issue and its interaction with the relevant tax treaty. For that reason, first the various deeming provisions of the fictitious wage concept are explained. Art. 12a of the 1964 Wage Withholding Tax Act/Wet op de loonbelasting 1964 (‘WWTA’) provides that an individual (resident or non-resident) who owns a substantial shareholding, i.e. 5% or more of the subscribed capital, of a company that is resident of the Netherlands and who performs personal activities for this company, should earn, for wage tax and personal income tax purposes [via art. 3.81 of the 2001 Personal Income Tax Act/Wet inkomstenbelasting 2001 (‘ITA 2001’), at least the ‘normal wage’ (there are rules on how to determine the normal wage). If such wage is not being paid the taxpayer will be deemed to have received this amount. To understand the fictitious wage concept, it should be taken into consideration that various fictions are interconnected:
A substantial shareholder is deemed to have an employment relationship if he performs activities on behalf of the company in which he holds such an interest [Art. 4(d) WWTA in conjunction with Art. 2h of the 1965 Implementation Decree of the Wage Withholding Tax Act/ Uitvoeringsbesluit loonbelasting 1965], provided that an employment does not exist based on one of the provisions of the WWTA. In many cases, the substantial shareholders already have a defined employment relationship with the company in which they hold the interest.7 However, if the substantial shareholder does not receive a salary in consideration of the activities for the company in which he holds such a shareholding, one of the essential elements for having a defined employment is absent.8
The deemed employment as mentioned under sub (i) should be considered in connection with the deemed wage concept of art. 12a WWTA. In the case of substantial shareholders, remuneration is set at a standard amount if the salary differs significantly from what is considered to be a commercial salary (in general 25% or more) or what is an at arm’s length salary when compared to the highest wages of other employees who are employed by the company or a related company. Art. 12a WWTA specifically targets tax avoidance schemes designed to establish zero income. In addition, art. 13a(3) WWTA stipulates that the time of receipt is the end of the calendar year in question.
To overcome the problem of one of the elements to constitute an employment under private law being absent, i.e., the employee’s entitlement to a salary, Art. 4(d) WWTA stipulates deemed employment if no salary is attributed in return for the services performed by the substantial shareholder.
Considering the fictitious wage concept, the following deeming elements can be distinguished:
- A fictitious employment;
- A fictitious salary;
- A fictitious receipt and moment of receipt.
When discussing the case law of the Hoge Raad in more detail, it does not make this distinction. It does not rule explicitly on the deemed employment element, which could also be seen as part of the fictitious wage concept; all three fictions are interrelated. This fictitious employment is important for the application of Art. 15 of the tax treaties styled on the OECD MTC to the fictitious wage concept to the extent that the employment was exercised in the Netherlands (of course this is not relevant for art. 16 of the tax treaties based upon the OECD MTC). The Hoge Raad also did not explicitly focus on the term ‘derived’ that was included in both art. 15 and 16 of the tax treaties at issue.9 The Hoge Raad took a somewhat integrated approach pinpointing on the interpretation of the expression ‘salaries, wages and other similar remuneration derived by’ which had to be interpreted the with the aid of Art. 3(2) of the treaties based upon the OECD MTC.10
The Fictitious Wage 1 decisions of the Hoge Raad11 involve a fictitious wage that was attributed to a resident of Belgium who was a substantial shareholder of a Dutch resident company (besloten vennootschap or BV), i.e., application of the fictitious wage concept (see section 2). This concept has been part of Dutch legislation since 1 January 1997. In coming to this decision, the Hoge Raad held that, in principle, domestic deeming provisions are allowed if they apply to income that, based on the nature of the income as determined by its source, would be allocated to the Netherlands under the applicable treaty. If the taxation right on the income, however, according to its nature, as determined by the source of the income, would not be assigned to the Netherlands, a domestic deeming provision resulting in a shift of the right to levy tax cannot be applied. In other words, if application of the fictitious wage concept results in characterizing the income as income from dependent personal services (Art. 15) or directors’ fees (Art. 16) under the former 1970 Belgium-Netherlands Tax Treaty (allocating the right to tax to the Netherlands), while that same income might also be derived as either dividends (Art. 10) or capital gains (Art. 13) (allocating the right to tax to Belgium, while also granting a limited right to tax dividends to the Netherlands), application of the fictitious wage concept should be rejected under the former treaty. This fiction, including the notion that the substantial shareholder is deemed to have enjoyed a normal wage, would bring about a shift in taxing rights between the Netherlands and Belgium. Consequently, the Hoge Raad concluded that the application of the fictitious wage concept to the existing tax treaties, i.e., those concluded before 1 January 1997, should be reversed because it is precluded by Art. 3(2) of the former 1970 Belgium–Netherlands Tax Treaty, which follows the OECD MTC, and, in particular, by the context of that provision. According to Art. 3(2), terms not defined in the treaty are to have the meaning that they have under the domestic law of the contracting states applying the treaty, unless the context otherwise requires. Regarding the application of the fictitious wage concept, the context, in this case, did require otherwise when interpreting the terms “wages” and “derived”. In coming to this conclusion, the Hoge Raad referred to the Commentary on Art. 3(2) of the OECD MTC (the relevant extracts of which were added to the Commentary in 1992 and, therefore, after conclusion of the former 1970 Belgium-Netherlands Tax Treaty).12
The Hoge Raad held that an interpretation provision such as Art. 3(2) of the former 1970 Belgium-Netherlands Tax Treaty, which was based on Art. 3(2) of the OECD MTC (1963), is intended to provide a satisfactory balance between (i) the need to ensure permanency of commitments entered into by the contracting states, in order to prevent a state from making the treaty partially inoperative by subsequently amending the scope of terms not defined in the treaty under domestic law, and (ii) the need to be able to apply the treaty in a convenient and practical way over time.13 The first viewpoint [sub. (i)] is expressed in the reservation referring to the context of Art. 3(2). This context is violated if the principle of reciprocity, on which the treaty is based, no longer has a basis in the domestic tax legislation that also forms part of the context in which the treaty operates.14 The need to ensure the permanency of commitments can be regarded as the equivalent of good faith.15 Based on these arguments, the Hoge Raad rejected extending the application of the fictitious wage concept to the former 1970 Belgium-Netherlands Tax Treaty on the basis of the good faith that the Netherlands was required to observe vis-à-vis its treaty partner, Belgium, when applying and interpreting the applicable treaty. 16
The Fictitious Wage 1 decisions demonstrate that the Hoge Raad has attached some weight to the consideration of whether the domestic legislation was amended prior to the date on which the tax treaty was concluded. Pursuant to these decisions it was assumed that a domestic deeming provision would be effective under a tax treaty if the latter was entered into after the fiction was introduced into domestic legislation. However, the Hoge Raad decided otherwise in its decision of 15 April 2011 (Pension on Emigration to Belgium decision)17 which was also referred to in legal consideration 2.3.3. of the Fictitious Wage 3 decision (see section 3.4 below).
The Pension on Emigration to Belgium decision (BNB 2011/160) involved a Dutch resident individual who emigrated to Belgium while being entitled to a Dutch pension. As of 1 January 2001, a preservative tax assessment is imposed in case of an emigration of a (former) employee who is entitled to such a pension (emigration levy).18 In the Pension on Emigration to Belgium decision (BNB 2011/160) the question arose whether this preservative tax assessment was justified under the present 2001 Belgium-Netherlands Tax Treaty (which entered into effect on 1 January 2003). Although, Belgium -as residence state - would have the authority to tax the pension income (pursuant to Art. 18(1) of the treaty in question) in a lot of situations, the Netherlands—as a source state—may also have a taxation right if one of the exceptions of Art. 18(2) and (3) of the treaty applied.19 The Hoge Raad emphasized in the Pension on Emigration to Belgium decision (BNB 2011/160) that the exit levy would be in accordance with the good faith requirement to be observed by the Netherlands vis-à-vis Belgium if the relevant treaty grants the Netherlands a right to impose tax. This means that the tax authorities are not permitted to collect tax under the protective assessment if any irregular act, whereby taxation rights are not assigned to the Netherlands, occurs within the applicable ten-year period (Art. 25(5) of the 1990 Tax Collection Act/Invorderingswet 1990).
Belgium could not only have awareness of the existence of emigration levy on pensions but in addition the joint commentary on the individual articles (gezamenlijke artikelsgewijze toelichting) of the treaty demonstrated that Belgium was aware of the levy that the Netherlands imposed on pensions upon emigration.20 Based on this awareness, one may argue that the principle of good faith had been observed in applying and interpreting Art. 18 (pensions) of that treaty.21 The Hoge Raad, however, explicitly stated that, with regard to the observance of good faith in applying and interpreting the 2001 Belgium-Netherlands Tax Treaty, the question of whether Belgium was aware of the emigration levy on pensions at the time it concluded the treaty was irrelevant. Moreover, according to the Hoge Raad the fact that the Dutch emigration tax was introduced prior to the entry into force of the treaty in question did not support the conclusion that its application would always be in line with the principle of good faith.
Thus, if the principle of reciprocity, which is of relevance to good faith in treaties, is to be respected, it is not enough for the other contracting state to be aware of a domestic deeming provision, even if that awareness is confirmed in the joint commentary on the individual articles of the treaty. In the Fictitious Wage 3 decision, the Hoge Raad referred to this conclusion regarding the Pension on Emigration to Belgium decision (BNB 2011/160), but provided more explicit guidance by stating that, in the absence of an equivalent provision in the other state’s legislation, the principle of good faith is only observed if it is sufficiently clear that the other state accepts the application of the domestic deeming provision under the tax treaty.
According to the Fictitious Wage 1 decisions a tax treaty is, in principle, not being applied and interpreted in good faith if a potential shift in the allocation of taxation rights between the contracting states is caused by a fiction that is included in the domestic legislation of one of the contracting states. Various decisions of the Hoge Raad may provide some examples of domestic deeming provisions not leading to the potential disturbance of the balance in the division of the taxation rights at a tax treaty level.
Under Dutch tax law a gain realised by a shareholder upon the liquidation of a company or the re-purchase by the company of its own shares may be taxed as a capital gain or as ordinary income (dividend) payment, depending on whether the shareholder’s share interest does or does not amount to a `substantial interest´ in the company (see section 1). For substantial shareholders these transactions have a hybrid character; for dividend withholding tax purposes they are seen as a dividend distribution22 and from a personal income tax angle, they are regarded as a deemed alienation resulting in possible capital gains23. The difference is important because under tax treaties a capital gain in general is taxable only in the residence state of the shareholder and a dividend may be taxed also in the source state. According to the Hoge Raad24 the hybrid character of the income resulting from these transactions is also recognised by the OECD Commentary.25 Given this hybrid character of these transactions there is not a potential shift in the allocation of tax jurisdiction when the deeming provision – that is a fictitious alienation for personal income tax purposes – would have an effect at the tax treaty level.
The decisions in BNB 2004/124 and BNB 2007/41 both involved the former 1970 Belgium-Netherlands Tax Treaty. The Hoge Raad held that that the repurchase of shares by the Dutch resident BV to its individual substantial shareholder residing in Belgium characterised as a capital gain (Art. 13 of the former tax treaty with Belgium) rather than as a dividend (Art. 10 of that treaty). The Hoge Raad held that the classification of a repurchase of a company’s own shares for domestic income tax purposes (alienation) was decisive at the tax treaty level and prevailed over the different characterisation thereof under the dividend withholding tax (dividend), inter alia because the dividend withholding tax was ultimately credited against the income tax.26 Similar to a repurchase of shares for purposes of the former 1970 Belgium-Netherlands Tax Treaty, the Hoge Raad characterised liquidation proceeds attributed by a Dutch resident BV to its substantial shareholder residing in Belgium also under the capital gains provision rather than under the dividend provision of that treaty.
To secure the treatment of such income as a dividend by the Netherlands as a source state, it is part of the Dutch tax treaty policy to include a provision to expressly characterise such gain as a dividend for tax treaty purposes.27 The Protocols accompanying the current 2001 Belgium Netherlands Tax Treaty (point 15 of Protocol I) and the 2012 Germany-Netherlands Tax Treaty (point X) contain such a provision. This illustrates that a specific provision forms part of the Dutch tax treaty policy in order to obviate the undesired consequences – at least from a government’s perspective – of the effect of a domestic deeming provision on tax treaties. There is an interrelationship with the Fictitious Wage 3 decision (BNB 2017/34) because as regards the Fictitious Wage concept the Dutch tax treaty policy (MTTP 2020) has as a clear objective that this concept should affect the Dutch tax treaties (see also section 3.6 and 4).
The Netherlands levies income tax at a flat (currently) 26.9% rate on dividends and capital gains that individual shareholders receive from a substantial interest (i.e., at least 5%) in a resident or non-resident company.28 Non-resident shareholders are also subject to this tax but only with respect to qualifying interests in a resident company. In its tax treaties the Netherlands tried to preserve such taxation to prevent emigrating shareholders from realising capital gains on the disposition of substantial interest shares tax-free during a period of five (or more) years. In the mid-1990s domestic rules were enacted which introduced an exit tax by treating the emigration of a substantial interest shareholder as deemed disposal of his substantial interest shares.29 The tax is deferred, however, and if the company’s profit reserves are not realised by the shareholder (through dividend distribution, share disposal or company liquidation) within ten years after emigration, the tax is waived (provided the emigration took place prior to 15 September 2015). This domestic policy, inter alia, is reflected in Art. 10 (Dividends) and Art. 13 (Capital gains) of recent Dutch tax treaties.30
The exit tax amount due by substantial shareholders emigrating on or after 15 September 2015 will only be waived in subsequent years to the extent the shareholder has paid the deferred amount due as a result of realisation events under Dutch tax law (such as profit distributions). In other words, the ten-year deferral period has been abolished.
The domestic levy (preservative tax assessment which may be waived after ten years) imposed on the emigration of substantial shareholders to jurisdictions (the UK, Belgium and the US) that concluded a tax treaty with the Netherlands containing a provision giving the Netherlands a taxation right on the disposal of the shares during a period of five years following the emigration does not contravene the good faith principle.
In its decisions of 20 February 200931, the Hoge Raad held that, in these cases, the good faith that is to be observed was not being violated in regard to the application and interpretation of the tax treaties in question as no benefits were taxed that, in view of their true nature, were allocated to the immigration state for taxation (Belgium, the UK and the US). Consequently, there was no potential shift in the taxation jurisdiction between the Netherlands and the other states involved. According to the Hoge Raad, the aim of the Dutch provisions is only to tax the appreciation of shares that make up a substantial interest where that appreciation took place in a domestic context.32 This is also in accordance with the fact that a step-up is granted upon immigration. Moreover, the concept of alienation in Art. 13 of the OECD MTC (capital gains) is not inconsistent with the conclusion that, in taxing a capital gain, a state may recognize a gain that has not been realized through alienation. This same view is found in the Commentary on the OECD MTC.33
The decision of the Hoge Raad (BNB 2014/17)34 concerned a Dutch resident individual with participations in investment funds residing in Belgium, France, Germany, Luxembourg and the US. These participations were subject to the notional investment yields tax (income from savings and investments; Box 3) despite that no actual dividends were received on these participations. At issue was whether the Netherlands was entitled to effectuate and impose the notional yields tax under the 2001 Belgium-Netherlands Tax Treaty, the 1973 France-Netherlands Tax Treaty, the former 1959 Germany-Netherlands Tax Treaty, the 1968 Luxembourg-Netherlands Tax Treaty and the 1992 Netherlands-US Tax Treaty. According to the Hoge Raad the various relevant treaties assigned the right to tax dividends paid to, or derived by, a resident of the Netherlands (the dividend article) to the Netherlands. The fact that the Netherlands did not tax the actual dividends paid, but rather a notional yields, did not in itself mean that the Netherlands expanded its tax jurisdiction beyond the limits of the relevant treaties. Such a domestic law characterization could not be applied under the tax treaties in question if it resulted in a shift in the division of taxation rights giving the authority to tax the income to the Netherlands. Under reference to the Fictitious Wage 1 decisions (see section 3.1), such an effect was not in accordance with the treaties at issue since it would entail a unilateral change in the operation of the treaties. The Hoge Raad held that the notional income from the participations in the investment funds could accrue to the taxpayer in the future in the form of either dividends or capital gains, both of which were taxable in the Netherlands under the relevant tax treaties. Therefore, by taxing the notional income from the investment funds (Box 3) the Netherlands did not exceed the limits to its tax jurisdiction under the applicable tax treaties.
In the Fictitious Wage 2 decision35 the Hoge Raad held that the fictitious wage concept was effective under the current 2001 Belgium-Netherlands Tax Treaty. In referring to the framework laid down in the Fictitious Wage 1 decisions first, the Hoge Raad held that it attached ‘great weight’ to the joint commentary on the individual articles, wherein Belgium confirmed that it accepted the extension of the application of the fictitious wage concept to Art. 15 (income from employment) and Art. 16 (director’s fees) of the treaty in question.36 Based on this acceptance, the Hoge Raad held that it could not be argued that the context, as laid down in Art. 3(2) (interpretation article), required a different interpretation that would prevent the fictitious wage concept from having effect.
The Hoge Raad ruled in the Fictitious Wage 3 decision 37 that the fictitious wage concept has no effect on classification in the 1999 Netherlands-Portugal Tax Treaty in respect of a Portuguese resident individual shareholder having a substantial interest in a Dutch resident company. Consequently, the fictitious wage cannot be classified as income under Art. 15 (income from dependent personal services) or Art. 16 (directors’ fees) of the 1999 Netherlands-Portugal Tax Treaty, even though the fictitious wage concept was introduced into the domestic legislation in 1997, thus before the treaty was signed (1999) and came into effect (2000).
The Fictitious Wage 3 decision (BNB 2017/34) combined the previously rendered decisions, specifically the Fictitious Wage 2 decision (BNB 2013/72, as mentioned in section 3.3) and the Pension on Emigration to Belgium decision (BNB 2011/160, as mentioned in section 3.2). The Fictitious Wage 3 decision (BNB 2017/34) provides guidance for the application of deeming provisions that potentially shift the allocation of taxing rights. Firstly, it sheds a light on the weight that needs to be attributed to the joint commentary on the individual articles in interpreting a tax treaty. Prior to the Fictitious Wage 3 decision (BNB 2017/34), it could be argued that the mere acknowledgment by a state of its awareness of the existence of a domestic deeming provision in the other state’s domestic law would be sufficient to allow for the extension of the application of that fiction to the treaty without violating the principle of good faith. The Hoge Raad is clear on this matter and imposes a relatively high threshold for domestic deeming provisions to extend to a treaty if there is no equivalent in the legislation of the other contracting state.
According to the Hoge Raad in the Fictitious Wage 3 decision (BNB 2017/34), the domestic deeming provision is only applicable if the legislative history (travaux preparatoires) of the relevant treaty, or any other source, demonstrates that the other contracting state accepts the application of the deeming provision under the treaty and that this deeming provision results in an allocation of taxation rights other than what would be expected under the treaty.38
Given the absence of any equivalent provision in Portugal and the absence of any legislative history or other source demonstrating acceptance of the extension of the fictitious wage concept to the interpretation and application of Art. 15 and Art. 16 of the 1999 Portugal-Netherlands Tax Treaty, the principle of good faith prevents the extension of the fictitious wage concept to these articles. Secondly, the Hoge Raad clarified that the mere fact that the other contracting state is aware of a domestic deeming provision - even if this awareness is evidenced in a joint commentary on the individual articles, as in the case of the Pension on Emigration to Belgium decision (BNB 2011/160; section 3.2) - provides insufficient grounds for this provision to have effect under that treaty, as it does not demonstrate that the other contracting state explicitly accepts the extension. In coming to its decision, the Hoge Raad seems to have interpreted the principle of good faith such that it protects the taxpayer. In doing so, it seems to address the issue from the perspective of the taxpayer rather than that of the relevant contracting states. Although this view would certainly seem to be helpful in terms of legal protection and legal certainty, questions can be raised from the technical perspective of treaty interpretation relating to explicit acceptance. The approach outlined by the Hoge Raad is, in any event, clear.
Even though, the approach of the Hoge Raad is clear, the author would have preferred that in the Fictitious Wage 3 decision (BNB 2017/34) the fictitious wage concept would have affected the 1999 Netherlands-Portugal Tax Treaty. The fictitious wage concept existed and formed part of the Dutch tax legislation at the moment the tax treaty with Portugal was negotiated and concluded. It can be presupposed that Portugal was or had to be sufficiently aware of the existence of the fictitious wage concept, so from that perspective the fictitious wage concept should have effect in accordance with the 1999 Netherlands-Portugal Tax Treaty. The context would not require a meaning different from that under the domestic law and the good faith included therein would be observed vis-à-vis Portugal.
The Fictitious Wage decisions are clear: any potential shift in the allocation of taxation rights as a consequence of a deeming provision in Dutch domestic law, in principle, represents a failure to observe the principle of good faith in applying and interpreting the treaty, irrespective of whether the domestic law provision was introduced before or after the tax treaty was concluded or came into force. A domestic deeming provision that has such an effect can only be applied in the event of reciprocity (i.e., the other state having an equivalent provision)39 or if the other contracting state makes it known - in a legally binding instrument - 40 that it accepts the application of the deeming provision to the treaty and the subsequent consequences for the allocation of taxation rights.
As far as the author has established, no tax treaty entered into by the Netherlands, other than the 2001 Belgium-Netherlands Tax Treaty, can be regarded as explicitly accepting that the fictitious wage concept should be applicable under the treaty. As a consequence, except in the case of Belgium, the fictitious wage concept cannot be extended to any Dutch tax treaty. If the Netherlands wishes to achieve a different outcome, it should try to obtain the other contracting state’s explicit acceptance that the fictitious wage concept applies under the treaty. This can be achieved, for example, by way of a protocol to the tax treaty. This may also explain the explicit reference to the Fictitious Wage 3 decision (BNB 2017/34) in the MTTP 2020 (see section 4).
According to the MTTP 2020, the Netherlands aims to explicitly lay down, in tax treaty relations, that certain fictions or similar arrangements under domestic law also have an effect on the relevant tax treaty.41 This is primarily because of the Fictitious Wage decision 3 (BNB 2017/34). These types of domestic deeming provisions only affect the treaty if the other contracting state explicitly accepts this (i.e., according to the principle of reciprocity). To meet this requirement of acceptance, it is now Dutch treaty policy to explicitly designate, in the treaty, the deeming provisions under domestic law that should have an effect on that treaty. Although the MTTP 2020 is not entirely clear on this matter, the author assumes that this means that, rather than including a more generic provision, the relevant tax treaty or protocol to such a treaty will specify precisely which domestic deeming provisions affect the treaty.42 This would also be in line with the approach that MTTP 2011 and MTTP 2020 adopted with respect to other deeming provisions relating to substantial shareholdings, such as repurchase of the company’s own shares (BNB 2014/123), income from liquidations (BNB 2007/41, see section 3.3.2) and the emigration of substantial shareholders (section 3.3.3). With respect to a more generic provision that seeks to regulate the application of these types of fictions, the question arises whether this will then be sufficient to constitute acceptance by the other state as envisaged by the Hoge Raad in its case law.
This contribution aimed to give some insights into (i) the triptych on the fictitious wage concept and its relationship to tax treaties and (ii) other decisions of the Hoge Raad on domestic fictions and the effect they have on tax treaties. The Fictitious Wage decisions ultimately have impacted the Dutch tax treaty policy.