NETHERLANDS Law and Practice Contributed by: Willemijn van Duren and Rowena Zee, Arcagna
Wills Governing Worldwide Estates A will can be executed in the Netherlands (typically by notarial deed) regardless of nationality. Whether Dutch law governs the succession to a person’s worldwide estate is generally determined under the EU Succes- sion Regulation: as a rule, the law and courts of the state of the deceased’s habitual residence apply, but a testator can usually choose the law of their nationality to govern the succession of their worldwide estate. For non-Dutch nationals living in the Netherlands who already have a foreign will, it is often advisable to review and co-ordinate it with Dutch/EU succes- sion rules to avoid inconsistencies and unintended outcomes. Divorce, Marital Property and Inheritance-Related Claims Jurisdiction (and often applicable law) for divorce, marital property matters and inheritance-related claims is also generally driven by habitual residence (and in some cases nationality) under the relevant EU instruments, rather than by any “domicile” concept. 2.2 Income Tax Residency In the Netherlands, Dutch personal income tax is lev- ied if a person is a tax resident (full liability) or if a person has certain Dutch sourced assets (limited tax liability). Dutch sourced assets include, among others, shares in a Dutch company or Dutch real estate. A person would become fully liable to Dutch personal income tax on its worldwide income and wealth if a person is considered a resident for Dutch tax pur- poses. This is the case if a person has a “durable bond of a personal nature” with the Netherlands. To assess this, all relevant facts and circumstances must be taken into account, such as: • the availability of a primary residence in the Nether- lands (through ownership, rental, friends and family or any actual right of use – even on demand); • whether the person had a place of habitual abode in the Netherlands, (for which is relevant, for example, whether they visited a doctor, maintained subscriptions, had a bank account and local phone number in the Netherlands); and • where the partner and children are located.
Intentions or the number of days spent in or outside the Netherlands are of lesser relevance. It may well be that a person has a durable bond with different countries. However, the strongest durable bond is not necessarily decisive for Dutch tax residency. Moreo- ver, even though the centre of vital interests may lie in one state, this does not rule out the possibility to have a “durable bond of a personal nature” with the Netherlands. The concept of domicile is not relevant for assessing Dutch personal income tax liability. 3. Intestacy and Forced Heirship Laws 3.1 Intestate Succession Under Dutch intestacy rules, if a person dies leav- ing a spouse and one or more children, the spouse and children are heirs in equal shares. In such cases, the estate is in principle settled in terms of statutory division ( wettelijke verdeling ). Under this system, the entire estate passes to the surviving spouse by opera- tion of law. The surviving spouse therefore becomes the legal owner of all estate assets and must settle all debts, including any inheritance tax due by the chil- dren and other costs relating to the settlement of the estate. This means the estate is immediately at the surviving spouse’s disposal, allowing the spouse to continue living as before as far as possible. Although the children are entitled to their respective shares, they do not receive their inheritance imme- diately. Instead, each child’s share is converted into a monetary claim against the surviving spouse. As a result, the surviving spouse acquires the entire estate but also incurs a corresponding debt to the children. The children’s claims generally bear interest. In prin- ciple, both the principal amount of the claims and the accrued interest only become due and payable upon the surviving spouse’s death. At that point, the claims including interest are deducted from the surviving spouse’s estate and therefore reduce the taxable base of that estate. This may lead to significant inheritance tax savings overall. If the surviving spouse does not wish to apply the statutory division, they may unilaterally reverse it within three months of the deceased’s death. A par-
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